Hostels

So I decided to look at how a hostel would do in my town in the UK, where we have growth in tourism, and I did a little research, found ( 10 year old, tourism is higher now ) monthly occupancy statistics. I did some vague estimates on room prices, based on being a few quid LOWER than same rates as existing hostels in the town. Some even vaguer estimates on ancillary spending per guest per night. Estimated staff costs, energy costs, insurance costs ( This one I had no idea about I found one figure of £500/month, no idea if that's realistic ) mortgage costs ( on a very large mortgage, far higher than would probably be necessary ), etc etc. What I consider to be all the costs, although maybe I missed some out. Factored in the business rates of a similarly sized hostel, VAT and corporation tax, as well as NI on staff.

Then I extrapolated the occupancy statistics ( which for 2017 I'd say are quite conservative ) onto an arbitrary arrangement of dorms, beds and prices so I could get an estimated turnover. - Costs, and I get a quite positive number. In spreadsheet land it would be quite profitable! So I'm wondering, how the hell do I start a business, and how the hell do I get money in order to buy premises?

Bump, or is biz only for crypto posting now?

Do you already have a relationship with a bank? It sounds like you don't.

What you need is a business plan. You can google templates online. You've clearly already done due diligence.

What you need to do now is compile all of that into a "story." Get it into a short, readable print-out and get it bound at a Kinko's or whatever they use in Limeytown.

Go to the bank and ask for a loan. Be prepared to explain why you are the best person to get this off the ground.

Yeah I've got absolutely no idea about banks, banking, loans, running a business, none of this. I've got no full time job and 0 credit score and I live with my mum. That's all mystical to me. Also 0 capital, and my family wouldn't be willing to give me a penny. So that would make it all somewhat problematic. So I don't think going to a bank myself would be realistic.

So the followup question is, what do I do in these circumstances? Not a lot right?

If you won't get a loan there are a few options:

a) Look for business partners / investors
b) Do a) but also work in lodging / hospitality. Shows your willingness to learn and that you have skin in the game.
c) Start small. Rent a room, try to market it and make money with it, then bootstrap or get some funding

Maybe read some books about starting a business?

Get a job and try to save some money

Well I doubt I'd get a loan, although that's what I'm kind of asking here, would there be any prospect of getting a loan?
given that I'm just a kid with no money. And that's assuming I find the right premises. Which would be really quite difficult as well as it has to fulfill a lot of criteria. Would require some waiting around. And that links into the starting small thing. In my head, one could begin with a property of say, 20-25 beds. Set up with perhaps 12 beds of dorms, and then 12 beds spread over private rooms. Private rooms being configurable as 4 bed dorms, or 4 bed private rooms depending on demand. From there you could gauge the demand for the different types of accommodation; dorms or rooms. To see what kind of direction you'd want to expand in.

From there you'd be able to get a mortgage to either buy new larger premises, or extend the original premises into a larger more profitable hostel. That seems reasonable to me. For now it would be that first step which is difficult.

As for a), great idea, other than asking my friends ( who have as little money as I do, and I'd rather not go into business with my friends ), how could I go about doing this?

as for b) already working in construction, which also gives me a lot of help in that I would have the capacity and connections to do up a dilapidated building in order to save money. So I'll stick with this.

c) is a possibility I'll look into renting premises.

>I'd rather not go into business with my friends
Very good decision and don't think of yourself as a kid. This only hurts you.

If you do your homework you will get money for your project. Rich businessmen, lawyers, doctors, older business owners, etc. Meet with them you'd be surprised how many chances you will get. A lot of people have money but there aren't good enough investments.

An good acquaintance got the chance to build an apartment building with 40 units when he was 25. The owner liked him, gave him the money and said "do whatever you want with it as long as you build the building to my standards".

You may also have heard of this guy Trump who bought and renovated his first hotel for about $120mil - around $114mil came from Hyatt.

Thanks for the reply. What do you mean, he got the chance? The owner of what? The land? Interesting nonetheless, in fact if I could I'd much rather that the premises were built from scratch than using an older building because that would allow all the design to be optimised for efficiency and being adaptable, and old buildings inevitably go wrong and take their own tithe in maintenance costs as well as being less energy efficient etc etc. But that's even more ambitious than using an existing building. So for now the plan would be to aquire a dilapidated building, old guesthouse, something like that.

As far as doing my homework, this is where I'd have no idea where to start. I would ask my family and if they were inclined they could probably fund most of it. But that's a non starter sadly and they're far too conservative in their outlook to think that any business could ever make money. Unless you're working for somebody. So as for doing my homework, where should I start doing my research with regards to that?

Also I should say what with Brexit, I think it would be a good time for such a tourist venture what with low interest rates on the mortgage and a lower currency encouraging foreign tourism.

Bump

>What do you mean, he got the chance? The owner of what? The land?

The owner of the land. The owner asked him if he has the confidence to execute this building project for him. He accepted and was successful. Made $1m off it because he was under budget.

Homework

Write a solid business case / business plan which includes a solid financial plan (worst / average / best case). Know your numbers, know your contingencies.

I bet there are tons of resources online especially about the lodging industry.

And get at least some experience. Building is great but get some lodging / hospitality experience. Work part-time in a hotel, learn how they work, learn the lingo. This is in my opinion your biggest weakness in the moment.

When you feel confident approach possible investors and partners. Showcase your plan, talk with them, learn from the experience. Improve. Talk with people in the industry, talk with hotel owners.

Thanks, well I've worked in hostels for accommodation. So I know the general system and what needs to happen every day physically for the place to run, and it seems to me a hostel is a lot simpler than a hotel to run;- far less staff, no catering. May do some more of that in Summer. Writing a business plan, I'll do that, I've got a spreadsheet with all the numbers. I suppose I'd need to identify potential premises for a business plan though? Right? The largest hurdle for my would be the last one, approaching possible investors. I know nothing about investment, and whatnot, so are you talking about just firing off an email to every hotel in town, although I don't see other hotels wanting to invest in a competitor, or are there specific businesses or organisations that may be worth approaching. And when you say approach, just email them? Write a letter? Knock on their door? Just email them like; 'hey I've got an idea for a hostel, Estimated higher end profit is XYZ, middle is ZYX, lower end -XYZ, any advice on that?

Certainly one thing I'll do is contact my local tourism board and see if they have more up to date occupancy statistics. Not sure how I'd be able to calculate lower end and higher end estimates. The stats I'm using right now are the monthly average occupancy statistics of all the b&bs and guesthouses in my town for 2007. I can scale up or down those stats by any factor I like on my spreadsheet ( Breakeven point at the moment is reached at ~0.63, which gives 50% occupancy in August; peak month, which given the state of the industry in my city is ridiculously low )

Would it be acceptable to just say that occupancy is normally distributed about the averages for the whole city, and then just use 1 standard deviation above and below as the lower and upper projections? Obviously I need to seek out more up to date figures, not least because they'll be even more optimistic than the 2007 figures I'm using.

Should also say that I've checked the other hostels in my town for occupancy, for the last couple of days, and they have very few beds; so they're already at 80-100% occupancy. The 2007 figure for May is 70%, so already it looks like a reasonable proposition. I'm going to write a script to check hostelworld daily for the local hostels to get their real occupancy rates for this summer.

Any more opinions? People with experience in this?

Bump

>I know nothing about investment

There's tons of literature online if you look on how to get (venture capital) funding. I create a VC pitch without having any prior experience in the field and nearly all investors were pretty impressed. I wouldn't necessarily say that other hotels don't want to invest into your project. Not every hotel is your direct competitor. Hostels are pretty low class. A 4 or 5 star hotel isn't your competitor but such a hotel could be interested in your project because it allows them to participate in a different customer segment, e.g students / young professionals. The same people could 5 years later stay at the 5 star hotel because they engaged while on vacation visiting your hostel and returned for their honey moon.

Generally, it isn't just about your profit. More visitors for you means more customers for regional restaurants, shops and attractions. That's one of the reasons, besides learning and leverage, that having good relationships with local (tourism-related) business owners is so valuable.


To your main question: Knock on the door if they work as a doctor or lawyer isn't such a bad idea. Or if they are some public events just go and talk to them. E-Mail is nice, too. Make it short, just sell the phone call in the first step. In the phone call you sell the meeting. In the meeting you sell yourself and your idea. And always follow up. For examples, use your favorite search engine

1 or 2 standard deviations is more than fine. In the end they won't invest in your idea but in you. And that's why doing your homework is so important, it shows that you care, it shows that you are prepared and it shows that you're willing to work hard. And that's what a lot of people with money like.

The main thing here is know your shit and don't fuck around. If you're going to be looking for investors then you've got to have your plan be robust.

Their trust in you is of the utmost importance. A friend of mine started a niche eco tour company and that's how he got his investors. He said they flat out told him that they weren't too certain of his plan but that if anyone could do it it was him due to his knowledge and dedication. Company worked out it's not anything massive but he's running a profit now.

I'm currently looking at investment and how to gain that, I hadn't really considered that that would even be an option at this stage, all I've got worked out is the numbers which show that it would be a pretty robust business with good prospects.

In terms of local businesses and engaging with them, that's something for once the hostel is running. For example one idea I had is to contact Hostels in cities which feed to my town, and then propose some sort of arrangement whereby they direct bookings to me, and in return they get a proportion of the booking fee. And of course you could have partnerships with local restaurants, pubs, etc etc. Lot of opportunities there, none of which I've factored into my sums.

I think I will look at drawing up a business plan, with blanks for the building I'd use, seeing as at the moment there's none that I would consider acceptable in my town. Would it be appropriate to approach potential investors with a business plan, with a blank space when it comes to location? Or should I only approach hotels, 'venture capital (what is this actually??)' and perhaps property companies or portfolios, would these be the right people to approach? Property developers and portfolios and funds and whatnot?

As far as pitching goes, I'm not an autist, I can talk well enough. Only things going against me are that I'm young, and I have absolutely 0 business experience. I've never owned a hostel or had paid work in one, so I think all these things would weigh heavily against me. However the numbers at least as far as I can see, and if I've not missed anything out, are robust, not a startup super-growth industry, but robust and profitable.

Just looking around, and was reminded of the princes trust, is this the kind of thing that I could approach the princes trust with? Any experiences with them?

Bump for brits

Beddybump

Bump