From October 1, 2020, the requirements for hostels will be tightened: budget mini-hotels will be prohibited from being located in residential buildings without a separate entrance and in the private sector. Such measures would hit 20-40% of the collective accommodation market. But for aspiring entrepreneurs, this opens up additional opportunities and makes it easier to start a business. Opening a hostel is simpler than creating a hotel and pays off faster. However, it is difficult for a beginner to understand all the legal requirements, preparing the premises and attracting guests. A hostel franchise can be the solution to all problems.
Advantages of a hostel franchise
Opening a hostel - a budget mini-hotel - involves solving a whole range of problems. The owner must find suitable premises that comply with legal requirements, including those coming into force in October. He needs to renovate it and decorate it attractively, otherwise the photos on booking services will turn off potential guests. You will have to install security and fire alarms, provide soundproofing for rooms and safes for storing money. To attract guests, you will need money for a marketing campaign. A set of tasks of varying levels of complexity can become an overwhelming problem for a beginner in business.
A hostel franchise solves these problems. The franchisor will provide the partner with step-by-step instructions, appoint a personal manager, and help with the search for space, its renovation and decoration. This involves additional costs for a lump sum fee and royalties, but it makes it possible to avoid mistakes and initially develop along the right path.
Advantages of a hostel franchise:
- A step-by-step guide, an accessible description of all stages of launching a hostel - from finding premises to welcoming the first guests.
- Assistance with personnel search and training.
- Preparation of documents necessary for legal work. Legal and accounting support.
- Information systems and special software that will simplify control over the reception and service of guests.
- Uniform style and design, brand books, advertising materials.
- The ability to attract customers with a well-known brand. Guests trust chains because they expect higher standards of service that are consistent in all cities.
- General advertising campaign. Promotion at the federal level.
- Corporate clients and additional sources of attracting guests. Most franchisors help their partners increase hostel occupancy through contracts with companies that need to place employees on business trips, guests and other people somewhere.
Some franchisors undertake to return money if all initial investments do not pay off within a certain period of time. This condition makes the opening completely safe from a financial point of view.
To open a hostel as a franchise you will need from 1 to 7 million rubles
How much does it cost to open a capsule hotel?
To open a capsule hotel, you should consider an amount of 1,000,000 rubles , since purchasing and creating capsules is not cheap.
You should also immediately decide which audience you will target. If these are young people, then you should not buy expensive capsules; it is also better to design the hotel in a modern style. If you are foreign tourists, more expensive options are possible, then you should get acquainted with foreign experience. For example, American Michelle Scott opened a capsule hotel in his own apartment, spending $40 thousand on the enterprise, and now receives at least $400 a day every day.
Download a business plan for a capsule hotel with calculations
The question of how much it costs to open a capsule hotel can be answered by reading the experience of other entrepreneurs. In Moscow and St. Petersburg, prices in capsule hotels are higher than in regular hostels, and more people stay in them out of a desire to come into contact with the exotic. Projects usually pay for themselves within 2-3 years.
Review of popular offers
To buy a hostel franchise profitably, you need to study all the offers of franchisors, understand their requirements and choose the most favorable terms of cooperation. We present an overview of popular franchises with up-to-date information on prices, requirements and prospects.
RUS
The RUS chain positions itself as the largest and most reliable hostel chain in Russia. It has 112 establishments across the country with an average rating of 8.5 on booking.com. The entrance fee is 420 thousand rubles, royalties are at least 5 thousand rubles. The total investment in the project will be 1.5-2.5 million rubles. In a month it is realistic to receive approximately 112 thousand rubles of net profit.
RUS Hostel promises its franchisees:
- search for premises;
- selection and training of personnel;
- uninterrupted flow of customers throughout the year, occupancy rate at 80%;
- contracts with corporate clients (MTS, Russian Railways);
- single call center;
- centralized loyalty program;
- training center and owner training.
Nice hostel
The “Cozy Hostel Network” already has 4 thousand hostels around the world: in Russia, Latvia, Lithuania, Belarus, Poland, the Czech Republic, Germany, Kazakhstan, France, Great Britain, and Portugal. The establishments of the network comply with the tasks and goals of the International Hostel Association. The network is rapidly developing due to favorable terms of cooperation and the demand for inexpensive accommodation services in general.
The franchisor promises high occupancy throughout the year and income of 180 thousand per month.
The franchise is available in 3 formats:
- City. For cities from 500 thousand to 1 million people. Total investment - 468 thousand rubles. The lump sum contribution will be 200 thousand rubles, the royalty is 50 rubles per week per bed. Payback during the first year of operation, monthly profit at 130 thousand. Cooperation with cities with smaller populations is carried out on individual terms.
- Megapolis. Available to cities with a population of over a million. The lump sum fee is 250 thousand, the royalty is the same - 50 rubles per bed every week. The total opening costs will be at least 520 thousand rubles. The project will pay for itself in 10 months and will bring in 180 thousand rubles every month.
- Exclusive. Available to investors who want to buy out an entire region. The size of the lump-sum contribution and initial investment is calculated individually, royalties at a similar rate. Profit and payback are individual.
The franchisor promises:
- work according to international standards;
- access to the international reservation system;
- business book with detailed instructions;
- assistance with solving all issues of the hostel;
- advertising campaign and marketing promotion;
- training;
- personal curator;
- individual approach;
- rights to territorial integrity (new partners will not be able to open in your city);
- form style.
Those wishing to become Nice hostel franchisees must share the company’s values:
- ensure continuous social connections within society;
- promote the strengthening of cultural ties;
- promote the development of accessible tourism;
- to popularize eco-tourism that is safe for the environment.
The franchisor helps to decorate the hostel interior in a corporate style
Like
The international network of Like hostels has 59 franchise establishments in Russia. The lump sum contribution is 300 thousand rubles, and the total investment in creating a business starts from 500 thousand. The company promises opening in 15 days and an annual income of 2 million rubles. There is no publicly available data on royalties; for each partner, the amount of monthly payments is set individually.
Like Hostel offers franchisees:
- step-by-step instructions for opening from scratch;
- own website and ERP system;
- brand book and design layouts;
- online support on all business issues;
- the opportunity to work for a brand with international fame;
- recommendations for cost reduction.
Hi Loft
The chain of designer mini-hotels (essentially hostels) has 38 establishments. The entrance fee will be 250-350 thousand rubles, and the total investment in the project varies from 900 thousand to 7 million rubles. Monthly payments are tied to the number of beds and amount to 200 rubles per bed per month. The franchisee is required to have premises with an area of 150 to 800 sq.m.
The franchisor promises:
- launch in 2 months (minimum period - 35 days);
- quick payback - from 6 months to 1.5 years;
- income at 274 rubles per month;
- step-by-step instructions for starting a business;
- a universal IT system for managing all processes;
- high occupancy in all seasons;
- investment in the second project.
An attractive interior is important: the occupancy rate of the hostel depends on it
Artist Hostel
The Artist Hostel chain of hostels is developing a franchise network and invites new partners to join it for 500 thousand rubles as a one-time contribution. Royalty payments begin when the hostel occupancy is 75%. If all investments do not pay off within 2 years, the franchisor will return the money.
The company promises profits of 170-200 thousand per month. The peculiarity of the franchise is that the new partner does not receive a personal manager who will help him with the opening. A full-fledged management team is allocated for him
Cooperation is possible with both premises owners and tenants. In the second case, the franchisor will help you select a suitable area and negotiate its rental. The renovation and decoration of the future hostel will also be undertaken by the senior company. Investments at this stage will amount to at least 1.2 million. Investments in paperwork (30 thousand rubles) and advertising (75 thousand) will also be required.
For work the following are provided:
- service for e-mail newsletters and SMS notifications;
- CRM system;
- contextual advertising and SEO promotion;
- form style;
- crowd marketing.
Voyage
The Voyage hostel franchise is available in 3 options:
- Light. The entrance fee will be 120 thousand rubles, royalty 5% of turnover.
- Optimum. The one-time contribution is equal to 220 thousand rubles, royalty is 3% of turnover.
- Smart. The lump sum contribution is 560 thousand, no royalties are provided.
All 3 options are suitable for owners and tenants of premises in cities with a population of over 100 thousand people. The majority of hostel guests will not be tourists, so the tourist attractiveness of the city is not of decisive importance. The franchisor offers:
- step-by-step guide to starting a business;
- assistance with finding premises;
- detailed information about documents, permits, attracting clients and other areas of work;
- technical and information support;
- reservation management system;
- additional channels for attracting guests and corporate clients;
- quick profitability - from 2 to 6 weeks;
- a large list of available cities;
- income from 100 thousand from every 100 sq.m.
New amendments to legislation prohibit the location of hostels in residential buildings
Selecting a room
The successful location of the hostel determines its success. It should be convenient for guests to get to their accommodation. Tourists visiting the city for the first time should have no trouble finding it. Accommodation near the metro, public transport stops, tourist attractions and embankments in resort towns is welcome.
New amendments to the law prohibit the placement of hostels in residential buildings without a separate entrance. That is, it is allowed to open a mini-hotel in a multi-storey building, but only on the ground floor and with a separate entrance. This is a big problem for existing hostels: some of them will have to move or cease operations. However, for beginners just starting their own business, this is nothing more than one of the conditions when searching for premises.
When purchasing a franchise, any franchisor helps you select a suitable area, evaluate its potential and renovate it. Most of them have size requirements. For example, from 80 to 400 sq.m. This is necessary to ensure the number of beds required for payback. Most often, the choice is made on rented premises, but sometimes owners also become part of the network. It’s easier for them to recoup their initial investment.
Human factor
My partner and I were administrators, cleaners, laundresses rolled into one. When we hired administrators, the process suffered from this: no one wanted to clean or do laundry, and we were not ready to pay only for check-in/check-out. And this was a problem that we were not able to complete before closing.
The majority of the residents were interesting, cheerful, adequate, but there were also those who, essentially without any leverage, needed to be put to bed, stop drunken brawling or playing board games too loudly.
Once again about the difficulties and the human factor - neighbors. I expected that sooner or later someone would write a statement to the police. And if in the first rental option we were on the first floor, then in the second we had neighbors below. We tried to maintain silence and call for order, but it is difficult to do this if the hostel is fully populated.
About the franchisor. I won’t name the company, but it’s one of those companies that has franchises for everything and very young management. I didn’t see any sense or benefit in our franchisor. We did not receive significant support or a famous brand.
Necessary costs
The costs of opening one hostel, according to estimates from different franchisors, range from 520 thousand to 7 million rubles. Most of the expenses will go towards rent and repairs. Hostels, like all accommodation facilities, are subject to strict sanitary and hygienic requirements. It is equally important to make the establishment cozy and stylish, buy modern furniture, plumbing fixtures, televisions and other household appliances. The hostel must look attractive in photographs on booking services, but this cannot be done without financial investment.
The advantage of a franchise is that the senior company will develop a design project and help implement it. These costs are included in the lump sum fee, so they will be cheaper than contacting a designer yourself.
In addition to the costs of the premises, funds will be required for registration and issuance of permits. The franchisor will also help with this. The total cost is approximately 30 thousand rubles.
There will be no costs for finding and training personnel. They are included in the lump sum fee: franchisors train the owners, managers and administrators themselves. Also, personnel issues are covered in instructions, which any company provides in abundance. The search for workers can be organized completely free of charge through the employment center and the Internet.
Investments in advertising depend on the wishes of the parties. The average cost of an advertising campaign for the launch of a hostel is 75 thousand rubles. This is promotion on the Internet, the media, through outdoor advertising, as well as through the franchisor’s internal channels.
The payback period for the hostel will take from 6 months to 1.5 years
Opening a capsule hotel: what documents are needed
What documents are needed to open a capsule hotel? The same as for a regular hotel or hostel.
- registration of individual entrepreneur or LLC;
- rental agreement;
- permission from fire and sanitary services;
- tax registration certificate.
It is better to choose OKVED code 55.11 – “ Activities of hotels with restaurants” , which includes the provision of services by hotels with various types of public catering establishments (restaurants, cafes, snack bars, bars, etc.) or OKVED code for hostels – 55.23.3 “Delivery rental of furnished rooms for temporary accommodation .
You will also need a business plan for a capsule hotel. But once again we say that capsule hotels are a new thing for Russia, and therefore it is quite possible to expect that additional documents will be required from you or any other nuances will arise.
To better understand how to open a capsule hotel, you should familiarize yourself with the experience of entrepreneurs practicing this business.
Payback forecast
In franchise terms, the expected return on the initial investment is always indicated. For hostels it ranges from 6 months to 2 years. Too optimistic forecasts should not be trusted: competition in the market is high, and the initial investments are large-scale. To make sure that your partner’s promises are true, read the franchisee’s reviews. Their experience is more revealing than hypothetical calculations.
The owners of premises who did not require repairs or those who inexpensively bought an existing hostel and transferred it to a franchise can usually break even and achieve a net profit within six months.
The payback rate depends on:
- the amount of starting investments;
- number of beds;
- room occupancy;
- level of competition in the city;
- quality of advertising and promotion of the hostel.
How to choose a supplier
The most pressing question when organizing a capsule hostel is where to buy the capsules themselves? The easiest and cheapest way to order is in China. The most famous manufacturer in this market is KOTOBUKI.
However, you can get creative and equip something suitable for the capsules. This is what Amsterdam entrepreneurs did with the Citizen M hostel: they used Pacific shipping containers as sleepboxes.
A creative approach to organizing a capsule hostel
