Why Are Hostels So Cheap? A Look Into Why.

Maybe you’re an avid hostel goer already, or maybe you’ve just set your search on booking.com to “sort by lowest price” and just had to scroll through hundreds of hostels to find a decent hotel room. Chances are you’ve ended up on this post because your asking yourself the same question. Why are hostels so cheap? Well, there’s a whole host of reasons why hostels can keep their prices low. As a solo backpacker who frequents hostels on a regular basis, I’m not complaining! But what are the reasons that hostels can offer accommodation so affordably?

Well, to start off with we have to delve into the mechanics of the business. While hotels are often offering a high-end luxury experience, hostels are generally targeting young travellers, aged up to their 30’s. Hostels are generally full of backpackers on a budget whereas hotels are going to be full of holidaymakers and businessmen. So, if you make the assumption that backpackers are generally on a tight budget, whereas holidaymakers probably aren’t, then you can see how their business model will have to differ.

A successful hostel needs to offer good value for money. The reason they are popular is of course because of the social aspect for young travellers, but also the affordability they offer. With this being the case the hostel market has to price its self competitively in order to attract customers. But how exactly do hostels keep costs low enough to offer their accommodation so cheaply?

How Hostels Keep Their Prices Low.

Well, as I said in the introduction their are a variety of different ways that hostels keep their costs down and in turn, pass that onto the customer. But the biggest reason that hostels are so damn cheap is the way they are set up.

For those of you that have never stayed in a hostel before I have a full guide you can read, but this post isn’t really about that. This post is about the way hostels are run and how they operate so cheaply, so let’s get into the reasons why hostels are so cheap!

Dorm Rooms.

This first one is pretty obvious but it really is the main reason why hostels are so cheap. The way hostels differ from hostels is the fact that they operate by providing you with a bed in a dorm, rather than a room to yourself. This as I said before, is one of the reasons solo travellers absolutely love hostels. There is a great social aspect and making friends in hostels is super easy! But asides from the amazing social side of staying in hostel dorm rooms, you are technically splitting the cost of the room with the other guests.

Let’s say you are travelling in western Europe, Germany for example. You need somewhere to bed down but the hotels at €60 are out of your price range. You see a hostel offering a bed in a 6-bed dorm room for €10, great you’ve just saved €50 on accommodation! But the hostel still has the potential to make €60 from that room, assuming it’s full. So hostels arent necessarily cheaper, you’re just splitting the cost of the room between guests.

They Are Often Staffed By Voulenteers.

Hostels are frequented mainly by travellers, as I have said previously. Sometimes these travellers love a hostel and city so much they want to stay for longer than they anticipated! Many hostels allow volunteers to stay and work for a few hours a day in exchange for accommodation in the hostel and usually free meals. I write more about this in my guide to staying at hostels for free.

Obviously, the fact that many hostels utilize volunteer staff allows them to save costs on wages, and in turn make the accommodation even cheaper in order to attract more guests and stay competitive with other hostels. Also, in my opinion, volunteer hostel staff really add something to the experience. It’s just a nice touch to have staff that are on the same page and journey as your guests.

Hostels Have To Be Competive In Their Pricing.

Affordability is such a key element to why hostels are so popular. Most travellers are young and on a budget. So hostels are the only feasible way they can continue to travel for an extended period. Without sleeping on park benches that is. So hostels have to compete with each other over their pricing! If a hostel that offers the same as all of their competitors is pricing their beds much higher than the others, chances are, nobody’s going to be sleeping in those beds!

There are hostels that offer more than just a bed however. I have found that popular party hostels are usually considerably more expensive than just your regular hostel. Gaint 10 story budget hostels (which I hate) are usually priced lower than all other hostels. So it’s not that all hostels are competing in price, but within their own separate niches, they have to. Which is great for anyone looking to stay at one. If there’s an abundance of customers and only a few options for them prices will go up. However, when there is an abundance of hostels (which there is in most cities) then prices will fall as they try and compete for your money!

Their Target Market Are Young Travellers On A Budget.

When your target market is young people who usually don’t have much money as it is, you’re really faced with no choice as a business but to keep the prices low enough for them to be able to afford it! That’s if you actually want people to stay in your hostel.

It may seem like a bad idea for your target market to be people with relatively low spending power. But like I said previously the rooms have the potential to make the same as hotel rooms, if not more. The fact that each person in the dorm is paying for their own bed it makes the accommodation affordable for the customer but because of the potential of the room being full of paying guests, it remains profitable for the hostel.

Another positive for hostels is that travellers really don’t expect too much from the hostel. If you are staying in a hotel and there is a slight issue, your probably going to complain and expect it to be resolved. However, in my experience, people in hostels have a different attitude. We know that we are paying a really low price for accommodation and we really don’t expect that much! As long as there are fresh sheets on the bed, running water and no rats running around the dorm, we’re generally pretty happy.

One of the main draws of hostels for this demographic (especially solo travellers like me) is the social aspect. The reason I love hostels so much is because of the number of interesting conversations and lifelong friends you will meet in them. If a hostel has no social atmosphere I will be more disappointed by that than the lack of a recently refurbished room, as will most guests.

So To Recap On The Ways Hostels Keep Themselves Cheap…

• Hostels are made up of dorm dorms, each guest pays a fee for their own bed. So technically they split the price of the entire room.
• They are often staffed by travellers who voulenteer, keeping the wage bill to a minimum.
• Hostels have to keep prices low to attract their target market; young travellers on a budget.
• Also they have to compete with other hostels to be the most affordable, again to attract budget concious travellers.

So Why Stay In A Hostel Rather Than A Hotel?

Well, for starters obviously the money you will save should be a massive draw! But more importantly, is how great the hostel atmosphere is! If you are a solo traveller you really have to stay in hostels if you want an authentic solo backpacking trip. They are such a great place to make new friends, have the most interesting conversations and learn from people from a myriad of different cultures and backgrounds.

Really it does depend on what you want from your trip though. If your going for a romantic getaway with your partner, a hostel dorm probably isn’t suitable. But if you’re travelling to a new city with a friend and you’re looking to bed down on the cheap and/or to socialise with other people, then hostels are the way to go! I could talk all day about how good hostels are, as you’ll see from the other posts on my blog. Really the message I’m trying to get across is don’t be scared of staying in hostels. They aren’t cheap because they are horrible and they cut all costs possible. They are cheap because they operate in a completely different way to hotels, if it’s a way that suits you, I can’t say, but you should definitely check in to one and find out!