Over the last couple of years, the tourism and hospitality industry has experienced a massive surge. So, if you decided to start your own small hostel and join this 8.6 trillion industry, props to you. In years to come, the hospitality industry will only keep growing and if your gig takes strong roots and manages to pop on the mainstream radar, you are in for a treat.
But, keep in mind, that all these things will take some time, and until you finally start earning a healthy profit, you will need to put a lot of money on the line.
Is there any way to avoid that? Well, not exactly. But, you can try to manage startup costs to keep your balance on the green pastures. Let’s see if we can help you out with that.
Assess the expenses you will deal with
The first step in solving some problem is being fully aware of that problem and all its twists and turns. So, if you want to trim the hostel startup costs down, you will need to make a very detailed and well-researched list of the expenses you need to make. Only then you can start the actual pruning. Well, here are some of the most important mentions you should take into consideration:
- Property acquisition
- Renovations and remodeling
- Furniture fixtures, leisure items, and devices
- Bends and linens
- Kitchen equipment
- Security systems
- Marketing costs
- Staff hiring and training costs
As you can see you have quite a lot of things to chew on. Expect the total sum somewhere between $100,000 and $850,000.
Negotiate supply prices
Now, let’s see how you can trim some of the supply costs down. This is the moment you should put your negotiation skills to good use. Some vendors will give you hefty discounts if you buy your supplies in bulk. Sure, you will need to spend more upfront, but you will make your gig sustainable in the long run. Also, look for the vendors that are still starting out and need a rub just as bad as you do. They will be much more inclined to shave some prices off, engage in cross-promotion activities, trade services, for free stays, etc.
Put your focus on social media
Paid ads and extensive SEO campaigns are great but they tend to cost a lot of money. For the time being, you should focus on creating organic word-of-mouth and referrals, and contemporary social media platforms present a perfect venue for your efforts. But, your guests won’t post reviews and people won’t take notice of them if you don’t establish a strong social media presence.
Do your best then to keep your profiles active, provide valuable content, and keep people engaged with calls to action, interesting campaigns, and other popular hooks.
Mitigate risks with proper insurance
When your hostel is still starting out, a little accident can bury your finances. Picking the appropriate insurance policies can go a great length in mitigating this issue, help you bounce back, and engage in various ventures with greater confidence.
Beware, though, that, when it comes to insurance, more is not always better. If you are not careful, some agents will fill in the agreement with various clauses you don’t need. People like to call these products ‘junk insurance.’ Don’t worry, though – even if you end up with these policies, you can always look for a junk insurance refund, and get your investments back. But, be sure to always read the fine print.
Use part-time staff and outsource positions
To put it simply, this will make your hostel much leaner and more flexible. So, until you make your establishment profitable, keeping accountants, marketing experts and other non-vital staff on the full-time payroll simply doesn’t add up.
A similar thing can be said about the off-season periods. Shorter-term and part-time workers will give you a great deal of financial leeway. The workers who are vital to your hostel, on the other hand, should get feasible perks. They are the engine that drives your profit and they need to be properly motivated.
Roll up your sleeves
Last but not least, we would like to point out that taking a bigger part in your hostel’s activities can relieve some of the workload you put on your staff and reduce the need for extra hands. Sure, you don’t want to stretch yourself too thin. But simple chores like running the errands, helping with cleaning, and, why not, even basic bookkeeping are well within your skillset. See, what suits you and what not. Any help you can provide can only make your hostel snappier and more money-efficient.
These were the top six ways to make the risks you get by starting a new hostel easier to deal with. So, start by properly identifying the areas where you can make cuts, and then do your best to optimize whatever can be optimized. If you are precise and strategic enough you will be able to put your gig on very healthy financial foundations while still providing a killer guest experience.
That’s what successful companies are all about.