Alternatives to generate revenue and profit in the first 5 years of business.

It’s long gone since the time that hostels and guest-houses were considered places for travelers with no money to spend. Nowadays, the young millennials who have become travelers are looking more and more for integrated, dynamic and cozy environments. On the other hand, the hospitality sector has been searching for different alternatives to make money and generate revenue beyond individual beds in private rooms or dorms.

So, how to combine business with pleasure? How to generate revenue with something different?

We talked to Guilherme Perez, Business Manager and Owner of We Hostel – São Paulo about the decision-making process regarding the challenges he faced as soon as he opened his business: “In the beginning, our revenue basically came from the accommodation. As we didn’t have any experience of hosting people, only references and studies, we focused all our effort on how to entertain our guests. We had a payback of around 2 and a half years, which is below the average for the market, that is between 4 and 7 years. Although we still haven’t achieved the 30% margin goal, we’re on the right track”.

To help the owners and managers of hostels and guest-houses to make the decision to expand their businesses and draw a strategic plan with focus on profit following new ideas, we’ve listed five alternatives to generate more revenue in your property. Here they are:

RESTAURANTS AND COFFEE SHOPS

One of the most common alternatives is to create a food and drink consumption structure in your business. Restaurants and cafeterias need a special license and permit for the sanitary inspection but the profit generated by selling the products is usually very significant. “Generally speaking, foreigners consume more food and drinks because they’re here on holidays and are searching for new experiences. In the bar, our main source of revenue is the people who live nearby and who come to our bar and parties, not our guests”, suggests Guilherme.

PARTIES AND CLOSED EVENTS

A simpler alternative would be to rent an area of your space to theme parties and closed events. It’s a great option for any season or even to generate visibility to your location by showing off a special decoration for the event and to promote the photos on your social media channels in a Digital Marketing effort with geolocation and hashtags.

COWORKING SPACES

In order to attract digital nomads to their establishments, many hostels and guest-houses owners and managers are transforming some of their spaces into co-working spaces, i.e., creating an adequate environment for those who work with their laptops and need a comfy armchair to spend the day concentrated, as well as a stable internet connection. Quiet rooms for meetings are also very welcome and the technological millennials appreciate it.

CUSTOMIZED PRODUCTS

Some hostels and guest-houses build such a powerful visual trademark that they develop Product Marketing materials directed at their guests. It can be in T-shirts, mugs, keyrings, slippers or any other item that can be stamped with their business’ or towns’ logo. The revenue gained from these products and souvenirs may not be that great, but it may grow when combined with bigger and even regional events.

TOURIST SERVICES

Another option to explore is offering tourist services that can be outsourced or not. However, these services must be made by reliable people or companies to avoid any kind of misunderstanding with your guests, as it happened once to Guilherme, from WE Hostel. “We had a transportation provider (airport, parties, shows, etc.) that didn’t fulfill the schedule so our guests would become dissatisfied with us. We had to stop that, look for suppliers again and restructure the operation”.

---

With time and as your own business develops, solutions will appear in the most varied ways, whether with guests’ suggestions or from members of your collaboration team. The important thing is not to let your daily operational work make you forget the importance of innovation and tactical solutions to increase your business’ revenue.

Who knows, in a nearby future the profit you’re making with restaurants, bars, room renting or even tourist services may be bigger than that coming from selling your empty beds. You’ll only know the answer if you start to calmly plan and manage your business.

Let us know the best ways you found to generate revenue and profit! What were your learnings? ☺