Over the past 18 months, investment firms including Brookfield and Apollo have made significant investments in the European hostel industry, which is growing faster than mainstream hotels. The plan is to finance the expansion of standardised modern hostels and further professionalise an industry that has provided a cheap and cheerful refuge to travellers on a budget for more than a century. Hostels are “the last space of the lodging sector that hasn’t really been touched [by institutional investors],” according to Andrew Heath, a vice-president at real estate adviser JLL. “People are looking and thinking: Can [hostels] be institutionalised? Can they be standardised and premiumised?”
Brookfield, which manages about $1tn in assets, acquired London-based Generator Hostels’ European business for €776mn last year. That followed real estate private equity firm L&G Proprium’s purchase of another European chain, A&O Hostels, in 2023. A&O secured €874mn of financing from Apollo in April. Both A&O and Generator plan to double the size of their estates.
Some fear that the growth of private equity-backed “chain hostels” will undermine the charm of the historically shabby lodgings. “What you compromise is that local, authentic atmosphere that so many travellers love,” said Evan Tzeng, founder of travel platform Stay Altered, which works with independent accommodation providers. In the 12 months to August, the number of large hostels in Europe — defined as those with capacity for more than 100 guests — grew 13 per cent to 83. While the total number remains small, the growth is outpacing that of hotels and other types of accommodation, according to figures from analytics company Co Star collated by JLL.
Source: Financial Times Companies · Summarized by HeadlinesBriefing