Outlook for 2019Presented by Byron Bunda at the American Hostel Conference

Click here for a live recording of the presentation

About

● Backpacker Business Solutions● Consulting for new hostel owners● Digital marketing for established hostels● Publishes the BackpackerBiz blog on

hostel management topics. Sign up here

● American Hostels● Loose collective of independent hostels● Goal is to unite the US hostel industry so

that we may learn and grow together● Free to join, no long term commitment

Part One: Economic Outlook

U.S. Travel Association outlook

● “A worrying trend of deceleration”● Weakening global economic conditions● International growth decelerating ● 2.4% Domestic growth projected● 1.0% International growth projected

Skift Global Travel Outlook 2019

● International arrivals likely to reach an all-time high● Another strong year of economic growth● Stock market volatility and political uncertainty could weigh on consumer

confidence● Headwinds

○ Stronger US dollar○ Rising interest rates○ U.S. trade tariffs and increasing protectionism

● 10 years into economic expansion○ Key indicators remain positive○ Barring a “negative shock” travel should grow

Labor Shortage

● Unemployment rate at its lowest since 1969● Tighter immigration laws, opioid epidemic● Bloomberg reports “upward pressure” on accommodation industry● 961K unfilled jobs in Accommodation and food service as of 9/18● Wages in the sector increased 3.3% in 2018 through 9/18● Big potential gains in automation and outsourcing in hostels● Besides higher wages, greater flexibility in scheduling helps

Prepare for a possible economic downturn

● Consider labor scenarios○ Contingency budget based upon a decrease in occupancy or RevPAB○ Cross-training now to make staff more adaptable in the future

● Increase efficiencies ● Diversify your customer base● Make hay while the sun shines

○ Can you book some groups for summer now?

● No two recessions are the same○ The world was a different place in 2008

Megatrends affecting hostels

Climate change

● Short term○ Hostels on the Atlantic and Gulf Coasts prepare for more storms

■ Hurricane Harvey: Houston’s demand increased 47.5%○ Disruption from forest fires

■ 2018 California fires closed many parks■ Affected San Francisco’s air quality “Lots of travelers left the city” - USA Hostels

● Long term○ Hostels with winter sports should prepare for shorter seasons○ Those at low elevation will be hit hardest

Continued increase in remote working● Remote work grew 140%

between 2005-2018● 10x more growth than

traditional jobs● More digital nomads● Not just “nomads” but also

regular office workers “telecommuting” one day a week

● Is your hostel set up to accommodate these guests?

“To us, the digital nomads are two types of people: You have individuals who are truly dedicating their lives to just traveling and working.

The other group, which is going to grow more, are people who have traditional jobs, bankers, lawyers, designers. They want something else that gives them a purpose in life.

We expect companies to be able to come these millennials and say “come work in our office for 10 months, but for 2 months, keep working, but do it wherever you want. We have a deal with Selina. Go travel the world.”

Yoav Gery PresidentSelina

An increase in shared spaces

● Shared spaces everywhere

● Coworking spaces● Coliving spaces● Enabling human

contact in our digitally isolated world

People are taking their work and study with them on the road, so it becomes increasingly difficult to tell the difference between travelling, staying and living.”

“Blending will increase, both within the youth travel sector, and between youth travel and ‘everyday life’.

For example, co-working is morphing into co-living, so accommodation is becoming an add-on to the workspace.

Greg RichardsResearch AdvisorWYSETC

The convergence of hospitality

● Hostels want to look like luxury hotels● Hotels want to have cool public spaces like hostels● Camping is now glamping● Airbnb wants to be like a hotel with Airbnb Plus● It’s time to loosen up on labels

One traveler, many types of accommodation

● Traditional full service hotel when on business trip (work is paying)

● 2 nights added on at a hostel for Bleisure (she’s paying)

● Airbnb for friend’s bachelorette party

● Glamping weekend with boyfriend

Possible fallout from Trade War with China

● Increased US tariffs on China

● China could respond● China has “weaponized”

travel before● China asked state-run

enterprises to avoid business trips to the U.S.

On the flip side, trade and tariff wars can shift travel patterns and push travel to become weaponized. It’ll be interesting to see how travel patterns for this region might change in 2019 as a result of political tensions."

"Over the next ten years, millennial travelers will enter their peak earning and spending years. According to a report from the Asian Travel Leaders Summit, about 60 percent of all millennials live in Asia, one-third of which come from China or India.

This emerging travel market has a unique and powerful position in the industry as Asian Millennial Travelers are estimated to spend $340 billion on international travel by 2020.

Adam HarrisCEO, Cloudbeds

Social media 2019

Flash is out

● Using social media as just another ad channel–filled with flashy clickbait and promo codes–feels increasingly out of step with social norms and user preferences.

● “Photoshopped images aren’t great for young travelers. They want to see what’s real.” -British Educational Travel Association

Authenticity is in

● Progressive companies will focus less on maximizing reach in 2019 and more on generating transparent and meaningful engagement.

● Authenticity relates to the trend of “experiential travel”

● Story based updates are growing 15 x than feed based updates

● Rethinking social updates as “more of an intimate, often raw, multimedia glimpse behind the scenes.”

Instagram is in

● Travel community on Instagram is a very “engaged, curious, passionate” audience.

● Take advantage of that● Instagram Stories are

evolving● “Experiential travel”

through Instagram Stories

Content: Sponsored out, user generated in

● An increasing distrust of advertising.

● Facebook advertising prices increased 112% in 2018

● “The key to success for bloggers and influencers is authenticity; if the things they promote, the places they travel and the brands they use are genuinely a part of their travel experience.” - World Nomads

The explosion of messaging

● 9 out of 10 consumers would like to use messaging to communicate with businesses

● Messaging is the #1 preferred customer service channel in the USA● “Facebook is becoming more of a messaging tool and is not really a

marketing tool anymore” - Samesun Backpackers● Engage your guests at every stage, from pre-booking to post-visit

Youth travel trends

Health & wellness in

● “A big shift” operators developing wellness and active as key areas

● Traveling for “meaning.” They want to be better off

● “Culture” through food, language, beliefs

● Getting off the beaten track to really discover the location

-STA Travel

“Wellness tourism is growing twice as fast as global tourism.

Wellness tourists are spending between 50 percent and 180 percent more than their average counterparts.

So the opportunities and demand for well-being are there –– and it’s clear that they’re here to stay.” Mia Kyricos

Global Head of Wellbeing,Hyatt

Mobile meditation and relaxation studio Be Time. “Meditation is where yoga was 10 years ago,” says the founder

Hedonism is out

● Fewer going on holidays that revolve around clubbing/drinking● They want purpose or adventures. ● To come back with amazing stories to tell. ● Amazing places that they can show off on Instagram

Experiential Learning

“Whether it’s cooking or yoga. Experiential learning is already big and travel is a great example of this. We just don’t always realise it.”

Sarah Clark, Intrepid Group

Increased interest in The South

● “Europeans come to the South because they’re interested in music, food, and civil rights” Alabama Tourism Department

● Robert Weinstein, two-time Hoscar winner, opening his second location in “the home of the blues” Clarksdale, MS.

Civil War tourism out, Civil Rights tourism in

● Brooke Johnson, GM of HI Richmond seeing less interest in Civil War historical sites

● National Memorial for Peace and Justice in Montgomery, AL

● National Museum of African American History and Culture aka “The Blacksonian”

● National Civil Rights Trail

Equal Justice Initiative’s National Museum for Peace and Justice

Montgomery, AL on the 2018 places-to-go lists in both the New York Times and Lonely Planet

An additional 40,000 room-nights from January through May, compared to the year before the opening

Montgomery opening its first two boutique hotels.

“Maybe the sites that we have in Atlanta aren’t enough for [someone] to make that next step and actually plan a trip.

Kevin Langston, Georgia Department of Economic Development, tourism division

But if they see what’s only three hours away to get to these sites in Montgomery, Birmingham, and other places, that could make for a 10-day trip, and that’s good business for all of us”

Responsible and Ethical tourism

“Yes, this next generation of traveller is willing to make ethical choices, but not always at a cost to them.”

Pete Edwards, Samesun Backpackers

More small festivals, more unique moments

● Big festivals like Coachella aren’t going anywhere

● Small, new festivals crop up every year

● “Festivals for a demographic who value unique experiences over the same old tourist traps” -Student Universe

Ondalinda: the next Burning Man—with a wellness twist. Events included heart opening cacao ceremonies, mud healing on the beach, meditation, water activities, and yoga.

Hostel industry 2019The chains are coming...

Generator Ho(s)tels

14 hostels

Generator Miami opened September 2018

Generator DC will open in 2019 or 2020

Found Hotels

● Opened April 2018○ Chicago○ San Diego○ Boston

● Coming soon to ○ San Francisco ○ Los Angeles ○ Hawaii○ New York

Selina● 43 locations in less than a

decade● 2 locations under development in

Miami○ Planned to open September

2018. Still not open● 1 location announced in NYC● Planned to have 5 US locations

by end of 2019.● Now planning 15 US locations by

Summer 2019● Seeking locations in Los Angeles;

Washington, DC; San Diego; Austin, TX; New Orleans; Portland, OR; and Nashville, TN.

Meininger Hotels

● 20 hostels in Europe● Long term lease on a

building in Washington DC

● 616-bed hostel opening 2020

JO&JOE

● Owned by Accor Hotels

● 1 location open in France

● 2nd French location opening March 2019

● Plans for Budapest, Rio de Janeiro, London, and Krakow

● “We are trying to open in the United States”

Who else might come to America?

Insatiable Airbnb

● 24% growth in gross value of bookings in 2018

● 3rd largest lodging player behind Marriott and Hilton

● Some pushback as bureaucracy works slowly

Airbnb Experiences

● Airbnb for tours and activities

● 2016: 12 cities with 500 options

● 2018: 1,000 cities and 15,000 options

● Will disrupt the tour and activity sector

● Does your hostel sell tours or partner with operators?

“We so far have seen that hosts can be empowered to provide something that hits their passion and also makes the guest’s trip a lot better.

Joe Zadeh Airbnb’s head of experiences

We are seeing the growth experiences to be even faster than the growth of our personal homes visits because we already have an engaged travel audience that wants to have a real local experience.”

Increased interest in tours and activities

● Consumers shift their spending to experiences rather than belongings.● High-income travelers “would rather spend their money on activities than a

nicer hotel room.” ○ 67% in 2018○ 59% in 2017

● Positive trend for hostels. Save on bed, spend on experiences● Opportunity to increase tour bookings as revenue stream

Source of bookings

● Walk-in and telephone bookings’ share will continue to decrease

● OTAs’ share of bookings will continue to increase

● Hostel website share of bookings will remain stagnant

● It’s important to invest time and money into your direct booking strategy

Hostelworld Data Nov 2018

Native Hostel makes it cool to book direct

Direct bookings: You can do it!

● Consider Native Hostel● Competition from a half dozen

quality hostels● Selling beds on Hostelworld &

Booking.com● 75% of bookings are direct

● How much money do you make for OTAs each year?

● How much money did you spend on digital?

● Are you experienced in digital marketing?

● Do you have free time to learn?

Increased use of channel managers

Myriad OTA options available

In closing...

Introduction Stage

● Infancy● The firm may be alone in the industry. ● May be a small entrepreneurial

company.● Known as "question marks" because

success of product and life of the industry is unproven and unknown.

● Focused strategy to stress the uniqueness of the new product or service to a small group of customers.

● Customers are "early adopters" ● Marketing to explain the product and

its uses to consumers● create awareness for the product and

the industry. ● Market demand will grow from the

introduction,● As the it grows at an increasing rate,

the industry enters the growth stage.

Growth stage

● Marketing to differentiate from competitors

● Firms tend to spread out geographically during this stage of the life cycle.

● R&D to make product better; reflect customers' needs and suggestions.

● Growing demand will create sales growth.

Earnings, assets, profits all grow● High growth and market share. ● Key issue is market rivalry. ● Industry-wide acceptance +● New entrants join industry =● More intense competition● To extend growth, firms approaching

maturity can expand into other countries and new markets.

Maturity stage

● Slowing growth● Rate of sales

expansion = growth rate of the economy

● Fewer firms● Those that survive will

be larger and more dominant

The U.S. hostel industry is entering its growth phase.

Let’s grow!

The BackpackerBiz takeaway:

Thanks!Byron Bunda

byron@backpackerbiz.com

(646) 660 4043

www.backpackerbiz.com