Hostels were once defined by shared dormitories and a low price. Many now derive most of their revenue from private rooms and from services that have nothing to do with beds.
Revenue per square metre drove the change
A dormitory sells several beds in one room, but each bed sells cheaply and the room needs more cleaning, more supervision and more shared bathroom capacity.
A private double in the same footprint sells at a much higher rate to two guests who generate less operational work and complain less about noise.
Operators comparing the two calculations gradually converted space, which is why a modern hostel often has a handful of dorms surrounded by private rooms.
The customer base widened
The original hostel guest was young, travelling long and extremely price sensitive. That traveller still exists but is no longer the largest group in the market.
Solo travellers of all ages, remote workers on extended stays and small groups now book hostels for the social layout rather than for the lowest possible price.
Those guests will pay meaningfully more for a private room in a sociable building than for an anonymous budget hotel, which is the gap the format now occupies.
Food and drink became the margin
A bar serving guests and locals produces a margin that beds cannot match, and it operates in space that would otherwise sit empty in the evening.
The same applies to a kitchen selling breakfast and simple dinners, and to events that keep guests in the building rather than spending elsewhere.
This changes the design brief entirely. Ground floors are built as bars and cafés with reception attached, rather than as lobbies with a vending machine.
What this did to the price floor
In high-demand cities the cheapest dormitory bed has risen substantially, because the space it occupies has an obvious higher-value alternative.
The very cheapest accommodation has moved toward properties outside the centre, and toward formats that do not attempt to be sociable at all.
Travellers who want the old proposition can still find it, but usually in smaller towns and independent properties rather than in the large branded groups.
How to read a hostel listing now
The ratio of dorm beds to private rooms indicates what kind of building it is, and a property with mostly private rooms will feel closer to a small hotel.
Dorm size matters more than price for sleep quality, and a four-bed room with lockers and reading lights is a different product from a twenty-bed room.
Whether the bar sits under the bedrooms is worth checking, since the same features that make a hostel sociable make it loud after midnight.