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Hostels vs hotels: Differences in London accommodations performance

Jan 8, 2020

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By Kelsey Fenerty, STR

Comparing average daily rates between hostels and hotels always will be an apples-to-orange exercise, as a hostel bed in a shared dormitory costs less than a private hotel room. In London, for instance, hostels charged £19.72 per bed while hotel rooms in the city commanded £154.32 on a trailing 12-month basis.

However, given the growing popularity of private hostel rooms and the upmarket “poshtel,” is the gap between London hostel and hotel ADR decreasing?

While a reasonable assumption, our data reveals otherwise.

London hotel rate growth surpassed hostel rate growth in 22 of the past 24 months on a rolling 12-month basis.

Hostels fared better compared to Economy and Midscale class hotels, with hostel ADR growth outpacing that of the lower tiered hotels for the past six months. However, Economy and Midscale hotel class room rates of £78.44 are still four times as expensive as the average hostel bed.

 

*trailing 12 month data

 

Occupancy parallels

While rates vary dramatically between hostels and hotels, occupancy between the sectors is similarly high, with running 12 month occupancy exceeding 80% each month. Hostel occupancy drew even with all hotel occupancy for the 12 months ending November 2019, and both sectors trailed Economy and Midscale class hotel occupancy by 1.4 percentage points.

 

* trailing 12 month data

 

Occupancy growth between hostels and hotels trends congruously as well. Hostel occupancy growth outpaced all hotel and Economy and Midscale class hotel occupancy growth for approximately half of the past 24 months.

 

Revenue per available ‘hmmm’

Given the similarity in occupancy between sectors, ADR is the defining difference between Revenue per Available Room (hotels) and Revenue per Available Bed (hostels). Despite hostel occupancy growth in excess of 2 percent for the past eight months, the gap in RevPAB and RevPAR continues to widen. Gap growth is noticeably slower between hostels and Economy and Midscale class hotels, where the difference in RevPAR and RevPAB increased only £2 over the past two years.

Correspondingly, the difference in RevPAB and RevPAR of all London market hotels grew £9, suggesting that higher end hotels are raising rates more rapidly than lower end hotels and hostels.

* trailing 12 month data
 

The gap between hostel RevPAB and Economy and Midscale class hotel RevPAR appears stable, an encouraging sign as these lower tiered hotels are often hostels’ closest hotel competitors. As hotel rates outside of the lower tier classes continue to climb relative to hostel rates, the sector should look for boost from budget conscious travelers.

 

Interested in more?

Meet STR at the STAY WYSE Hostel Business Conference in Amsterdam 30-31 January 2020.

STR reports on hostel performance in London and Amsterdam and is actively pursuing other markets. Reports are free to data providers. Interested in more information? Please contact Patrick Mayock at pmayock@str.com

About STR

STR provides clients from multiple market sectors with premium, global data benchmarking, analytics and marketplace insights. Founded in 1985, STR maintains a presence in 15 countries with a corporate North American headquarters in Hendersonville, Tennessee, and an international headquarters in London, England. For more information, please visit str.com.

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