Youth hostels expand in U.S. by shedding old identity
‘Natural evolution’ from dorm-room setting makes headway in market
London-based hospitality group Generator opened its first U.S. property in Miami Beach last month, placing its dorm-room-like accommodations outside Europe for the first time.
Just don’t call them youth hostels.
While Generator has been operating for 23 years and has 13 locations in popular European destinations like Paris, Barcelona and Amsterdam, its research of the U.S. market found that the term hostel is a turnoff to many American guests.
“The hostel thing doesn’t describe us that way,” said Alastair Thomann, chief executive of Generator Group, noting that its Miami property has more private rooms than the dormroom settings with bunk beds usually associated with youth hostels. “We’re in the space in between hostel and cool boutique hotels.”
The moves reflect a broader shift in the fast-growing hostel industry away from its barebones past. Traditional hostels are adding more private rooms while some established hotel brands are shrinking their room size and putting more focus on bars and food to target millennials, betting young travelers would pay a higher price for the hostel culture and experience.
“I think this is a natural evolution for the hostel, and it has just really grown in the past five years,” said David Eisen, director of hotel intelligence at HotStats.
Youth travelers are big busi- ness. According to the World Tourism Organization, a specialized agency of the United Nations, travelers ages 15 to 29 accounted for an estimated 23% of all international travelers in 2015 and spent a total of $286 billion in 2014. Generator last year had more than two million guests globally.
As these properties become more popular and professional, Mr. Thomann said the number of corporate travelers is growing especially fast.
Generator, which is owned by London-based real estate investment firm Queensgate Investments LLP, is not the only one embracing this market and putting less emphasis on the word “hostel.”
Freehand, a New York-based brand run by hotel company Sydell Group in partnership with private equity investor Ronald Burkle, has upscale youth hostels in Los Angeles, New York and Chicago.
Its first property opened in Miami Beach in 2012, but since then it has focused more on business travelers and private rooms, while decreasing the number of shared accommodations.
Hilton is also looking to launch its first urban microbrand before the end of the year, which was described as “hostel on steroids” by its chief executive, Christopher Nassetta, at a forum in New York last year.
The brand would have hostel- like characteristics, such as smaller guest rooms compared with the core Hilton brand, the company said. But it isn’t a hostel and guests wouldn’t be sharing rooms with people they don’t know, Hilton said in an email.
The brand is counting on “hyper-charged food and beverage opportunities” to make up for the lower rates, Phil Cordell, Hilton’s global head of new brand development, said earlier this year.
“Although Hilton won’t be opening hostels, we have been looking at the market to understand what opportunities there may be for a leading hospitality company,” Mr. Cordell said in an email. Generator’s Miami Beach property has 344 beds in 105 rooms, and guests could pay as little as $20 for a bed in a dormstyle accommodation with four or six bunk beds or $95 for a private room with en suite bathroom. All rooms have an en suite bathroom.
Generator Miami features a pool, a common area and a restaurant. DJ Khaled and Wyclef performed at the property’s opening party.
The company said it expects to open another location in the Dupont Circle in Washington D.C. next month.
As more hotels and real estate investors announcing these projects, Generator is not concerned, saying they have found the attention helpful at this stage.
“It would be different in 5-10 years,” Mr. Thomann said. “The market will be saturated but we’re really far away from that.”