How hostels are being redefined in the post-pandemic era

When German teacher Richard Schirrmann converted a former classroom to accommodate young travellers on a budget in 1909, no one could have predicted the global movement he would inspire. Three years later, Schirrmann bought a castle near Dortmund to establish the world’s first youth hostel and by the 1920s, Germany had 2,000 low-cost hostels dotted around its rural areas. But it wasn’t until a group of Brits brought the idea back to the UK and launched the Youth Hostels Association (YHA) in 1930 that the new movement gained its poster child.

This July, after more than 90 years in operation, the charitable organisation announced it will sell off 20 of its 150 hostels. Given the hammer blows of the pandemic, it wasn’t wholly unexpected. YHA’s affiliated New Zealand organisation collapsed in December 2021, with the loss of 11 hostels. By December 2022, 19 of YHA Australia’s hostels were also permanently shuttered, and the country’s Nomads hostel brand shut down or sold six of its 16 properties. 

“All hostel organisations around the world were really badly affected by the pandemic, because obviously we’re relying on people sharing space,” says YHA chief executive James Blake. “We lost 80% of our income in the first year of the pandemic and 50% in the second year — that’s about £70m in all.” He points out that it wasn’t until April 2022 that hostels were finally able to operate normally again in the UK, when shared dorms reopened. 

For the YHA, the aftermath of the pandemic brought what Blake describes as a “perfect storm” of challenges: inflation (labour, laundry, food), spiralling energy costs and the cost-of-living crisis. It’s this, coupled with depleted financial reserves, that’s forced it to sell off 13% of its UK hostels. 

Despite this latest blow to the industry, demand for hostel beds doesn’t appear to have dropped much — the YHA says guest numbers are now running at about 90% of pre-Covid levels. And according to data from online travel agent and booking site Hostelworld, in November 2022 bed bookings in some countries around the world surpassed 2019 levels. Although the hostel market is still strongest in Europe — accounting for 50% of bookings on the Hostelworld platform — bookings have soared in countries that have historically been cheaper to travel in, such as Egypt (up 106%), Turkey (67%), Guatemala (87%), Mexico (55%) and Laos (33%).

Price is certainly one of the biggest challenges right now. Anecdotally, it’s thought that many cities are operating at half the hostel bed capacity they were before the pandemic. To offset spiralling costs, hostels have leaned more heavily on price surging — increasing prices when demand for them is greatest. As a result, the cost of dorm beds has rocketed, in line with the double whammy of high demand and low capacity. The rising number of solo travellers has only increased demand for hostel beds further. 

Finding new value

“The days when you could travel on a 2p Ryanair flight and spend €10 on a hostel bed are not coming back,” says Kash Bhattacharya, who runs the Budget Traveller website and is the author of The Grand Hostels: Luxury Hostels of the World. Although Bhattacharya has seen the cost of travel increase across the board, he believes it’s most noticeable — and keenly felt — when it comes to hostels because they’ve always been seen as a bastion of cheap travel. 

In Europe, prices have become notably higher in key cities, where overtourism is an issue. As Bhattacharya says: “If you’re willing to get off the beaten path, there’s still a lot of value. But if you want to go to places like London or Rome, there are too many people travelling and you’re always going to pay over the odds for a hostel.”

Oliver Jakes, a 23-year-old who’s just returned from three months biking between European cities, says he found hostel prices had doubled since he took his last trip, Interrailing through Europe in 2018. “This time around, if I found a dorm bed for under £40, I’d be happily surprised,” he says. And to get these prices, he needed to book around four weeks in advance, leaving little room for the spontaneity that traditionally came with backpacking.  

To cut down on costs, Jakes camped between visits to big cities, but he says he found most Interrailers headed straight to city-centre hostels because they were travelling on foot. Higher prices in cities such as Paris, Copenhagen and Amsterdam meant he had to cut back on other things like food and comfort. “More centrally located hostels were more expensive but they also had worse conditions,” he says. “In Oslo, I paid £50 for a bed but it was just horrible: very hot, with 14 people to a room and only one bathroom between all of us.” 

Ultimately, Jakes believes, the key aspect that keeps young people booking is the social scene that’s at the core of the hostelling experience. “Hostels are still a good option if you want to go out, because they’re a good way to meet people,” he says. “I think a lot of hostels can set a higher price because they’re essentially charging you for entry into the hostel’s social sphere. It’s like paying to enter a club.”

It also seems to be the case that the hostels which offer something more are the ones that are excelling in the post-pandemic world. “I always say the mark of a great hostel is when the staff and the owner give you the keys to the city,” says Bhattacharya. For him, experience is king. That might mean impromptu city tours, in-house cooking lessons or insider recommendations.

He cites Bogentrakt, a new, independent hostel that opened in Switzerland this year, and which he visited in the summer. It’s the first hostel to open in the small Alpine town of Chur, occupying a former prison in the historic centre. “It’s a beautiful hostel and there was a whole mix of characters there — a young family, a film crew, backpackers from Finland,” he says. “Marco Leibundgut, the owner, cooked up this classically Swiss dish called capuns. Nobody paid for this. It’s the type of experience you’d have had 20 years ago in a hostel — drinking and eating together, and just talking.” 

Community & connection

That type of experience might explain why Airbnb hasn’t had as much of an impact on the hostel industry as some observers initially predicted. At its roots, travel will always be about connection and the current Airbnb model is a far cry from its original intention to help independent travellers connect with locals in their own homes. On a social level, rarely can the Airbnb experience compete with the community aspect of hostelling, and that sense of community is particularly strong in the independent hostel market.

Here, owner-managers have a vested interest in ensuring their guests experience their home city in the best possible way. In recent years, some have also diversified to increase their appeal: spare lounges have been converted into co-working spaces to cater for digital nomads; aperitivo hours and karaoke nights are creating social opportunities for solo travellers; and dorms have been carved up into private rooms to appeal to those seeking more seclusion in the aftermath of the pandemic.

Some, such as The Beehive hostel in Rome, were forced to diversify during the pandemic. While The Beehive offered cooking classes and family-style dinner nights before 2020, owner Steve Brenner — a keen baker — launched his Beehive Bagels business in October 2020, as a way to make ends meet during lockdowns. Bagels had always been served at the breakfast table in The Beehive, but by the time the hostel emerged on the other side of the pandemic, Beehive Bagels had become a fully blown business, delivering all over Italy. 

Alongside the evolution of the independent hostel, there’s been a rise in private-equity-backed, branded hostels — and these players are doing a good job at differentiating themselves, building on the ‘flashpacker’ (backpacking with a bigger budget) trend that took off in the decade before the pandemic.

Top of the game is Generator, a boutique brand of 16 hostels in key ‘honeypot’ cities around Europe, including Venice, London, Amsterdam and Berlin. Their interiors are heavily design-led and many come with extras such as shuffleboard bars, karaoke and DJ nights, and swimming pools. In the US, its owners also run the hybrid Freehand hotel brand and the Broken Shaker bar chain, which features on the US section of The World’s 50 Best Bars list and is starting to be introduced into Generator hostels. Prices run from £30 for a dorm bed to over £800 a night for a suite in New York.

All these bells and whistles come at a price, but it appears plenty of travellers are willing to pay. CEO Alastair Thomann says Generator has never been more profitable — and its nightly rates are now the highest they’ve ever been. “We sell out every night,” he says. “I think what we’re doing differently to a lot of the other properties out there is that you’re essentially getting the same amenities and the same surroundings and quality as a really good lifestyle hotel — but you can have an entry-level price point by just buying a bed.” 

Thomann adds that one of Generator’s fastest-growing markets post-pandemic is families, a trend also witnessed by Blake at the YHA. “If you want to do a city location nowadays, four-star hotels have become completely unaffordable,” says Thomann. “So you move together as a family and take a four-, six- or eight-bed dorm, and it will end up probably 50% cheaper than staying in a three- or four-star hotel. If you go to Amsterdam, Rome, Venice, wherever — how much time are you really spending in your room anyway?”

The space-sharing economy that underpins the industry is also what makes hostels one of the most sustainable ways to travel. In September last year, a report by sustainability testing and certification specialist Bureau Veritas, conducted in partnership with Hostelworld, found hostels only have 25% of the carbon impact of hotels. Bhattacharya believes they’re innately sustainable because of their role as “guardians of the local community”, encouraging travellers to go out and spend money in the local area rather than tucking them away, as an all-inclusive resort might do. 

Hostels may be evolving, but if the industry can hold onto its core values of connection, community and sustainability, they will always have a formative role to play in how we, as travellers, grow up and see the world.