Hostel intentions

06 August 2001 by
Hostel intentions

They have at various times been unkindly accused of being the Great Unwashed, the real reason behind growing tourism figures, or the guests nobody wants. They are the global backpackers - young people with everything they own packed in a rucksack on a mission to see as much and spend as little as possible.

No one is quite sure just how big this market is, since the British Tourist Authority (BTA) says it doesn't count incoming rucksacks. "Backpackers is too broad a description, there is no way to get that sort of research," a BTA spokesman admitted.

The accommodation backpackers currently use is a twilight zone for the hotel business: terraced hotels that have seen better days and have been crudely converted into bunkhouse-style accommodation or tiny rooms with scant bathroom or dining facilities. To make a profit in central London on rates which can drop as low as £20 per person per night leaves little room for cosseting in the backpacker market.

A new concept in Glasgow could change all that. Euro Hostel is a new private hotel company that aims to change both the industry attitude to backpackers and the dismal standards of accommodation and attention they often get in the UK. Euro Hostel Glasgow is a 116-bedroom, 360-bed hostel, the first of five planned in the next few years as part of a £15m business plan.

The Euro Hostel director who is charged with delivering this new level of hospitality to backpackers is Paul Murray-Smith, whose last job as managing director of Scottish Highland Hotels before its sale to Alchemy Partners in 1999 saw his guests arrive with clothes packed in Samsonite rather than Karrimor.

He is frank about why he switched away from the four-star market. "When we sold Scottish Highlands, I analysed the accommodation ladder; it goes from five-star to lodges, then it seems to disappear below that," he says. "Hostels have the image of long-stay unfortunates, DSS clients and backpackers. I saw it as a gap in the accommodation market. There is no obvious step down from lodge to hostel in graded accommodation."

Murray-Smith is the only director of Euro Hostel with a strong hospitality background. The rest are independent businessmen with a keen eye for an opportunity. That opportunity, says Murray-Smith, was to offer within a branded concept the three things that backpackers want: cleanliness, quality and security. Of course, price is a sensitive issue, agrees Murray-Smith, "but backpackers are prepared to pay a little bit more for a lot more."

The site of the first Euro Hostel could not be more ideal. It is just a stroll from Glasgow's action zones of Argyll Street and Sauchihall Street and overlooks the main railway station. City centre sites may be expensive, but Murray-Smith says it is essential that Euro Hostels are where the buzz is. The Glasgow site was formerly the Royal Stuart hotel, but latterly had been used as a university hall of residence.

Small rooms, minimal food operation, city centre location, in need of paint, and up for sale made it an ideal property. The refurbishment is still not complete, but a lot has been done. The bedrooms are small, most have metal-framed bunk beds, but all have private bathroom facilities, a rarity in hostel accommodation. Instead of wardrobes there are lockers, designed to take a large rucksack. Bedding is pillow, sheet and duvet in a plastic bundle on the bed each night. It is up to guests to make their own beds.

Backpacking is often a lone pursuit, so guests must be prepared to share rooms. There are same-sex and mixed-sex dorms, and dorms vary in size. Glasgow's Euro Hostel has 32 dorms with four beds, three dorms with eight beds and four dorms with 14 beds. The rates for a bed start at £13.75 a night in the 14-bed dorm including VAT and Continental breakfast. For £18.50 a bed can be had in one of the 70 double rooms, or a single costs £25.

Marketing to backpackers is a daunting proposition. Most of the bookings are walk-ins, which makes a nightmare of room management. There is no obvious way to market to what is a global and unconnected community, and because of the cheap room rates, there is not much marketing budget available.

Murray-Smith says the conventional hotel marketing channels don't work for backpacking hostels. It's necessary to use the communication channels the customers are familiar with. "Word of mouth is the best marketing tool in the hostel market. They may be independent travellers, but they talk to each other. It's an important piece of information exchange when they meet - ‘Where did you stay? Was it OK?' - you can't underestimate how much of this personal recommendation goes on."

The other big marketing tool is the Euro Hostel Web site, www.euro-hostels.com. It is undeniably aimed at a young accommodation market, with its cartoons and funky language.

Internet booking is seen as a key part of future selling strategy. For Web bookings, Euro Hostel will debit the credit card immediately, rather than just using it to secure the booking. This means that even if the guest fails to show, Euro Hostel has the revenue. Average stay is 1.5 nights per guest, but few book for more than one night in advance. If a city looks good for more than one day and the accommodation is OK, backpackers will book extra nights on the spot.

While the core market for Euro Hostel is clearly identified, it is far broader than just the rucksack sector. Its price point makes it attractive to accompanied school parties on visits to the cultural assets of Glasgow; to short-stay contract workers; and, in a small but growing way, to guests who might normally be expected to stay in more conventional hotel accommodation, such as support and building staff for events at the nearby Scottish Exhibition Centre.

Building a business based on young people with few responsibilities and out to have a good time raises the question of rowdy behaviour, drugs and alcohol abuse. Murray-Smith says none of these is a problem. The reception area is facing the hostel entrance and it is manned 24 hours a day. That serves the dual purpose of letting in backpackers arriving at odd hours and keeping a firm eye on who comes in. The hostel is licensed and sells bottles of beer, but with so many bars and clubs close by, few guests choose to stay in. For those who do, there is a simple lounge area and a recreation room with video games, plus a clutch of Web-linked computers for hire in the reception area.

The food operation is Continental breakfast only, served in refectory-style surroundings with a large element of DIY about the breakfast. It's a simple offer, and the take-up is only modest - but essential for groups of clients such as school parties or contract workers. There is no kitchen for the guests to use, but there are plenty of food outlets available near by.

The first task for Euro Hostel is to establish Glasgow as viable, then start the roll-out. A site has already been identified in Edinburgh, but Murray-Smith acknowledges that site costs will be higher than in Glasgow. When Edinburgh is secured, then it is Bristol, Birmingham, York and London. Could Euro Hostel be an international brand and concept? Murray-Smith thinks it could, but the only plans he will talk about are the six UK sites.

Euro Hostel Clyde Street, GlasgowTel: 0141-222 2828Web site: www.euro-hostels.com

Capacity: 364 beds in 116 rooms

Break-even occupancy figure: 28%

Current occupancy: 36%

Staff: 25 full-time equivalents costing 22% of turnover

Planned openings: five in the UK in the next five years

Next sites: Edinburgh, Bristol, Birmingham, York, London

Finance: £15m committed; debt funding from Lloyds TSB

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