Thinking about opening a second hostel? Read this first

Is your hostel humming along smoothly? Are you considering starting a second? There are still so many cities that either need a hostel or need more hostels that now is a great time for operators to consider a second location. Andy Ward is the owner of Drifter Jack’s in Austin and Ember in Denver, two top-rated hostels. He joins us today to tell American Hostels what it was like to start a hostel, the second time around.

It had its difficulties, and it was also much easier. The first hostel you have to figure everything out from the beginning. I’d been taking notes for the past five years on what I wanted for a hostel, but when I started my first hostel, I was still figuring everything out as I went. For the second one, I already had systems that helped make it work from day one.

The thing that was more difficult with the second hostel is that it’s bigger, it’s a boutique hostel as opposed to a traditional backpacker hostel, and I purchased the building and went through a huge construction phase. It was a huge learning curve in that regard.

Once the construction was finished it was a lot easier opening the second hostel. I knew how to get staff, how to train them. That all went a lot smoother.

Having the manager in place beforehand to handle the staff and guest related tasks made everything so much easier. Even if I had hired a new manager in Denver I would have sent them to Austin to train. Having the manager handling everything at the reception desk meant I was free to deal with suppliers, construction, and everything happening behind the scenes.

From all the experience with Drifter Jack’s, we had a book in place with all our systems from before day one. I also assembled our marketing plan for Ember far in advance. Before Ember was a reality we had our logo, our website, we already knew what we wanted on our Hostelworld listing.

It was a lot easier. I wouldn’t have been able to do it without the first hostel. It was still hard because banks don’t recognize hostels. It’s uncomfortable for them to lend to hostels. I went to all the major banks, none of them would lend to me. I finally found a smaller state bank, showed them my financials and the money I saved from hostel #1 and they gave me a great loan at a nice rate to buy a property and have enough start-up capital for hostel #2. There’s no way I would have been able to do that without the four years of financials from the first hostel.

After I received the loan, it was time to buy the property and begin construction, and that was all a new learning process for the next year of my life.

Denver has a lot of similarities with Austin and I love the city. I also, like the idea of diversification because it makes me feel more secure.

Did it make you worried, opening a second so far away from your first hostel?

I already had the first hostel running in a way that I didn’t have to be there. I would show up every once in a while to show face and make sure everything was running smoothly, but for the most part, the systems I had in place and the relationship I had with the manager meant that I didn’t have to be there. After it had been that way for two years I felt that I could have a second hostel anywhere and the one in Austin would continue running smoothly. After spending six months traveling internationally, I decided I could comfortably do this with a hostel anywhere in the US.

• Ensure that operations at your first hostel are smooth and predictable before beginning on your second hostel.
• Locating your second hostel in a different market diversifies your portfolio and reduces your risk.
• Use your first hostel as a training ground for the staff that will operate your second hostel so they're prepared from day one.
• Good bookkeeping at your first hostel can make it easier to access capital for your second hostel.
• Having your staff in place sooner than later means that you're free to handle the behind-the-scenes work required to open a new hostel.