Why Two Hostel Operators See Their Future in Tours

The upcoming Arival Berlin will feature two speakers from the hostel sector have built successful tour businesses. Their approach could be a model for the accommodation industry, and create opportunities for tour and activity operators to reach new customers through hotel and lodging partners.

The hostels have long been active – and successful – in cross-selling tours and tickets, or offering their own experiences. Now, two hostel operators are demonstrating how tours can be not just an “ancillary service” but a major strategic focus for accommodation operators.

For Abraham Hostels & Tours, the tour division has become the largest business unit within the group, according to Gal Mor, co-founder and partner overseeing strategic initiatives. Considering that the Israeli company was recently named among the top 10 largest hotel companies according to HostelWorld, the success of Abraham’s tour division signals the potential for accommodation providers to step into tours, activities and experiences.

Founded in 2010, Abraham Hostels has three properties in Israel and plans are in place for two more locations for hostel and tour operations. That’s just the start, as Mor’s vision for the business is much broader. “We chose the name because we wanted to open hostels across the Middle East, along the biblical path of Abraham, the first backpacker,” said Mor. “If that’s possible geopolitically, that’s the goal.”

Mor adds that Abraham Hostels & Tours is not a religious-oriented business. Their inspiration comes from Abraham’s journey as a unifying symbol among the area’s prominent faiths

An obvious cross-sell

There is a synergetic relationship between Abraham’s hostel and tour operations. The hostel business provides a captive audience to market the tours, while tour customers also become hostel guests.

“About 70% of people going on the tours are not hostel guests. That allows us exposure to a greater audience, and many become our guests,” said Mor. “For people staying at the hostel, we give them a discount so if they’re staying at the hostel anyway they can go on the tour. And they don’t have to worry about getting to the departure point on time.”

Mor sees tours, activities and experiences as not just another stream of revenue, but key to the company’s strategy to serve its customers and stay relevant as traveler tastes change.

“The segment of independent youth travel is growing at the fastest pace, as is the demand for experiences and social interactions. That’s more important to them than a posh room or a fancy meal,” said Mor. “They’re looking for deals on flights and accommodations so they can use that savings to buy experiences, and usually, an experience that is iconic to the destination.”

Guest interaction is the secret sauce

One example Abraham offers is a workshop at each hostel that teaches how to cook in the style of the local cuisine. Guests can learn to make hummus and, with a couple of drinks, they then sit down with the people in the class and enjoy a meal.

“It’s a great way to meet people,” said Mor. “That’s the secret sauce; the interaction is key.”

Fabio Coppola, chief visionary officer and co-founder of boutique Rome hostel YellowSquare, would agree. YellowSquare began offering cooking classes (“Kitchen of Mamma”) that have become very popular with the hostel’s guests.

“It creates an opportunity for the guests to learn about local food but also to get together with other guests,” said Coppola. “That experience with each other is what makes this special.”

Although YellowSquare’s roots are in hostel accommodations, Coppola sees tours and experiences as central to the company’s future, with the potential to be more important than heads in beds. They have launched a tours division, YellowGuides, which features walking and bike tours, bike and scooter rentals, wine tastings and an escape room.

As hotels and other lodging providers face competition from Airbnb and online travel agencies, expect more to step into our industry. This could create an opportunity for tour and activity operators to reach new customers through local lodging providers. But hotels and accommodation providers can be just as protective of their customers. The key for operators will be to seek out the right lodging partners and ensure you have the right product fit for the lodging partner’s customer set.

Hear more great insights on working with local lodging partners and building your tour business from Gal Mor and Fabio Coppola during the Theater program at Arival Berlin, to be held March 4-5, 2019. Register now!