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What can Hotels learn from Hostels?

Deon Wagener, Senior Revenue Manager
Sep 22, 2020 - 3 minute read

In my revenue management career, which spans nearly 9 years, I have seen many ways and styles of revenue management in general. I started my career with a 5 star luxury hotel and managed everything in-between. The most challenging encounter I had was without a doubt Hostels.

Hostels are a curious segment. The luxury brands look down on them, the economy brands don’t want to be associated with them, but in the end I have to admit that the way hostels revenue manage, we all could take a page from their book.

First, what exactly is a hostel and how is it different from Hotels as we know it? In a nutshell, Hostels are in the business to sell mainly beds. However, I prefer to associate the term Hybrid to Hostels, since they also sell Dorms and Rooms on top. They need to have extremely high operational efficiency due to the low margins and high volume product.

By having this efficiency, hostels are able to scale up/down resources as needed. Hostels have 3 different categories which have completely different demand between them. These categories (starting at the most granular level) are Beds, Dorms and Rooms. Beds are the bread and butter of hostels and this makes up the majority of the inventory.

The encounters I had with hostels all indicated that there was next to zero technology available to them and most hostels had to rely on Excel and proprietary systems, so very much bespoke. The really complicated part comes into play with systems since hostels do not want to have a fixed supplement between the different Beds, Dorms and Rooms. Understandably so!

Hostels want to be able to yield their categories completely independently from one another since they realised that each category has different behaviour and cannot be purely derived from one another. Most known systems out there are not able to offer this capability.

The big question is why? Shouldn’t all room types be treated as its own category with its own demand? Shouldn’t hotels be treating their room types similar to hostels? Small caveat: I have worked with some hotels who have already reached this level of sophisticaton.

For most revenue managers the big obstacle is their systems capabilties. The tech partners out there are unfortunately not as sophisticated as hostels when it comes to managing the room/bed types as its own defined category with its own unique demand. That is luckily changing as now there are some pretty good new PMS’s out there and of course let’s not forget that PACE has been having this capability since day one and have recently launched Pace Analytics where users can properly monitor the impact.

So, what can actually take away from all of this? I would argue the key takings are that each Revenue Manager out there should treat every room category/type independently from the other. This can only truly be done if you are able to determine the demand for any given time (comes into play the tech stack).

There is no better time than now to actually invest in the right technology to prepare for the post Covid era. Many will argue that it’s not the right time, but quite frankly, when is it ever the right time? Hospitality has always been one of the slowest industries when it comes to change. The hotels and hostels that are having the best tech stacks will be the ones coming out of the pandemic the strongest.

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