"What’s your business model?" is another way of saying “How do you plan to make money?” Attached above is the business model for a new hostel in the hospitality industry. This is when you take the time to ask yourself some fundamental questions and do some Google research to ensure that you understand all possible aspects of the business you are about to launch. A few questions you should be able to answer include
Since this is a vital part of you understanding the business, I have decided to go into details of how your sales channels work. The good news is there are tons of websites out there to instantaneously connect you to the world of backpackers. The bad news is that they will ask for a get a pound of flesh. Gone are the days where backpackers would rock up armed with only a lonely planet and make their way to the recommended hostel. The lonely planet is dead. Long live the internet.
So overall for a new hostel you’re looking at 30% from Hostelworld, 30% from booking.com, maybe 20% going through tripadvisor and eventually booking with HW or Booking.com (tripadvisor is linked to these sites), 10% through your own website and 10% as walk-in customers. Depending on your location (if you’re next to a train station for instance) or as your popularity grows your walk-ins and homepage bookings will increase which should be your goal to maximize revenue. However, for the first year, ignore the commission and list of as many sites as you can until you figure out what works best for you.
The revenue stream of your business can be broadly divided into 4 segments
Please remember that the image of your hostel (and hence your bed revenue) is at stake the moment you venture into any non-core business, so tread with care. Do not kill the golden goose.
Rent and salaries will be your major operating expenses. Other than these two, Utilities and Taxes will also factor into your monthly costs. We will delve deep into the subject of costs in SECTION 2: Evaluating the Opportunity.
There's no need to reinvent the wheel. Business models have been around for decades and there's a great deal of free quality information and tools out there to help you get started on yours. The following are the resources that I have used in the past
Creating your own business model is advisable to ensure that you understand the various aspects that you need to consider as part of your project. Feel free to share a link to your business model below for any feedback or comments from the community.