Hostel market booming in SE Asia: C9

Established hospitality chains moving into hostel markets
Established hospitality chains moving into hostel markets

South-east Asia’s hostel market experienced “skyrocketing growth” in 2017, surging 32 per cent in bed inventory, according to the latest Hostel Market Update by C9 Hotelworks.

The surge brings the bed count in the region to 63,632 across 1,766 properties, led by Thailand with a 41 per cent share.

Thailand now has 722 hostels and 25,207 beds, up 28 per cent year-on-year. Other hostel market leaders in the region are Vietnam, with 221 hostels and 7,763 beds, a bed supply increase of 41 per cent year-on-year.

Top five hostel markets in the region

Bill Barnett, managing director of C9, observed “no sign of deceleration as investment is being embraced by an increasing number of hospitality groups and institutional investors”.

Indeed, the report shows conventional hotel companies investing in hostels, highlighted by Lub d, the region’s largest and fastest-growing hostel group.

Despite the influx of capital into branded hostels, independent hostels continue to dominate the regional market, with 1,532 properties representing 87 per cent of total supply.

C9 further reported that year-on-year market-wide ADR per bed (ADRB) declined with bed supply rising sharply. Singapore has the highest ADRB, followed by Myanmar and the Philippines.

Meanwhile, Barnett observed: “In past years, hostel developers maximised profits by developing properties with high bed inventory and no private rooms. However, micro-private rooms in hostels are becoming essential and impactful to rate yields. This can best be seen in the growth of hostels with private rooms in Indonesia, Thailand and Vietnam which now exceed 50 per cent of overall room inventory.

Going forward, C9 expects privacy will become more indispensible for hostels, prompting an exponential growth in private rooms.

C9 also foresees hostels will increasingly come under government scrutiny due to the growth of shared economy products such as Airbnb.

“Despite an elevated growth of supply, one considerable complication to the hostel market is the ambiguous rules and regulations; these have become a major concern in leading destinations such as Thailand, Malaysia and even Japan. While government regulation is starting to evolve, this remain a key sector issue,” Barnett said.

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