What Hostelworld data reveals about pricing decisions

Last month Hostelworld released its Evolution of the Hostel Traveler report. We learned some valuable insights into how present and future generations of travelers book hostels. Let's discuss how these behaviors can affect your pricing strategy.

Do you compete with other hostels in your area? If so, you’re probably checking regularly to see how much the competition is charging. If you don’t monitor your competition’s prices carefully, you’re either missing out on extra profit by making your beds too cheap or missing out on bed nights by making them too expensive. 49% of Generation Z backpackers reference price as what will attract them to stay at a hostel. The problem is, how the prices change is only half the picture. When the prices change is important too.

BackpackerBiz Takeaway:

When your hostel changes prices is just as important as how you change your prices. Today’s hostel travelers are price sensitive, they’re booking in advance, and with the vast majority of hostels selling online, backpackers have perfect information into what a bed’s current market value is. Getting smart with dynamic pricing is an effective way to increase your profitability and decrease anxiety from low occupancy nights.


Look ahead when making price changes

Backpackers of the future are 66% more likely to book 6-12 months in advance. Are you taking this into account when you look at your competitor’s prices? 

Hostels without a proper yield management strategy sometimes offer their base rates, then as a date gets closer, if they don’t have the occupancy they want, they panic. “Quick, drop the prices! We have too many empty beds!” This will be an increasingly ineffective strategy as time goes on. With future travelers being 52% more likely to have all their hostels booked before they set off on their trip, a last-minute price drop will only attract those few bookers remaining who didn’t plan in advance.

This can be particularly deleterious in markets with high competition and seasonality. One hostel panics and lowers their rates, sending a shockwave across town. It becomes a “race to the bottom,” and in the end, the only winners are the backpackers who get a bed for way less than what it’s worth. One hostel revenue manager in Sydney described the anxiety of see those low occupancy numbers: “Everybody just hold on! The backpackers will come.”

The days of backpackers turning up to a hostel without a reservation and asking for the price are quickly declining. Hostelworld reports a 53% decline in day-of reservations for the upcoming Gen-Z traveler generation. “Only 13% of future backpackers plan to walk-in to a hostel without a reservation on the day, compared to 24% of recent travelers and 44% of those who backpacked over 10 years ago.”

How to make smarter price changes

So if the reactionary method of dynamic pricing won’t work, what should you do instead? Get creative with your offerings and leverage technology to help you compete.

Offer time-based specials

early bird special

First, your hostel can offer early-bird and last-minute specials. Most systems enable you to create special rate plans and packages to offer the right price, to the right traveler, at the right time. You can experiment with timing options to see how many days in advance to offer early-bird rates or how few days in advance to offer last-minute deals.

They say “the early bird gets the worm.” When it comes to hostels, the further in advance your customers are booking, the more accommodation options they have available to them, and the more they’ll expect a great rate. We already accept this logic when it comes to booking flights. The most expensive plane tickets are those purchased at the last minute. Your walk-in price could be the most expensive. After all, a backpacker standing at your front desk is the least likely to turn around and jump in a tuktuk/ Uber / subway just to save a few dollars at your competitor’s place.

Monitor the competition

Market Data

Cloudbeds' PIE tracks how your rates compare to your competitors'

Next, hostels can use technology to track their occupancy and their competitors prices to make informed pricing decisions. Cloudbeds' Pricing Intelligence Engine is the smart choice for hostel revenue management. The Pricing Intelligence Engine (PIE) allows you to create simple rules for changing your prices. These rules can raise and lower your prices automatically based upon your occupancy or what it detects your competitors are doing to their pricing (goodbye to the days of compulsively checking Booking.com to see what the neighboring hostel is doing).

Author's note: I work for Cloudbeds. Does your hostel want to join the dozens of HOSCAR winning hostels that use Cloudbeds? Submit your info here and I'll be in touch 😄

Know your pace

running pace

If you’re manually monitoring the competition it’d be too time consuming to run 52 searches and check out every week’s price for the year ahead. Do you have insight into your hostel’s pace? In revenue management pace is “the rate at which reservations are made for a particular date.” According to Hostelworld data, backpackers are booking accommodation in Europe 24 days in advance, whereas in Latin America it’s only 11 days. Study your hostel’s pace and monitor how it changes. Everyone knows that major holidays get booked further in advance than regular dates, but what other factors (seasons, weekends versus midweek) do you need to consider when it comes to understanding pace?

Work smarter, not harder

It's a lot of work to track your competitors, monitor your pace, and create special rate plans and packages. Hostel operators already have enough on their plates, and so often they keep it simple and leave the prices alone. If you're looking to grow your business, creating your yield strategy offers great "bang for your buck." An empty bed is missed potential revenue. Selling out too early is money left on the table. With a yield strategy that considers the behaviors of today and tomorrow's hostel travelers you can make the most of every bed night.

About the Author Byron Bunda

Byron has worked with hostels big and small, city and rural. His first job was as a receptionist in San Francisco and his favorite was leading the events for a 500-bed hostel in Sydney. Today he's a Market Manager at Cloudbeds. Besides all things hostel related, he enjoys motorcycle riding, especially because it's the perfect way to get from hostel to hostel!