Millennial and Gen Z Travelers Flock to Affordable Generator Hostels
Introduction
In today’s fast-paced world, travel has become an integral part of the millennial and Gen Z lifestyle. However, with rising room rates and a cost-of-living crisis, young travelers are finding it increasingly challenging to find affordable accommodation. This is where Generator Hostels comes into the picture. With competitive prices and a wide range of locations, Generator Hostels has become a popular choice for budget-conscious travelers looking for comfortable and affordable lodging options.
The Success Story of Generator Hostels
Generator Hostels, a private equity-owned hospitality group, has established itself as one of the largest operators in the industry. With 21 hostels across Europe and the United States, offering around 12,000 beds, Generator Hostels has been capturing the attention of millennial and Gen Z travelers. Not only is the group on track for record revenue of 225 million euros this year, but it is also experiencing substantial growth in profits, with an increase of almost 30%. This success can be attributed to the group’s affordable pricing strategy during an economic crisis.
Jason Kow, the chief executive of private equity fund Queensgate Investments, which owns Generator Hostels, emphasized the importance of affordability in attracting customers. He highlighted the value proposition offered by Generator Hostels, stating, “It’s cheaper… if I want to travel to Paris and see where all the other budget hotels are going in terms of prices and I have the option of staying in the 10th arrondissement… and I can do it at a fraction of the price, but I have to share accommodation, it becomes an attractive proposition.”
The rise in room rates for traditional hotels and other accommodation options has led young travelers to seek affordable alternatives like Generator Hostels. According to industry data provider CoStar, average hotel room rates rose by 14% in the seven months through July, compared to last year and a staggering 30% above 2019 levels. This significant increase has made Generator Hostels an even more attractive option for cost-conscious travelers.
Expansion and Future Plans
With its continued success, Generator Hostels has plans for expansion in the future. The group, which currently operates sites in major international cities such as London, Barcelona, and New York, intends to launch 10 additional hostels worldwide in the coming year. The expansion will follow an asset-light model, where Generator Hostels does not own the long-term lease. This approach allows for flexibility and the opportunity to capture more market share from other accommodation providers.
Despite being popular among younger travelers, Generator Hostels also caters to families and corporate bookings, broadening its customer base. The average age of a Generator customer is 27, reflecting the hostel’s appeal to young travelers. However, Generator Hostels’ affordability, combined with its capacity to meet the needs of different traveler segments, puts the group in a strong position to capitalize on the growing post-pandemic tourism demand.
Looking at the financial aspect, Queensgate Investments, the private equity fund that owns Generator Hostels, acquired the group for €450 million in 2017. As of now, the plan is to hold the asset until there is “more certainty” on interest rates or a potential reduction, enabling strategic decisions concerning the property. However, the current focus remains on growth and expanding the success of Generator Hostels in the global market.
The Remarkable Appeal of Generator Hostels
Generator Hostels’ success story can be attributed to its affordability, strategic locations, and the changing preferences of millennial and Gen Z travelers. Here are some factors that make Generator Hostels stand out in the bustling travel industry:
- Competitive Pricing: Generator Hostels offer budget-friendly rates, making it an attractive choice for travelers looking to save money without compromising on comfort.
- Prime Locations: The group’s hostels are strategically situated in major international cities, allowing guests to experience the heart of these destinations while keeping costs low.
- Catering to Various Traveler Segments: While popular among young travelers, Generator Hostels also serve families and corporate bookings, widening their customer base and ensuring a diverse range of guests.
- Flexible Expansion Model: By adopting an asset-light approach, Generator Hostels can rapidly expand its footprint in new locations and adapt to changing market dynamics.
The Future of Affordable Accommodation
The rising demand for affordable accommodation from millennial and Gen Z travelers has given rise to innovative concepts like Generator Hostels. This trend is not only changing the way young people travel but also reshaping the entire hospitality industry. As the cost-of-living crisis persists and room rates continue to skyrocket, affordable accommodation alternatives like Generator Hostels will play a crucial role in meeting the evolving needs of travelers.
Summary
Generator Hostels, a prominent player in the hospitality industry, has gained popularity among millennial and Gen Z travelers due to its affordable pricing strategy. With 21 hostels across Europe and the United States, Generator Hostels offers budget-friendly options without compromising on comfort. The group’s success can be attributed to its ability to meet the rising demand for affordable accommodation in the face of increasing room rates. With plans for further expansion and a proven track record, Generator Hostels is set to continue its growth in the global market.
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Millennial and Gen Z travelers have increased demand for Generator Hostels by moving down from pricier Airbnbs and four-star hotels, as room rates have risen sharply amid the cost-of-living crisis.
The private equity-owned hospitality group is one of the world’s largest operators, operating 21 hostels with around 12,000 beds across Europe and the United States. It is on track for record revenue of 225 million euros this year and earnings before interest, tax, depreciation and amortization of around 75 million euros.
Generator’s revenues are on track to increase by around 20% compared to last year, while group profits are growing by almost 30%.
Jason Kow, chief executive of private equity fund Queensgate Investments which owns Generator, attributed the group’s success to its affordability during an economic crisis.
“It’s cheaper . . . if I want to travel to Paris and see where all the other budget hotels are going in terms of prices and I have the option of staying in the 10th arrondissement . . . and I can do it at a fraction of the price, but I have to sharing accommodation, it becomes an attractive proposition,” Kow said.
In the seven months through July, average hotel room rates rose 14% from last year and 30% above 2019 levels, according to industry data provider CoStar.
“Affordability is definitely a key component and we are getting more people as a result. . . based on the cost of living trending downward in our product,” Kow said.
Generator owns and operates sites in major international cities including London, Barcelona and New York. Over the next year, it plans to launch 10 more sites around the world under an asset-light model where it does not own the long-term lease, including a new hostel in Bangkok.
The average age of a Generator customer is 27, but Kow said the group also caters to families looking to get away on a budget and has also received corporate bookings. The enthusiasm of young people to spend on travel and in a big way post-pandemic tourism demand it put the group on a strong footing to capture more market share from other accommodation providers, Kow said.
Queensgate, which has around €3 billion in assets under management, bought Generator for €450 million in 2017. Kow said it would hold the asset until there was “more certainty” on interest rates or “perhaps also some reduction in interest rates.”
“Then we can consider some sort of strategic option, but at this stage we are focused on growth,” he added.
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