How to Start a Vacation Hostel Business in 2022 – An Overview


If you want to earn extra income, then why not start a vacation hostel business? This type of accommodation has become very popular over the years. In fact, according to the World Travel & Tourism Council (WTTC), global travel and tourism revenues reached $10 trillion last year, representing a 7% growth compared to 2017. The WTTC also predicts that these numbers will continue to rise until 2027.

Vacation hostels offer travelers a unique opportunity to meet other guests from across the globe. They provide affordable accommodations, usually located near tourist attractions. These properties are often family owned and operated, meaning they can give their clients a personal touch. If you want to start a vacation rental business, then here is how to start a vacation hostel business from scratch.

how to start a vacation hostel business

What is Vacation Hostel

A vacation hostel is a place where travelers stay for free while visiting cities around the world. The concept was first introduced in Europe but has now spread across the globe. Many hostels offer amenities such as Wi-Fi access, laundry facilities, communal kitchens, and meeting rooms. Some also provide tours and activities. Vacation hostels are quite popular among travelers, especially solo travelers. Besides, a large group of students or corporate people make these hostels popular too. 

Where to Start Your Vacation Hostel

When it comes to starting your vacation hostel, location plays the most important role. Tourists prefer locations that are easily accessible from railway stations and airports. Besides, the location must have good commutation from markets, medicine shops, and any emergency places like hospitals. 

Also, the price should be considered before you start your hostel in any popular or prime location. The price will be more in prime locations and will be moderately low in non-prime locations. Apart from that, you need to pick a good location with a decent neighbourhood. 

Things You Need to Start a Vacation Hostel Business

There are a few things you need to have before you start a vacation hostel. It is important to focus on the following points,

  • Market research: Before starting a vacation hostel, it is important to research the market share thoroughly. This helps in decision-making. 
  • Business plan: Before you hit the street, make a solid business plan. Check on the close competitors and their unique selling points. Based on that, you can compare your USPs and offer a profitable deal to the tourists.
  • Decide on services: Make a list of services you can offer and at what price. You must decide on what type of services your hostel will provide to its tourists. 
  • Set a Budget: As soon as you get ready with the business plan, you must be ready with the budget/cost. 

How to Start a Vacation Hostel Business

Vacation rentals are becoming increasingly popular among travelers looking for affordable accommodations during their trips. While some vacation rental businesses operate solely as short-term rentals, others also provide longer stays. Either way, starting a vacation rental business requires planning and preparation. Here are some tips to get started:

Step 1: Research Local Regulations & Laws

Before opening a vacation hostel property, make sure you understand local regulations and laws regarding renting out properties. For instance, some states require homeowners to obtain a license before renting out their homes, while others allow homeowners to rent out their homes without obtaining a license.

Step 2: Determine What Type of Property Is Right for You

Decide on what property you need for your guests. There can be many options, such as an apartment, private residence, bread and breakfast (b&b), or renting a single room. Also, you can find a property that has restaurants nearby so that your guests can dine out. It would always be better if you find any property near airports and stations. Determine what type of property you need for your guests.

Step 3: Create a Budget Plan

Once you’ve decided on the type of property you’d like to open, it’s time to figure out how much money you’ll need to invest upfront. To calculate your budget, first, estimate how much income you expect to receive from guests. Next, consider all of the costs involved with operating your vacation rental. Finally, subtract these numbers from your expected revenue to come up with a realistic number.

Step 4: Register Your Business

Once you are ready with the location, budget, and overall business plan, you can register your vacation hostel business. You can register as a sole proprietorship, an LLC, a partnership, or a corporation. Each structure has different rules and regulations when it comes to setting up a business. For example, if you want to start an LLC, you must register under the Secretary of State. 

If you start an LLC for your vacation hostel business, you must know that each state has different rules and regulations. For example, an LLC in Texas must pay an annual Franchise Tax, whereas an LLC in Florida does not have to pay such taxes. 

Step 5: Hire People & Employees

Now, it is time to hire your staff members. Get people who are experts in hospitality management. In vacation hostels, you don’t need a lot of people to serve. But, there must be a cook/chef, a cleaner, a room service person, a waiter, and someone at the reception – these people must be there when guests arrive.

Step 6: License and Permit

It is indeed a very crucial step. You must obtain a business license and a proper permit to run your vacation hostel. Before you start making money from your vacation hostel, you must obtain your licenses and permits to let your business run smoothly. Even if you start small, you must have permits and licenses to conduct business in the state. It makes everything legal and smooth.

Step 7: Get a Website

In today’s era, digital presence is much more important than anything else. You must have a website that tells people what services you offer. Make sure to mention your unique selling points. It can be the location, property, or amenities at a budget price or the overall price. Share images of rooms, windows, and other amenities you offer in your website’s gallery section. 

Step 8: Promote Your Vacation Hostel

Social media, local newspapers, pamphlets, and websites – are the best ways to promote your property. Social media such as Facebook, Instagram, Twitter, and Snapchat are all very popular apps and have a lot of followers. Hence, it would be nice to share your stories, posts, and other updates on these social media pages. People will be able to find your hostel easily. 

Step 9: Get Started

Finally, you’re done with all the essential steps. Now, it is time to stage everything. Get started with all your plans and calculations. Start making money with your vacation hostel business. 

After Starting a Vacation Hostel Business

After you start your vacation hostel business, you need to take care of other things. As a business person, you need to get these things done to run your business smoothly. Here are some of the essential things to consider after starting your vacation hostel business,

  • Obtain Insurance: Insurance is required by law in almost every state. Before opening a vacation rental, make sure you’re covered legally. Check with your insurance provider to ensure that your policy covers liability and damage to personal property. 
  • Register With State Licensing Boards: In addition to getting legal coverage, you must register your vacation rental with the appropriate licensing boards. Some states require licenses for vacation rentals, while others only require registration. Be aware of the requirements in your area.
  • Apply for Tax Credits: You must apply for a tax credit from the state’s revenue department to get tax benefits. LLCs have pass-through taxation. Hence, it would be a double tax benefit for the entrepreneurs. 
  • Get Business Bank Accounts: Get business bank accounts to operate your business. It is wise to have separate bank accounts for personal and professional expenses. This will help you to track your credit score for future purposes. 
  • File Tax Returns: As soon as you start your vacation hostel business, you must file your annual tax returns. For LLCs, annual reports, biennial reports, and in some states, Franchise tax reports must be filed. If you have an LLC in California, you must file Franchise Tax Reports. On the contrary, having an LLC in Wyoming means filing an Annual Report. 

Cost to Start a Vacation Hostel Business

The cost of starting the vacation hostel business depends on the size of your business. It starts from $100 to $38,0000+. If you want to start big with a prime location property, you might need a handful of money as your initial investment. On the contrary, if you start small with a non-prime location, fewer amenities, and a few rooms, it might cost you less.

The average cost of starting a vacation rental is $19,000+. It includes property rent, business registration fees, providing amenities such as breakfast, wages of employees, and so on. 

Earn Revenue From the Vacation Hostel Business 

It is not easy to make a profit from a vacation hostel at first. Due to massive competition, the market does not allow newbies to make a huge profit margin. However, it is not impossible. Vacation hostels are quite popular among young people, especially students, solo travelers, and corporate travelers. You can earn from $10,000 to $35,000 a year from your vacation hostel business. This mentioned amount is just an estimated amount. It can be changed based on your hostel. 

FAQ

What’re some tips to get started with a vacation hostel?

To start off, you need to find out what kind of traveler you want to attract. If you plan to target backpackers, then you should consider starting a hostel for them. However, if you want to target families or couples, then you should look into renting rooms to travelers who don’t mind having roommates.

How long will it take to build up a clientele?

The first step in building a clientele is to find out what kind of clients you want to attract. If you want to attract families, then you should focus on family-friendly properties. If you want to target travelers who like adventure activities, then you need to look for properties near hiking trails, waterfalls, etc. Once you know which type of clientele you want to attract, you can start looking for properties that fit those needs.

How much profit should I expect from each booking?

The average revenue per customer for a hostel is $40-$50 per night. If you plan to open 10 hostels, then you need to expect about $400/month in profits. This number may vary depending on how many nights you book per month and whether you charge extra fees such as breakfast or Wi-Fi access.

How long will it take me to get started?

The first step is to decide what kind of business you want to start. If you choose to be a vacation hostel owner, you need to find out how much money you need to invest in opening a vacation hostel. This amount depends on whether you plan to hire staff or work alone. Once you know how much money you need, you should consider where you want to open your vacation hostel.
There are three options for choosing a location: 1) pick a city that has a lot of tourists, 2) pick a city close to a tourist destination 3) pick a city that offers cheap accommodation. After deciding which option works best for you, you should contact local authorities about licensing requirements and other legal matters.

Where should I open my first location?

You must choose a location that is near airports or stations. Also, find a property that is easily accessible from the rest of the city/place. Prime locations might be expensive for start-ups. In that case, go for a non-prime location. However, make sure to have a friendly and good neighbourhood in the location you are selecting.

Conclusion

This is all about starting a vacation hostel business from scratch. Read this article thoroughly to get a clear idea about how to start a vacation hostel business. If you have any queries or want to share your experience in this field, feel free to comment below and share with us.

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