Europe’s branded hostel sector has expanded significantly over the last two years and yet supply in many of the cities most popular with youth travellers (defined as those aged 16 to 34) remains constrained.

To help build a picture of supply relative to potential demand, we examined the number of branded hostel beds per 1,000 youth travellers in 10 key gateway cities (see graph, below).

The German hostel market is among the most mature, with two of Europe’s biggest branded operators – A&O and Meringer – originating there. Partly as a result of this, Berlin emerged as the best supplied market with 11.2 beds per 1,000 youth travellers. Barcelona was next with 5.3 beds per 1,000 youth travellers.

From a growth perspective, London and Paris stand out as both attract large numbers of overseas visitors but they currently have just 2.8 beds and 1.4 beds per 1,000 youth travellers respectively. Similarly, Dublin, Rome and Copenhagan all have fewer than 2.4 beds and therefore appear to present good opportunities for future growth.

Whether the constrained supply identified at a city level is translating into strong operational performance across the board is difficult to say, as most operators do not make this information publically available. However, with operators continuing to expand into new markets this would appear to be the case.

Appealing to the Airbnb generation

There’s no doubt that the value-for money appeal of hostels has been a driving force behind the sector’s expansion, but it is not just about cost. Travellers are increasingly looking for a more 'local' experience than a traditional hotel can offer, as shown by the phenomenal rise of Airbnb.

The evolution of branded hostels is another expression of this trend, in which the Airbnb generation sees the shared travel experience offered by hostels as increasingly attractive. Several hostel brands are already tapping into this by ensuring their sites offer a local experience of the city they are in through the general offer, design and onsite amenities. Other operators have taken it a step further by using Airbnb to sell beds.

Looking ahead

The growth in branded hostels across Europe reflects the evolution of the wider hospitality sector in which distinctions between subsectors continue to blur. The opportunity to increase stock in major cities with high overseas visitor numbers remains significant due to the supply constraints identified through our research. This, combined with a very mobile younger generation constantly in search of new experiences, should see operational performance remain strong going forward.

Further information

Read Savills European Tourist Hostels Report