Why the Hotel Industry Should Be Paying More Attention to Hostels

Whatever you think of hostels, change that perception.

That's what Generator Hostels CEO Fredrik Korallus said when he was interviewed on stage at the Skift Global Forum on Tuesday in New York City.

"We've changed the formula," Korallus said. "We've created a much higher end experience. It's an extreme focus on experience to really accentuate everything that happens during the journey for the guest. We have 1s2 open sites across Europe, 8,500 beds. Everything is beds."

Korallus said that although he's been in hospitality for many years, it remains a challenge to change people's perceptions of what hostels are, or can be, today.

One of his biggest challenges, he said, is "finding the right people. Recruiting and calling up a hotel GM [general manager. No matter what, GMs think of hostels as a major step down. Joining a hostel company doesn't feel right to them."

But as more brands like Generator and now, AccorHotels, enter the space, it's becoming easier to show how much of an elevated, social, sophisticated, and profitable experience you can have in today's hostels. And hostels like Generator and its peers are having an influence on the greater hospitality model overall, and changing the way people want to experience a destination.

"This is the first time in my life where I can say we don't compete," Korallus said. "Only 1 percent of hostels in the world are branded. Today, I think Accor announced a new brand, Jo&Joe — everyone is following that vein. The guest who stays at generator stays at Moxy, Freehand, 25 hours, etc. Where will they stay when they grow up? Will they go back to the traditional?"

So who's staying at Generator Hostels? Korallus said the average age of his guests is 24, and "they live for what happens in terms of the design of the space, the food."

He also said that while his guests might not spend much to stay with Generator, they're willing to spend a thousand dollars on a meal at a Michelin-star restaurant during their travels, so it's wrong to assume that hostels are only for budget-minded backpackers.

What also distinguishes this new generation of hostels is the incorporation of locals and the establishment of a real community within the properties themselves. "There is literally, all the time, something going on. We create this in order to bring in the community," he said.

Korallus also noted that the hostel model can be profitable. Since opening in Rome just a month ago, the property has had 90-percent occupancy on a consistent basis, and 60 percent of Generator's business overall comes direct. Instead of spending money on advertising and marketing, Generator relies on its guests to promote the brand, too.

To hear more about how hostels are moving beyond the backpacker, check out this Skift Podcast.