Can urban hostels turn a profit by striking a balance?
Lessons from Denver for creating a thriving hostel scene that balances style and amenities with affordability.
"There are tons of hostels in America -- a lot more than you'd think," according to Jim Ilg, owner of the 11th Avenue Hotel and Hostel. Problem is, most hostels are "off the radar of American travelers, who are warming up to the idea of communal touristing, but still think sharing a bathroom with somebody they don't know is a scary thing."
Hostels, Ilg continues, are for folks who are "interested in the experience." And, in an urban setting like Denver, it can be quite an experience. "I've walked the alleys of Denver, and I've seen all kinds of colorful things," admits Ilg, chalking up some of the "negative elements" associated with his hostel to the nature of urban settings.
"Look," he adds, "this isn't Greenwood Village; this is downtown, and you're going to see some things."
Chad Fish, co-owner of the soon-to-open Hostel Fish, the latest lodging to enter Denver's affordable hospitality scene, says American hostels "tend to be built around the transient population because America is spread out, whereas Europe is condensed."
In the Denver metro area, that's held true, and hostels have struggled to survive as owners walk a fine line between affordability and exclusivity. "We try to stay travel-oriented, but it's hard to know for sure because everybody says they're a traveler," explains Dick Mitchell, manager of the 54-year old Denver International Hostel.
Hostels must stay focused to survive
Denver International and 11th Avenue Hotel and Hostel have survived as others closed, like Hostel of the Rockies, Melbourne International Youth Hostel and the infamous Boulder International Hostel, set smack-dab in the middle of the University of Colorado's Boulder campus.
In its prime, the Boulder International Hostel had about 400 beds and 250 rooms, and it drew guests from every continent, including researchers from Antarctica.
Before closing up shop in 2012, longtime owner and manager Ron Mitchell wrote, "There is no greater enjoyment than in introducing visitors from Beijing to people from Poland or Nigeria and have them go climbing for the day… Better yet is watching three year olds [sic] from China, The Ivory Coast, and Norway carrying on animated conversations with each other in utterly separate languages, happy as clams."
Reports indicate that Boulder's once-thriving youth hostel -- located on University Hill, and launched in 1961 -- declined during its later years as hostel traffic decreased when a core clientele of young European travelers was able to afford more expensive accommodations.
"The client mix changed, with more homeless people looking for a place to stay," Mitchell told BizWest reporters in 2013. "We accommodated them, but that really wasn't the purpose."
Boulder International saw seasonal dips, filling up in summer and early autumn months during Boulder's tourist season, and falling short the rest of the year, when dealing with drunken college students created another slew of costly problems.
All of these factors, along with Mitchell's age (he was in his seventies when he retired), led him to sell his half-century-old University Hill parcels -- 13 buildings within four blocks of each other, including an 11,687-square-foot building the comprised the main youth hostel and has since been converted into Sigma Alpha Epsilon, a 150-member fraternity.
Ilg says that "the business model of a hostel doesn't change; what changes is the management." Generally speaking, Ilg says hostels fail when owners lose focus. "It's not the neighborhood, it's not the business, it's not the economy -- it's simply the fact that one has lost their passion."
And passion's something you have to have when you're in "the bottom rung of the scale of places people would actually want to stay," as Ilg puts it.
Staying affordable and communal
Travelers come to hostels for the communal atmosphere.
There's no shortage of wow features at Hostel Fish.
The Internet's given the bottom wrung a huge boost: "It used to be that everybody went through a travel agent to find somewhere to stay, but now you go online and there are forty different booking sources," says Fish, adding, "If you're on top of your game from a digital marketing aspect, there shouldn't be as many problems keeping a consistent level of occupancy."
Fish traveled Europe and North Africa after college, usually by way of hostel. "Some were really good, and some were really, really bad," he says. Seeing the land through a local's eyes was unparalleled, and Fish decided he wanted to replicate his positive hostel experiences in Denver when he relocated here in 2010.
Around that time, Fish ran an analysis on local hostels. Seasonality might have been a hurdle in Boulder, but, says Fish, "One of the really interesting things is that Denver doesn't see the seasonal tourism dip that most big cities see; we get traffic year-round thanks to the ski industry."
Fish also learned that, done right, hostels can be more lucrative than traditional hotels. Because hostel owners charge per bed instead of per room, they stand to make more money per square foot. There's a hostel in Maui, for example, that brings in more than any hotel on the island. The challenge is striking a balance between "the number of people that's comfortable per room and the price per bed," Fish says.
With rates starting at $45 a bed per night, the posh Hostel Fish has 65 twin beds divided between several community rooms, most containing four to eight beds. Two rooms have ten beds, and two private suites are also available.
By contrast, Ilg's hostel, with bunk rates starting at $23 per night, has 136 total beds situated in 80 private and semi-private rooms; there are two female dorm rooms, two male dorm rooms, and there's a working man's dorm in the basement for short-term and extended-stay guests who are actively seeking jobs during the day. Dick Mitchell calls the facility "basically a downtown Denver residential hotel," he says, "But they do a good job, and have a nice hostel service."
Beds at Denver International go for $19 a night, and the building can accommodate about twenty guests in its shared apartment spaces, each equipped with a kitchen and bathroom. The owners say their rates are somewhat prohibitive for transient guests.
Keeping the environment travel-oriented is another way to draw the right clientele. Taking a cue from hostels he's seen in New York and California, Fish will "have policies that gear Hostel Fish toward the traveler," he says, noting that guests will be required to show a travel stub like an air or train ticket, or out-of-state identification.
"The best hostels," he says, "are the ones that focus on the communal space and create a place for congregating and sharing information."
Staff, then, is key, and Fish plans on employing folks who are passionate about hospitality and Denver. "We'll have a floor-to-ceiling wall map with all of the bike and hike routes, along with, you know, information on the best burrito in town and concerts to see on Tuesday night," says Fish.
A new "swanky" breed of hostel
Hotel Fish will be the newest hostel in Denver.
Area hostel owners like Ilg and Dick Mitchell have experienced backlash in the form of negative reviews on TripAdvisor and similar websites. It's a tricky balance between affordability and the wide spectrum of travelers' expectations.
Fish plans on delivering a different type of hostel experience. In 2012, he put together a business plan for a new breed of hostel, then hooked up with SCORE Denver, a nonprofit providing counseling and mentorship for small-business owners. Three years later, with the help of co-partner and landlord Paul Tamburello, Fish's 7,800-square-foot poshtel is scheduled to open by the end of June on the upper floors of the historic Airedale building at 20th and Lawrence.
When it comes to executing upscale affordability, Fish says it's all about the details. For starters, safety and everyday comfort items are non-negotiable: "clean sheets, soft mattresses, individual showers," Fish says, rattling off a list of conveniences that also includes bedside charging stations and lights, privacy curtains, free Wi-Fi and custom duvets from nearby DENY Designs.
From there, Fish focused on design quality. "I've been working with (shike) design, and David Schaich has done some amazing things," Fish says.
There's no shortage of wow features at Hostel Fish: a 29-foot-long, 13½-foot-wide glass, prism-like skylight, for starters, along with bright trim, curved walls, beautiful bay windows and, says Fish, "layers upon layers upon layers of wallpaper, which we tried to salvage."
Fish has also preserved some -- but not all -- of the building's history. The Airedale opened as a hotel and saloon in 1889; later it boasted a rather seedy string of businesses: a brothel, an adult bookstore and a peep show.
A new restaurant, Ophelia's Electric Soapbox, will enhance the swanky vibe of Hostel Fish.
Having culinary wiz Justin Cucci's latest concept, Ophelia's Electric Soapbox, below won't hurt Fish's swanky vibe. "An elevator will go straight from their two levels up to our two levels, and one idea I had is to have our staff run down to grab breakfast for guests -- sort of like a breakfast in bed," adds Fish.
Hostel Fish's central, public transit-proximate location couldn't be better for business, Fish says. "One of the things I loved about hostels in Europe is that you pay less for accommodations, and that leaves more for spending on fine dining, visual and performing arts, et cetera."
Location is everything, he adds, calling an urban setting "key in an upscale hostel." And while many may consider the last sentence's final two words mutually exclusive, Fish is looking to soon change that preconceived notion and beat travelers' expectations in Denver.
This story was originally published in Confluence on June 22, 2015.