We’ve covered before how important it is for your hostel to have a revenue management strategy. One of the reasons why making decisions about your yield strategy feels complicated and scary is because you normally don’t get to see how other hostels in town are performing. Hostels have to make a decision based upon their own occupancy, their own prices, and maybe their competitors’ prices, without knowing how full everyone else is. But it doesn’t have to be that way.
STR has been collecting benchmarking data on the hotel industry for over fifty years, and now they’re starting to work with hostels too. I spoke to Patrick Mayock from STR about their new hostel benchmarking programs and what they mean for the hostel industry.
"Once a month participating hostels send us four data points for their occupancy and their rates. We aggregate the data from all the participating hostels in the city so that we can create city-wide averages and then we publish the data. Hostels that participate get to use the data for free. Others can purchase reports from STR. Because the data is an average taken from across many properties the data all remains anonymous"
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"They’re using this data to make decisions around pricing. When it comes to your revenue management strategy you have 2 possible goals. You can increase occupancy or you can increase rates. So how do you decide? If you do this based only on your own data then you’re making a guess. If you can look at the data from STR on the city’s average daily rate and occupancy then you have something to compare yours against.
The second use case is investment deals. If you want to buy a new hostel or do a big renovation on your building you have to have the data for due diligence to show that it’s going to pay off."
"STR has been working with hotels for over fifty years. It was a confluence of factors. First, we have noticed that there has been some blurring between previously siloed accommodation types. Thanks to new distribution channels and a wider understanding among travelers, it’s now based on experience and amenities instead of the label, 'hotel' versus 'hostel' versus 'vacation rental.' New distribution channels also make it easier to search wider and have access to different types of accommodation. STR also wants to represent true accommodation market performance, which means we need to expand our world view beyond hotels.
Some of our key hotel clients also want to see reporting on hostels, with Accor and Hilton both having launched hostel-related brands. We were also approached by several prominent hostel players who came to STR and said, 'we need better visibility into our sector. We need data to attract investments and for due diligence on projects.' so we developed this in collaboration with these hostel industry insiders to ensure it would suit the unique dynamics of the hostel industry."
"Good market performance will make sure you can keep that hostel owner lifestyle. The reports are simple enough that you can look at the numbers on the market’s occupancy and rates and just make an easy change for next month. With this STR data you’re going to make smarter decisions, which means you can run the property more profitability."
"For some people there is hesitation because they’ve never done this before. Once we show them the value of the data and how we completely protect confidentiality, they see the value in it. In terms of not wanting to publicize how lucrative your market is, you can operate like that for only so long. People who invest in real estate are very smart and can sniff out good opportunities.
Also, it’s easy to undervalue benchmark data for your city when the economy is strong and your hostel is relatively full and making money. It’s during a downturn when being smart about your revenue management strategy becomes more essential and this glimpse into how the hostel market is performing becomes worth even more."
"We have to have a minimum number of hostels reporting in order to start the data set. If properties take a wait-and-see attitude, it won’t happen in that market."
"Any hostels that are interested, it doesn’t matter if they are in these markets, can get in touch with me directly at PMayock@str.com. A lot of our markets that we operate in came about organically."
Big thanks to Patrick Mayock for agreeing to be interviewed for this article. Do you have a hostel management story to share? Get in touch!
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. Besides all things hostel related, he enjoys motorcycle riding, especially because it's the perfect way to get from hostel to hostel!
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