With a market of over 1,200 properties and nearly 52,000 beds, the new and improved product is turning the heads of traditional hotels.
According to a report on hotel market trends in Southeast Asia by hospitality consulting group C9 Hotelworks, there was a 42-per-cent surge in beds coming online in the “flashpacker” category from 2015 and the third quarter of this year.
Thailand, Malaysia and Vietnam are now the top three players in the region, with Indonesia narrowing the margin with year-on-year growth of 73 per cent.
“Hostels are unlike hotels as average rates are calculated on a per bed basis, compared to hotels which use a per room rate,” Bill Barnett, C9’s managing director, said yesterday.
“Our research across Southeast Asia shows that if comparing the two accommodation models side by side, the average room rates in newer hostel properties are matching or exceeding those in the more established budget hotel tier.”
What has surprised many analysts is the growth in upscale hostel properties that now also offer many creatively designed private rooms.
“Ultimately the mix of accommodation and bed types in what is being termed ‘poshtels’ attracts not only solo travellers and couples, but also taps the fast-tracking friends and family group.
“Hostels are also set to take advantage of Asia’s low-cost airline carrier trajectory in a significant way,” he said.
Viewing C9’s research, it soon becomes evident that a different business model works in city and non-city locations.
Although the market average is 4.1 beds per room, this number shoots up in urban locations like Singapore where the average is just over six beds per room.
Land prices in urban locations remain a significant factor.
However, unlike the more inflexible institutional approach to branded budget hotels, hostels can easily adapt to retro-fits and re-purposed real estate, so more groups are now developing a critical mass of properties.
“In Europe, chains such as Generator and Meininger have attracted institutional investment to spur expansion, and we are already seeing private equity players in Southeast Asia start to chase the trail of what is arguable the region’s must exciting travel space,” he added.