New 'boutique' branded operators are looking beyond the traditional backpacker market.
Hostels are appealing to a wider variety of guest segments than currently open to the hotel sector.
Supply continues to be dominated by independent operators. Further consolidation of the sector means that branded supply is set to expand, similar to that seen in the hotel sector.
London and Paris offer the greatest opportunities for expansion based on current supply in relation to their youth' tourist markets.
The ceiling in bed rates requires operators to have large sites in order to obtain the critical mass to deliver optimum returns.
Future expansion over the short term will continue to be driven by private equity attracted by the current low penetration of branded supply, low operational costs and ability to drive revenues through F&B and other add on services.
Source : Savills