Traveling is a crucial part of life. People who are overburdened with their jobs and other work always look for an opportunity to get a break and traveling is a great way to freshen up yourself and come back to work with new enthusiasm. Today, we will be exploring the hostelworld business model which has 20 plus years of experience in the travel industry with more than 13 million reviews on the website across more than 17000 hostels in 179 countries. It is basically an online travel agent which has thousands of hostel listings for your next travel accommodation.
This business model is super amazing for the ones who love traveling and self-discovering. Also, you greet like-minded people during traveling as they are on the same path of adventure as you.
Let’s understand the hostelworld business model in detail and get our usual answers to “How does hostelworld work?” and “How does hostelworld make money?”.
Hostelworld- the beginning
In 1999, Hostelworld was founded by Ray Nolan. In the beginning, the company was launched under the name “Web Reservations International”. However, in the early 2000s, the name was changed to “Hostelworld”. The company is headquartered in Dublin and has offices in London, Shanghai, Sydney, and Porto. It has been publicly traded on the London Stock Exchange since 2015, as Hostelworld Group PLC.
Hostelworld- The present state
At the present time, it is leading the travel industry extraordinarily. It focuses on travel enthusiasts who are generally aged 18-35. Nonetheless, its services are all for all demographics- couples, young travelers, old travelers, group travelers, solo travelers, etc. It has now turned out to be the best place to discover and book hostels online. Hostelworld is a leading global online travel agent which is focused on the hostel market to provide inspiring adventures to its customers.
Hostelworld Business Model
Before answering questions such as “How does hostelworld work?” and “How does hostelworld make money?”, we must understand the business model in detail. So, let’s move on to discussing it in detail.
Hostelworld’s business model is very much similar to the other online travel agencies. Keeping all the business strategies on one side and its main occupation on one side then, we realize that it is a simple online travel agent (OTA) with some strong business strategies. The company doesn’t own any property. It is just an online marketplace that connects travelers with hostels. It lists various hostels on the website for the access of all its travel customers who wanted each and every detail regarding the place. The platform specifies detailed information about the hostel and also allows customers to compare the best options available. It shows all the reviews, ratings, and compares the property on the basis of rank in staff, security, cleanliness, money, location, atmosphere, and facilities. The payment can also be done on the same platform without having to look for other options.
Features of hostelworld app- a brand strategy
- My Trips: This feature lets the user know the local weather and also provides a recommended list of the best places to eat before the trip, during the trip, and also after the trip. It was launched as the first move to give their customers/ app users a reason to use the app for more and not just for the regular hostel bookings.
- Hostel noticeboard: It is a feature that enables the partnered hostels to promote local events and activities through a virtual noticeboard that allows the customers to meet new friends from all around the world. Customers get timely notifications about the event and relevant information for stay.
- Hostel chat: This particular feature of the app allows the travelers staying in the same hostel to chat with each other through the app and make travel plans. This is a great opportunity for solo travelers to connect with new people and gain an opportunity to make new friends during travels.
- Speak the world: Hostelworld’s app creators well knew the fact that hostel travelers are open-minded and are keen to know unknown cultures and connect with them. So, the app has a feature that translates up to 43 languages allowing travelers to communicate with each other which otherwise is not possible.
However, Hostelworld and many other companies from the global travel industry faced a huge loss because of the COVID-19 pandemic. It was reported that Hostelworld has faced a €17.3 million loss at the Ebitda level, down from €30.5 million profit in 2019. In 2020 also, their net annual revenue fell by 81%. During these tough times, the company’s main focus was on the support of employees, customers, and other hostel partners by accelerating their business as soon as possible. The CEO of the company, Gary Morrison is hopeful that as the vaccination programs are going on all around the world, the company’s loyal customers will come back after the travel restrictions are removed. He is confident that after the pandemic, hostelworld will emerge stronger than it was before.
How does Hostelworld work?
Hostelworld is the largest website present on the Internet for booking hostels and accommodations. The website lists more than 17,000 properties in 179 countries. It is a reliable and efficient reference platform with thousands of reviews on the property that are given by hostel guests.
To search for the best hostel for your next accommodation, you will need to input the target location and the dates of travel to generate a brief list of properties available at that time and location. You can easily filter them according to the prices and ratings of the hostels. Once you have finalized the booking, you will receive a confirmation in your email.
The most important and attractive thing about the platform is that it guarantees the best price for the property. It says that if you find a booking cheaper on any other website, then they will refund your money back.
Hostelworld also runs its own app to compact its functionality in an app form that is user-friendly for the customers. On the app also, there are the same features and functionalities available as on the website. The booking and payments can also be done using the hostelworld app. The app has an additional feature which is the availability of checking nearby hostels for any last time bookings. It also has an in-built app to check nearby locations and choose a property for accommodation. The app also hosts regular meetups and events which allows people to meet new friends.
How does Hostelworld make money?
Hostelworld is an online marketplace that works to unite hostels and tourists.
Typically, hostels can reach more potential clients by leveraging Hostelworld’s platform than by trying to advertise on their own. On the other hand, tourists/guests can use the property as a one-stop-shop location, to explore, compare and book hostels instantly and securely.
Here are its two primary income models:
- Commission fees on bookings
- Recommended properties (Ads)
Booking Commission Fees
Hostelworld receives a commission each time a client books through its website. This commission is known as “booking deposit” fees. As renters, we pay the booking deposit when we make the engagement. We’ll pay the balance of our booking total to our host when we reach for check-in.
Hostelworld enables properties to determine their commission fees (between 10-25%). The chosen commission fees are one of many circumstances(including reviews, information, photos, and more) that affect a property’s ranking in the search results available on the website. In their account backend, customers can see how their property is projected to change in the ranking (if at all) by raising or lowering their commission rate.
Hostelworld’s adjustable commission option mixes feelings among hostel owners.
In less competitive areas, hostels can increase their profits by spending a low commission rate and yet rank best. Conversely, hostels in high competition areas may feel the system helps hostel chains with deep pockets and brand recognition, as they can bear to pay higher commissions and don’t depend on Hostelworld as much for customers.
From Hostelworld’s view, providing adjustability for modifying budgets while still incentivizing properties to pay for larger exposure.
The system makes sense because it’s in Hostelworld’s best long-term benefit to regularly provide guests with the best possible hostel life. If commission fees ever became the dominant ranking factor, Hostelworld would soon lose its credibility, and ultimately its customers.
Recommended Properties (Ads)
Hostelworld also increases its profits by selling advertisements on its official website. When you search on Hostelworld, you will frequently see the “Recommended Properties” part above your search results. Featured Properties pay Hostelworld for this display so that they can attract more customers.
Hostels Payment to Hostelworld
As a visitor, your booking amount goes straight to Hostelworld. This amount serves as the hostel’s commission fee to Hostelworld.
Basically, Hostelworld charges this price for the display and automation the site provides for hostels. Most hostels find it difficult to get exposure online without booking sites like Hostelworld.
How Hostelworld Charges Travelers?
Other than the booking amount, Hostelworld doesn’t charge their tourists/guests. Ideally, booking amount helps reduce cancellations since customers have something invested. But if a traveler cancels or doesn’t show up, a cancellation/no-show fee is charged.
Since guests’ booking amounts go directly to Hostelworld.com, sometimes you’ll find lower prices on the host’s website.
Who are Hostelworld’s investors?
Hostelworld is an online booking website that allows travelers to book hostels for their travel accommodations. According to Crunchbase, Hostelworld has invested only in Goki on 2 September 2019. The lead investor’s count of hostelworld is also one. The company had acquired HostelBookers.com on 11 April 2013 for €100 million.
Report on the evolution of hostel travelers by Hostelworld
Hostelworld has posted a report on the evolution of hostel travelers which will help us better understand the scope of the travel industry in the coming years. Here are the major conclusion points that the report mentions:
- Future travelers don’t want to visit a place that everyone else has been. They are seeking fresh adventures where many people haven’t ever been. To accomplish this desires hostels are investing in giving new experiences to their customers.
- In the coming years, hostel travelers will be most probably women. So, hostels have to take care of the security and cleanliness to create a healthy environment for all the women visitors.
- The upcoming travelers look for destinations they haven’t ever visited. Most of them do not want to try the same place again and again. This creates an opportunity for the development of hostels in the traditional areas where most people do not usually visit.
- Travelers want to visit more places in the same city. They want to make out the most from the place they have booked. Future hostels that are planning to give their property to travel agents must highlight the visiting places to their customers for attracting them to invest.
- The report says that the stereotype which was prevalent that young travelers just want to party with friends during travel is not true now. They want to make the most out of their vacation time by creating new memories and gaining new experiences from the destination they visit. Although it includes night stays and meeting new people it doesn’t include drinks, parties, and shared experiences.
- Tomorrow’s travelers are going to consider many things such as the tourist attraction, food places nearby or some attractive places to visit. Hostels have to take care of these factors also to keep attracting new customers.
- Tomorrow’s travelers plan their trips much further in advance. Gone are the days when people left their travel plans to chance. Now, they have definite travel goals to achieve during the trip.
- Internet is ruling everyone’s day. Before choosing anything, people first google for the reviews of that product. For hostels, online appeal and positive reviews are very important to attract young travelers.
- Although price is a key deciding factor for hostel travelers to book their trip, young travelers are increasingly less conscious than the previous generations. They are less influenced by getting good deals on flights and accommodations.
- A desire for quality accommodations is increasing among young travelers, so hostels should continue offering quality design and decor to attract young travelers. There has been a 28% increase in the importance of the quality of hostels from past to future travelers.
- Hostels should look for expanding their payment options as future travelers increasingly don’t want to use credit cards or cash anymore.
- Asia has always been one of the favorite places for travelers mainly because travel in Asia is affordable and the ratings of hostels are greater than eight out of ten. As per the data collected by Hostelworld, Thailand and Vietnam are the most visited hostel properties operating up to date. Columbia is also a favorite destination as it provides hostel guests with a wide variety of options ranging from friendly budget to true luxury.
In 2019, the travel segment was the largest segment of the online travel agent market. The global online travel agent market gained great heights in 2019 but faced a huge dip in its growth rate due to the COVID-19 pandemic as all the countries in the world went into complete lockdown and then in 2021 also, there are many travel restrictions worldwide. Industries like airlines, railways, hospitality, travels and all such sectors faced a major setback because of the pandemic. However, slowly and gradually, as the restriction are being removed, growth is being observed.
The rapid population growth, economic growth, growth in the no. of internet users, and government initiatives will drive the market for online travel agents.
The growth of smartphone and internet users is anticipated to grow the online tourism industry. The increasing involvement of people with the internet increases the chance of their shift toward the online channels for booking their travel tickets. Still, the major hindrance towards the growth is government restrictions, geopolitical tension, and of course the still prevalent corona virus.
To take advantage of the coming opportunities, online travel agents have to make major changes to their business model and make transformations that are compatible with the coming generation also. They have to make considerable changes as we have discussed in this article to grow in the coming future. Online travel agents have to make the best use of various online channels available on the internet and leverage social media marketing. They will have to invest more in online advertisements because there’s a huge opportunity of attracting customers through online channels.
After reading the article, if you think that this sector is for you or you want to launch an online travel agent platform you should go with hostelworld Clone. Ncrypted Technologies has the right solutions developed by our talent pool who specializes in creating innovative technical solutions. We offer customized and innovative features as per your requirement to let you launch a successful online travel agent platform.