Opportunity of Hostel in India Soon to Reach its Impending Doom?

Hostels Over Luxurious Hotels

You're reading Entrepreneur India, an international franchise of Entrepreneur Media. This story originally appeared on Franchise India

Hostels no longer mean sparsely furnished dormitories where cash-strapped young backpackers lay their heads and queue to use communal bathrooms. New breeds of luxury hostels have spied a gap in the crowded hotel market place to offer chic accommodation at bargain prices, attracting savvy holidaymakers of all ages.

Franchise India

A neoteric conception, U HOSTELS offer a plush accommodation amped by aesthetically designed urban structures, a young and lively ambience and above all, utmost hygiene standards to ensure a comfortable and enjoyable stay for every traveller.

Innovative Concept

Hostels are being touted as the preferred accommodation choice among the millennials. A heady blend of expansive services, luxury and affordability get them an edge over other urban accommodation options.

"It's totally a new concept. If you look at the hostel accommodation in the country, it is highly fragmented and there is no brand which offers quality and consistency with premium services to customers. Premium hostel segment is a completely missing segment in India, we are looking at filling that vacuum," said, Sudhir Sinha, Managing Director, U Hostels Hospitality LLP. As a premium product, U Hostels will have "amenities of a hotel and comfort of a service apartment." "Our Hostels will have cafeteria, restaurant, gym, space for cultural events, laundromats, etc.," Sinha said.

Luxury Living

Millennial travellers want to have their pick of chic, cool hostels complete with award-winning bars, luxe bath products, and even personal reading lamps. The sharing concept/co-living culture has been borrowed from hostels, while amenities will be equivalent to a four-star hotel. This concept is prevalent in Europe in a big way.

"We will offer international standard extended stay and shared accommodations in prime business districts across India to the working executives and discerning travellers," Sinha said.

Service offerings at U Hostels are personalized and best suited for long stay needs, a pre-requisite for the cost-conscious yet aware global guests who travel frequently for both business and leisure.

Rising Demands

Lack of informal and urbane accommodation options are catering to the sensibilities of bachelors and young travellers between the age group of 25-40 years. According to a survey, there is a steady rise in the demand for luxury hostels owing to their low cost, strategic locations & extended facilities along with a buoyant ambience, conducive for travellers of all age groups. Valued at an approximate $5.2 billion in bed revenue, the growth projections for the hostel industry are as high as 7-8 percent each year. Emerging markets like Asia, The Middle East, and Eastern Europe are being touted as potential preferred locations with expected revenue growth from the hostel industry in double digits.

Expansion Plans

U Hostels are planning to invest up to Rs 300 crore to set up 10-12 premium hostels in metro cities in India. These hostels would be premium properties with 3 or 4-star facilities for working communities.

"We are also in talks with developers in few cities where they have huge unsold inventory. We can take one whole block of apartments and convert into U Hostels while the ground floor/first floor can be converted to the reception," Sinha said.

"We are also looking for investors. It will be different for each property. We are looking at a minimum of 40 rooms per property. With a minimum stay of 90 days, a person will have to shell out around Rs 18,000 rent per month," he said.

Franchising Facts

Investment: INR 50lac - 1 Cr

The preferred location of unit franchise outlet: Prime locations in all major metros, tier 1 and tier two cities.

Anticipated percentage return on investment: 15 %

Duration of Franchise Agreement: 5 Years

This article was originally published on Franchise India by Sneha Santra.