Posted: 01/21/19 | January 21st, 2019
I’ve wanted to own a hostel since I first started traveling. During my month on Ko Lipe in 2006, I spent my lazy days on the beach dreaming of opening one in New Zealand with some friends. It was going to be eco-friendly and called “The Greenhouse.”
A few years ago, I actually ended up owning a hostel in Austin. During that time, a lot of new hostels were opening in the city. Competition for guests heated up. Austin is one of the fastest-growing cities in the country after all.
As my friend and I were thinking of ways to draw in guests, we stumbled onto the Hostelworld Elevate program.
(OK, he did. Then texted me all about it!)
What does this program do?
It gouges hostels owners — and lines Hostelworld’s pockets.
As a consumer, I’m well aware that booking websites charge a commission for properties to be listed in their results. That’s how they make money. And also that “featured” properties pay more for special placement on top of regular results. (They should just put the word “ad” up instead of being coy. We all know what’s going on.)
I don’t find anything wrong with that model. Hostels get access to a larger pool of guests, companies get money, consumers get a one-stop-shopping solution.
But this Hostelworld Elevate program is much more insidious than that.
Here’s how it works:
Hostelworld, like all search sites, has a default search results listing (the one you get if you don’t use a filter or sort by any criteria). Let’s use Austin as an example:
As you can see, we’re #5 despite having the top rating in town.
The standard commission for Hostelworld is 15% per booking:
So how do we end up number five on this list?
Thanks to Hostelworld Elevate, hostels can pay more to rank higher in the results.
If we pay 25% commission, for example, we can go up two spots on this list. (That means the other hostels on this list may be paying even more than that to secure a higher ranking on the default search results.) It doesn’t put us at the top as a featured listing or anything — this is just to move up on this default list.
In theory, we could jump to #1 in the default search results if we paid a lot more money to Hostelworld, regardless of how good our hostel is. As long as we are willing to pay to play, we can be anywhere we want to be.
However, we were definitely not going to pay the extra fee, even if that means sitting at the bottom of the default rankings as more hostels in Austin open up.
But Austin is a small sample size. There are only five hostels on the list, so even without paying, we aren’t likely to be missed.
But think about big cities with hundreds of hostels, like London or Paris or Berlin or Sydney.
Who is going to scroll through pages and pages of results? How easy it to miss even the sites on the bottom of the default list when Hostelworld returns 20 results?
Have you ever wondered why so many of the top hostels on the default search results list seem to be bigger or part of chains?
Here’s London as an example:
Look at all those chains! And here’s Paris as an example too! Look at all the similar names here:
To the hostel owners out there, this is probably old news, but to me this was a huge shock.
To be fair, I don’t know the exact formula Hostelworld uses to pick the default list without Elevate getting in the way but I do know that if you pay, you can be anywhere you want.
Which is why you see sooooo many chains as the tops results in so many cities. I can’t prove it but based on what I know (and the fact these chains tend to have higher prices), I bet they are paying. I’m sure there are some chains out there who don’t pay and still rank well. But my guess is that many of them do pay for their spot.
Small hostels like mine can’t give that much money to booking sites. Hostels aren’t a high-margin business. They are often a labor of love. Small, cozy, family-run hostels don’t have the beds or cash flow to give 25% of their revenue to Hostelworld. Paying more for higher rankings would put many of us out of business.
(And you don’t even get anything extra for paying more money — there’s not even a support number or dedicated email address. It can take days to get an answer from someone at Hostelworld!)
Larger hostels with a lot of beds and/or that are part of chains can make that happen. They have the margins.
This might be why I sometimes see chains with low ratings on the top page (or like in Paris where 3 hostels from the same chain are in the top 5). This is, in part, why I think much of the default list is paid for.
That means that hundreds of hostels that might be great are stuck at the end of the default search results because huge chains can pay the higher fee for higher placement. (Imagine what the competition must be like to get to the top in a city like London! Yikes!)
I get why Hostelworld does this (and why hostels pay). It’s a business decision. But not all decisions are good ones. I love Hostelworld, but this left a bad taste in my mouth. There are not a lot of other places where hostels can go to be found, especially since Hostelworld bought Hostelbookers, its biggest competitor.
Sure, there’s Hostelz and Gomio, but they lack the inventory Hostelworld has.
So what can you, the consumer, do to make a huge and positive impact on the hostel owners of the world?
If you’re going to use Hostelworld, just:
- Sort by price
- Sort by rating
This will ensure that any cheap and/or incredible hostels that get pushed down to the bottom of the search results because they don’t want to pay the placement fee will not, in fact, get buried.
(You’d be surprised at how many people don’t do this. Remember it’s a lot easier to look at the options given to you, assume they are the best results, and pick from there. No one really knows how these default rankings work but a lot of people assume they work like Google. The best results are the top results (they aren’t) so don’t scroll further. This true for many websites. The path of least resistance always wins!)
Also, book directly with a hostel. Most hostels offer discounts if you book directly as an incentive to go around the large booking websites. I’ve seen lots of signs at hostels offering discounts when you book direct. The hostel keeps more of the money and you get a lower price. It’s win-win.
Whatever you do, when you book your next hostel please don’t reward this scheme and only pick hostels on the default search setting.
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jcmatt
Yeah, not really surprised by this. I usually search by price and then look at the reviews. Also, I narrow my search down by location (I like checking the maps on booking sites to see what’s available in the area I want).
Chris
I always sort by rating or price, but making owners pay such a high premium for that top spot is pretty ridiculous. Especially since they have the monopoly. I usually try to book direct, but I’ll be making a much greater effort to do so now!
Frank
Seems like a great reason for consumers to not use their site ever. I understand some sites let you pay to be “featured” higher but it’s always marked and usually then defaults to rating rank. This is just sketchy.
Honestly wouldn’t be surprised if its illegal to rank ones that pay them extra higher without marking them — effectively they are showing an ad that isn’t marked as such and misleading the consumer to think those companies are better. (Further reading — FTC Act on Endorsements)
NomadicMatt
It’s not illegal to do this. Just underhanded.
Jorge
Great article and thanks for sharing.
When you also have fake or paid reviews everywhere from gadgets, to hotels to restaurants, it’s getting increasingly difficult to trust anything you read out there.
I can’t say if this is legal, but it’s definitely unethical. Other platforms use this tactic, but at least you can see it as “featured” or “recommended” or something along those lines.
Imagine if Google or any other search engine would rank web pages based on who paid the most. Can you imagine the outcry?
Patty Dwyer
Price first, location, and perks. I don’t give a hoot much about the rating unless there are many complaints.
How do I share this article to my facebook friends?
NomadicMatt
Hit the Facebook button at the bottom of the article! 🙂
Angelo L. Coletta
Thanks Matt. Booking in Sacramento in March. Gonna book direct!
Pat, L
Thank you for sharing this info, I’ll skip Hostelworld when ever possible.
Mika
Thank you Matt for educating us. I am often frustrated trying to directly book with properties because it appears the search engines do the same thing, listing bigger companies willing to pay for placement.
Lisa Kerstjens
Thanks, Matt for sharing. I didn’t think of the ranking too much, but it makes sense. I always sort on price and rating anyways and usually look at the map to see where I want to be and then read the reviews as well. I’m sure most people don’t realize this as you said. Actually never thought about going directly to the hostel instead of the site, but will do this in the future. I do this though with rental car companies though because of the hidden charges upon arrival, just use the booking sites to see which rental companies are in the area and then book direct, so it makes sense with the hostels as well. Will share your article with my readers as well so they know.
Elena Matsegorovaa
Hi everyone! It’s a very hot issue at the moment. We all should realize, that the only people who will give you the best price for the room when it comes to booking a small independent outlet will be the owners themselves. There is a growing movement to encourage potential guest to book their accommodation directly called #BookDirect and also 6th February is the international #BookDirect day. I do not discourage you to use the big booking sites, but only to shop around and familiarize yourself with the area. I personally book only through the website of the hotels itself or speak to the owners directly. It saves a lot of money!
Dennis Collins
Same thing is true on hotel booking sites. I always search by price and filter out any place with a review rating average less than 8. Then I also check the price on the hotel’s own website.
Mike
Great read. My thought/suggestion. Let me know what you think.
ASSUMPTIONS:
Most people just use these sites to research their accommodation so being the first place they see is quite valuable.
You can set your room rate at whatever price you please.
You can set your commission to the booking site at whatever you please.
SUGGESTION:
Set your room rate much higher on HostelWorld (i.e. price your dorm bed at $48 instead of $28). Then give Hostel World a 50% commission or whatever you need to rank #1 on the list). You will get amazing visibility, and some people will still book through Hostel World, and LOTS of others will see you with the “Top Rating in Town” and the #1 result on the list….and many of them will go to your own website and book for the $28 per room (of which you keep all of that).
This way you might loose a few Hostel World bookings who think you are too expensive, but i think you will gain even more sales from people seeing you fist on the Hostel World list, then going to HKAustin.com and booking direct and being super stoked it as so much cheaper. But might take a bit of testing to see if that’s true. My 2 cents.
George B
That is a brilliant idea, a cleaver way to compete against the big chains. They could not afford a 50% commission, so your beating them, at their own game.
I have thought, that the whole idea of hostels as being low margin, is false. You can often put 6-8 people in a room, without any housekeeping. At a $35 rate, that’s $210-$280 a night, for a crappy room; you could maybe get under $50 nightly for. So your earning Luxury Hotel revenue, without any of the costs associated with 4-5 star accommodations. I am surprised that Air B&B has not put this industry out of business.
NomadicMatt
Unfortunately, people don’t leave the booking sites. They would just see you’re more expensive and skip you. They wouldn’t go “Ohh, I’ll go to their website and see they are cheaper.” Booking sites work because they are convenient. 99% of people don’t go the extra step of booking direct. They don’t want the hassle. They are already on the booking site so they want to book there.
It’s a good idea in theory but, in practice, it won’t work. People aren’t that rational! 🙂
Laurence Goldman
Try it and see. Perhaps have different prices on different sites. Look at it as short term R&D.
Maybe, it’s time to build a truly independent booking site for small, independent properties.
Geoff White
In your article you say small hostels don’t have the margin to pay 25% for a better ranking to get more business, then in your P.S. an ad for your own hostel, you throw 20% discount out to the reader as an incentive, to get more business! WTF? If it smells like hypocrisy and looks like hypocrisy..
NomadicMatt
No, it’s giving you the discount and not giving the $ to Hostelworld.
20% is less than 25% so you and the hostel both win.
madmax
No surprise and therefore much ado about nothing, IMO. Many sites/businesses use this or a similar model and certainly HostelWorld’s competitors do similar. . I would think most users filter by ratings/price anyway. You’d be stupid not to.
Think about what grocery stores do – food companies pay for shelf space. So you see the Tostitos and other Frito-Lay brands and Coke and Pepsi front and center at eye level while small companies get the less visible spots, assuming they can get shelf space at all. What HostelWorld is doing isn’t new, just the 21st century, online version of what businesses who serve as middle men have been doing for years.
Gregory Barnes
Excellent point. There are a zillion examples of how big chains use economy of scale to become more profitable. That’s one of the main reasons businesses scale up in the first place. If HK Hostel were scaled up into a chain, would this article even be written?
Businesses use whatever legal method they can to increase business. For example some will write an article to a captive audience of readers about how their hostel is getting screwed over, and them even offer a discount to book with them – I’m sure that will increase their business substantially.
Sammi
I’ve had a bad taste with Hostelworld ever since that girl reported she got sexually harassed by a hostel owner and it got totally dismissed (until a lot of people took to Twitter & it became a big deal). After that I booked a hostel in Morocco where the owner stole my things when I went to Marrakech for two nights! Hostelworld brushed that off as well giving me a credit I’ll never use. Since then I’ve been keen to book direct with hostels, altho I’ve also become a fan of Expedia & started booking cheap hotels st the same price I used to pay for dorm rooms
Erna
Thank God i always sort by rating. I never believe “good description” provided by hotel/hostel as it comes from one side only. I always rely on the review of other guests. If i can not find enough reviews, then i will look for it in tripadvisor, also look for the place in google maps..
Thank you for the information anyways, it bring a new perspective about the bussiness.
Victoria@TheBritishBerliner
Sadly, I’m not in the least surprised Matt but I wouldn’t have expected this from a company advocating cheap travel or encouraging young people to travel on pretty low budgets, etc.
I haven’t used their website for at least two years as I’m only interested in boutique hostels or apartments / houses these days and do a lot of corporate travel too, so I either book with the establishment directly or via booking.com as I have an affiliate with them.
But even there, I usually search on ratings, price or precise location in reference to the reason for my travel and whether I’m travelling solo or with family.
‘Glad to know that you’re keeping on top of things. Good job on your hostel by the way. It looks lovely! 😀
Liese
I would expect that Booking.com uses similar tactics. So if I use them going by location and price but book direct whenever possible. Same with airline tickets, by buying direct I don’t pay for the middleman of a booking site.
Michael Johnson
You are my guide, my
my muse. Post fantastic, as always … an inspiration for the whole industry.
thank you so much.
Michael J.
Kaz Shakespeare
My favourite hostel, The Siem Reap Hostel, has closed down. I know you know this hostel Matt. It had rated at 9.3 for abt 10 yrs! Phenomenal!
But was way, way down in the listings. A hostel that was environmentally aware & supported many local Khmer projects, couldn’t pay the blood sucking fees that HW was demanding. So sad to say goodbye to all the staff whose difficult lives just became that little bit harder.
Laurence Goldman
I hear you. I never realized the vig these sites are charging. There should be at least a sliding scale based on number of beds or something.
How does Agoda and Booking.com compare?
As to booking directly from hostel, I can say, in Asia, prices are, as a rule, better to book from Agoda, rather than on site. I think their thinking is, they’ll make up for the squeeze with their foot traffic.
Anyway, thanks for opening my eyes.
Norman Frazier
And shared. Thx, for the heads up. A little knowledge can go a long way. This also why I book direct.
Renae
Anyone who doesn’t know to search by price and rating (and then location) are serious hostelling newbies/lazy and probably deserve to terrible atmosphere of badly ranked chain hostels
Liz
Just because someone is “new” to something does not mean they deserve to have a terrible experience.
Scott
This was fascinating to learn, thanks for sharing. I was not aware how properties were ranked on that site. And congrats on opening the hostel! In the age of airbnb it’s cool to see more reliable lodging options still going strong.
Mikala Wood
I understand your frustration, but that’s why I always search by ranking. My other friend who’s always on an extreme budget searches by price. Most websites do this. As for the chain Hostel One showing up first, they also have the highest ratings and is one of the best hostels that I’ve ever stayed at…and I’ve stayed at a ton of hostels worldwide.
Liz
Unfortunately, this has become a regular business practice and it is specifically designed to fool people into believing that rankings are based on “best” to “worst”. Even the “Find a Lawyer” sites create their lists and sub lists based on payments from the attorneys and firms.
Travel With Trang
Ugh! And this is how big chains just take over. I always filter by price (cheap traveler here ?????) and then look at the rating and distance. But its sad that they know people dont always do that.
Mindy
While other booking sites may do similar things, I am glad that while I was traveling for a year over seas that I rarely used Hostelworld. I used it as a comparison site, but usually found my best deal on booking.com. I tried a few times looking directly at the hostels site as I almost always book my flights that way, but found that booking.com was so close and on a couple occasions, cheaper than directly with the hostel that I just stayed on the booking sites. It helped that they also offered discounts/perks after reaching a certain number of bookings through them. Regardless of which site I booked through, I always filtered/Sorted by price and rating. I quickly realized I didn’t want to look at anything with less than an 8.0 rating, unless there was no other option. (I have clearly hit the age where I have realized there are certain things worth paying a little extra for.)
Stephanie
That’s terrible!! It sucks you have to go through that too with your hostel but I’m just glad that you have enough influence in the travel world to be able to spread the word and hopefully at least start to build some kind of awareness of these kinds of schemes that screw over good honest businesses. I had a similar yet obviously different experience with TripAdvisor when I felt totally mislead with the algorithm of reviews that continually favored a small number of less than high-caliber businesses at the expense of others. As a consumer I’ve had to learn to be more discerning with bookings systems and reviews too.
Nick Moulds
Hi Matt,
I’m a little late to this but have to add that this doesn’t surprise me at all. I think the nature of hostels themselves has greatly changed over recent years (when I first started traveling it was always about budget but now interesting and boutique hostels are slowly blurring the lines – and prices – between hostel and hotel) so this seems like an inevitable move from Hostelword, unfortunately.
My question is, can you do much to fight this? Do most of your bookings come direct or do the majority come through a site like Hostelworld? I’m helping a hostel with their site at the moment but I fear that 99% of the crowd will go via Hostelworld and never even see the site or the effort that goes in from the owners.
Great article as always, thanks for bringing it to light.
Philipp
Hey Matt,
great article! And yeah, unfortunately all very true. From the experience in working in a hostel myself I would still recommend hostelworld over booking.com for reasons I won’t go into detail (a lot of hostel owners, etc seem to be quite unhappy with booking.com).
However, I still think the best thing to do is the following. Have a look on hostelworld/booking/whatever and choose your favourite place to stay and then BOOK DIRECTLY ON THEIR WEBSITE. This will save the hostel paying the commission and instead that money can be (hopefully) invested into the hostel. Also, the margins on hostel bookings are sometimes not that big, so 15% is a huge chunk of the potential revenue.
Also you might end up with better deals booking directly (discounts/tours/etc) you might not get when booked through a third party. And in case booking directly is more expensive, just flick the hostel an email, I am quite sure they would be happy to do something about that. There is often room for flexibility.
So I think it is totally worth putting those extra 5 minutes into the whole booking process. As a hostel (co) cowner yourself now I imagine you would agree with me 🙂
Renee
Thanks for sharing these insights Matt. I do try and book directly when I find a place I like or know. But I find it’s not always that easy to do so, it can actually be very challenging to find the hostel or hotel website if you don’t know it-google will flood the search results with booking sites first.
Jim
Great article, I have learned first hand that Hostelworld’s customer service is no walk in the park either. Before Colombia started requiring the PCR test I made a 7 day reservation at Hostel Fatima in Bogota. But once the test was required I cancelled the reservation in plenty of time. I eventually received the credit back from Hostelworld, but ended up being charged for the entire week by Hostel Fatima. After contacting the hostel, I learned that Hostelworld never communicated to cancellation to the hostel and that they needed to hear from Hostelworld. So I contacted Hostelworld and supplied a copy of the charge and ended up having a perpetual run-around dialogue with them. In other words, they were not going to to be bothered contacting the hostel. From now on I will take the chance and just do walk-in reservations.