Published on: November 28, 2011by Kevin Coupe
The Wall Street Journal has a story about the newest venture being financed by Yucaipa Cos., the investment group headed by billionaire Ron Burkle that has positions in companies like A&P and Barnes & Noble. Yucaipa is working with a hotel developed called the Sydell Group to develop high-end, for-profit youth hostels around the US, believing that this market is dramatically under-served.
“His new venture is launching its first hostel in Miami Beach, where it is spending about $20 million to acquire and convert an Art Deco-style South Beach hotel for a fall 2012 opening,” the Journal writes. “The hostel will offer its 350 beds for about $40 a night. That compares with about $30 a night, on average, for existing Miami hostels and about $100 a night for low-cost hotels,” not to mention being wildly less expensive than premium hotels. The story adds that “the partners say amenities - including bars, restaurants, swimming pools and stylized lobbies - will distinguish their properties from other youth hostels, although they will pale in comparison with luxury hotels.”
The Journal continues: “At a time when many operators are crowding into the luxury segment of the industry, the new venture is a bet that there is a sizable foreign and domestic youth market the major hotel companies have ignored. While youth hostels are found in most major American cities, they have never caught on as they have in Europe, where sharing rooms with strangers is much more common.
“Youth travelers are responsible for an estimated $136 billion a year, or about 18%, of world-wide international travel receipts, according to the World Tourism Organization.”
Now, I have to be honest. Much of this surprised me. I had no idea the youth hostel business was so big or had so much potential. My experience with youth hostels is 30 years old, took place mostly in Europe, and it is the smell of urine at the one in Venice that I remember most. (Though, to be fair, one of my best friends in the world has been active in the American Youth Hostel movement for years, and would maintain that most hostels are better than what I experienced.)
But what really impresses me in the ability to see a potential competitive opening where most people do not.
I’m not sure I’d stay in one of these hotels. I’m sort of past the point in my life where I want to share a room with a dozen other people. On the other hand, I think I’d rather stay in a youth hostel than an “elder hostel,” and going to see Martin Sheen in The Way did get the juices going a bit.
I’ll be interested to see how this plays out for Burkle ... and how many competitors jump into the business if he is successful.
It’ll be an Eye-Opener.
- KC's View: