Hostel Booking Sources Report 2017

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STAY WYSE Hostel Booking Sources Report 2017 Executive Summary An insight into the most important direct and indirect booking channels for youth accommodation providers, the impact of the sharing economy on business and the effects of economic uncertainty, terrorism and political unrest on the hostel business. LIVE STAYSPORT WYSE Hostel Booking Sources Report 2017 2 STAY WYSE Hostel Booking Sources Report 2017

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COPYRIGHT ©2018 WYSE Travel Confederation. ALL RIGHTS RESERVED The copyright for the design and content of this publication is owned by WYSE Travel Confederation. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form, by any means – electronic, photocopying or otherwise – without the written permission of WYSE Travel Confederation. Members of WYSE Travel Confederation may distribute this publication within their organisation.

To request permission contact [email protected] or call +31 (0) 20 421 2800. Disclaimer: The presentation of material in this publication and the designations used do not express the opinions of authors, but represent the results of primary research. Whilst every effort has been made to ensure the accuracy of this publication, WYSE Travel Confederation cannot accept any responsibility for any errors or omissions. STAY WYSE Hostel Booking Sources Report 2017 4

Introduction

It would be no exaggeration to say that the confident outlook reported by Hostelworld in its 2017 Interim Results Announcement is characteristic of hostels in general at the moment.

“The Group has returned to growth, reflecting the strength of the core Hostelworld brand, which now represents 92% of the total Group bookings,” commented Feargal Mooney, Hostelworld’s Chief Executive Officer, in the company’s 2017 Interim Results Announcement.

Business is good for hostels right now. There is strong investor interest in the sector and not only did design hostel pioneer Generator change hands for EUR 450 million, it crossed the Atlantic to the USA. Notably, it chose Miami, home of Sydell Group’s Freehand. Styled for a “new generation of urban travellers,” Freehand’s funky, community-centric concept is well established in American cities like Miami and Chicago and has recently stepped into Los Angeles, suggesting that the hostel concept is taking root in the USA. In Europe, expansion is rampant for some large hostel brands. With a record 1.3 billion international arrivals in 2017 and nearly a quarter of those being young travellers, affordable, safe and welcoming accommodation is in high demand and hostels are happy to oblige.

“It’s a great time to be in the hostel business,” said Anne Dolan, co-founder of Clink Hostels. “Business for hostels is booming and only set to grow the coming year. The savvy hostels of today cater not only for traditional backpackers, but discerning travellers looking for stylish and sociable accommodation – that includes business travellers and families.” STAY WYSE Hostel Booking Sources Report 2017 5

Online Travel Agents (OTAs) like Hostelworld have helped the new breed of youth-tailored accommodation operators to attract 54% of their bookings for the last two years, according to WYSE Travel Confederation research. Furthermore, OTAs not only generate the majority of bookings for hostels, but also firmly dominate the indirect booking channels available to hostels, accounting for 83% of indirect bookings.1

Just 53% of hostels reported marketing initiatives to generate direct bookings – surprising given the general debate around commissions and the power that OTAs command in the travel accommodation space.2 Furthermore, this proportion has remained consistent over the last few years and interestingly it doesn’t seem to vary much by world region. One could therefore assume that hostels are satisfied with the services that they receive from OTAs - especially where those services are tailored to attract the attention of not just any guest, but hostel guests.

“The mix of direct bookings and bookings via OTAs works well for us, allowing us to attend to the business of running the hostel, said the operator of a small, independent hostel located in Africa. “We would much rather deal with hostel-branded OTAs. Most OTAs offer broad stroke solutions, but guests who book through hostel-branded OTAs have a better idea of what they are looking for and know what to expect. This has a knock-on effect for customer satisfaction.”

In 2015, despite the growing presence of Booking.com as an OTA for hostels and other youth travel accommodation operators, the hostel identity and branding that Hostelworld as an OTA offers remained important for hostels to acquire bookings. WYSE Travel Confederation speculated that as more youthful, hybrid and hostel-inspired accommodation emerges, it could become more difficult for consumers to identify and differentiate true hostels.

“I am disheartened to see that some budget hotels, which are not strictly hostels, are creeping into Hostelworld,” a small, independent hostel operator commented. “I am not sure if this is a trend towards increased generalisation for them.”

1 WYSE Travel Confederation, STAY WYSE Booking Sources Report 2017. 2 WYSE Travel Confederation, STAY WYSE Booking Sources Report 2017. STAY WYSE Hostel Booking Sources Report 2017 6

Hostelworld has indicated a move to differentiate themselves from mainstream OTAs through community-building tools for the traveller, such as in-destination recommendations, translation aides, new payment methods and pre-trip guest-to-guest communications.3 The expansion of such services for hostel guests would seem to suggest an attempt on Hostelworld’s part to extend the ‘s’ of hostel (social) to the digital domain and to instigate it pre- trip rather than limit it to the physical atmosphere of the hostel itself.

Though difficult to compare on like terms, it will continue to be interesting to watch the duopoly of Hostelworld and Booking.com in the hostel and youth-tailored travel accommodation space. Having generated “3.9 million bookings” through its 35,000 properties in 2016, Hostelworld appears to maintain an edge on Booking.com (25,000 hostel properties) in terms of hostel inventory globally. However, what will also be interesting to watch is Airbnb’s sprint to the top as an OTA for hostels.

Boasting 80 million “arrivals” in 2016, the rise of Airbnb as an OTA of importance for both hostel operators and young travellers alike has become clear through WYSE Travel Confederation’s research. Findings from WYSE Travel Confederation’s 2017 New Horizons IV survey of youth and student travellers indicated that the Airbnb brand is of significant importance to young travellers booking accommodation via a third party – even more important than Hostelworld.4 When only hostel users are considered, Hostelworld regains its stronghold, though Booking.com appears to be of the most importance to young people looking to book travel accommodation.5

Whether Hostelworld’s new digital community-building tools will rival Airbnb’s cache when it comes to “community” remains to be seen. Already working in the “experiences” marketplace, and rumoured to be dabbling in dining, flights, and the luxury market, Airbnb also serves as a sort of travel agent/ micro-finance platform for young travellers who are keen to craft a lifestyle that says ‘I’m a savvy local even when I’m not travelling.’

3 “Hostelworld Has Ambitions to Complement Bookings with a Sense of Community” Patrick Whyte, Skift. August 23, 2017. 4 WYSE Travel Confederation, New Horizons IV, 2017. 5 WYSE Travel Confederation, New Horizons IV, 2017 STAY WYSE Hostel Booking Sources Report 2017 7

For hostel operators, Airbnb has become a new channel through which to generate bookings, but one that does not yet feature as central to business.

“We use Airbnb simply to have a presence in its market; it’s useful to complement the remainder of our business,” said one operator.

Ironically, an independent hostel operator explained that the guests they attract from Airbnb tend to be those in search of affordable alternatives in an over-priced short-term rental market in the city – presumably the same rentals that Airbnb stands to profits from. However, the big question with Airbnb at the moment is not whether it will continue to build its global community, but if communities around the globe will allow it to grow. MeritTravel.com | 1.866.341.1777

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Executive summary

In 2017 hostels were generally more optimistic about their business prospects than they were in 2016. The majority of hostels expected an increase in bookings over the next 12 months.

External factors such as the economic instability and terrorism had less impact on business in 2017 than in 2016. This seems to have contributed to the generally optimistic orientation of the sector.

The balance between direct and indirect bookings remained largely unchanged in 2017 when compared with our 2016 survey. On average, hostels drew 46% of their bookings from direct sources and 54% from indirect sources. The main sources of direct bookings were the hostel’s own website (29%) and walk-ins (23%).

The main sources of indirect bookings were OTAs (83%). The share of bookings generated for hostels by OTAs grew again in 2017, largely at the expense of travel agents and tour operators.

Booking.com and Hostelworld Group continued to be the largest sources of OTA bookings for hostels; their market shares remain largely unchanged when compared with our 2016 report. STA Travel and KILROY continued to be the leading travel agents/wholesalers, although generating a smaller share of bookings for hostels in 2017. Axis and Globe Travel and G Adventures also remained the leading sources of tour operator bookings for hostels. STAY WYSE Hostel Booking Sources Report 2017 10

Fifty-three percent of hostels reported undertaking marketing activities to increase direct bookings in 2017, mostly through social media. The results of operators undertaking such marketing activities shows that these do lead to a higher level of direct bookings.

The guest profile for hostels remained relatively steady in 2017, with around 80% individual clients and 20% groups (12 people or more).

Just over half of respondents (51%) were neutral about the effect that sharing economy platforms such as Airbnb have had on their travel accommodation business. When it comes to positive and negative assessments of the sharing economy’s impact on their business, slightly more accommodation providers were positive rather than negative.

Adverse economic conditions were again the leading external issue of concern for hostel operators in 2017, although the proportion seeing negative economic effects fell from 41% in 2016 to 31% in 2017. Terrorism, political unrest and health issues were all viewed as less of a problem in 2017 compared with 2016, but environmental issues/climate change increased as a threat.

Booking expectations for hostels during the coming 12 months were generally positive, with almost half of respondents expecting bookings to increase. Over 26% were expecting a strong increase in bookings, a significant change when compared with 2016 (15%).

STAY WYSE Hostel Booking Sources Report 2017 11

Background and methodology

The aim of the STAY WYSE Booking Sources survey is to monitor the main distribution channels through which hostels and other youth travel accommodation (YTA) providers6 secure bookings. The report offers hostel operators insights that enable them to assess their position in the marketplace, benchmark their performance, and identify opportunities to increase revenue. Just as technology and consumer preferences evolve, so do the booking channels available to accommodation providers. WYSE Travel Confederation therefore believes it is important to gather and share information on how these changes are affecting YTA operations.

This is the third edition of the STAY WYSE Hostel Booking Sources Report. This report is based on data collected via an annual survey and provides an overview of hostel booking sources in the 12 months prior to June 2017 and explores business expectations for the 12 months thereafter. Global and regional snapshots of the main online travel agents (OTAs), travel agents, and tour operators in the youth travel space are provided. The hostel industry’s attitudes toward sharing economy platforms such as Airbnb and the impact that external factors have had on the business of youth travel accommodation are also examined.

6 Types of youth travel accommodation for this report include hostels, (budget) hotels, student accommodation/residences, guesthouses, B&Bs, and campsites. STAY WYSE Hostel Booking Sources Report 2017 12

The STAY WYSE Hostel Booking Sources survey was conducted online from 15 June to 26 July 2017. Respondents were asked to report on the sources of their bookings for the 12 months prior. Findings are referred to in this report as those for “2017” and compared against the two previous surveys conducted in 2016 and 2015.

A total of 596 responses from 87 countries were collected, representing 1,133 establishments with a total of almost 116,000 beds. This is a slight decrease in reporting compared with 2016, but similar to the response to our 2015 survey7.

7 The 2016 survey included 670 responses from 89 countries with a total of 2,590 establishments and 250,000+ beds. The 2015 survey included a total of 1,276 establishments with 121,000+ beds. It can be simple.

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