Hostel market showing 'early signs of success' as customer base broadens beyond backpackers

Sebastian McCarthy
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According to analysts there has been a growing demand among families and businessmen to a market traditionally dominated by young backpackers.

One of the UK’s leading premium hostel operators reported a 60 per cent rise in revenues in the six months to the end of June, in the latest sign of the growing demand among families and business people to a market traditionally dominated by young backpackers.

Safestay, an emerging high-end owner of hostels in Europe, reported this morning that it has sold a total of 284,000 nights in the first six months of 2018, increasing from 140,000 in the same period in 2017.

“We think this is an emerging sector with some early signs of success, much like budget hotels were 20 years ago. It’s a very interesting space with the first few players starting to appear, with Safestay being one of them,” Canaccord equity analyst Nigel Parson said to City A.M.

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Parson said that three sectors of customers were now making up the hostel market: “There are the backpackers out doing their global tour. Secondly, there are the school trips and football teams and people travelling for events. And lastly there is the growing awareness from families.”

While Safestay suffered a pre-tax loss of £0.8m as it ramped up investment in the first half of 2018, revenues soared 60 per cent to £6.5m.

Safestay chairman Larry Lipman told City A.M.: “We’re seeing businessmen in suits, single travellers, mum and dads with babies – there is a huge customer base now.”

Lipman added: “There is a movement in the whole sector, of which we are playing a part. If you look at student housing as it was 10 years ago...that is where the student hostel market is today. There is so much opportunity and growing attention, and there are some big ticket deals being done.”

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Hostels in the latest sign of an alternative property investment grabbing the headlines for higher-than-expected levels of growth in recent years, with sectors such as hotels and student housing also becoming more mainstream among investors.

Recently Nick Barker, the finance chief at student property developer GCP, told City A.M.: “The student market has changed. People used to talk about student property as an alternative asset class but now it’s a mainstream market with sophisticated deep pocketed investors who see value in student accommodation in London.”