Hostel Of

Funded 17 Dec 2018

£250,000 target

£257,270 from 0 investors

Business overview

Location	Digermulen, Norway
Social media
Website	www.hostelof.com
Sectors	Travel, Leisure & Sport Non-Digital B2C
Company number	920700349
Incorporation date	6 Jan 2018

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Investment summary

Type	Equity
Valuation (pre-money)	£3.9M
Equity offered	5.98%
Tax relief	N/A

Idea

Introduction

Hostel Of combines the hotel and hostel business models to create a hybrid product directed at millennials, a large and important segment in the current tourism and hospitality industry. Our aim is to combine the amenities, comfort, safety, and reliability of a hotel, with the social atmosphere, youthful experience, and affordability of a hostel. By locating in unique and up and coming destinations, such as the Lofoten Islands in Norway, and with plans for Iceland afterward, we intend to fill the gap in the market and emerge as the new accommodation choice for travellers.

Investor Perks

THE HOSTEL OF LOFOTEN PHOTO BOOK CAN BE DELIVERED TO YOUR HOME TOGETHER WITH A PERSONALISED KEY-CARD FOR INVESTORS THAT HAVE PLEDGED AND CLAIMED THE KEY BEFORE THE 25TH OF NOVEMBER.

Please note that any discounts, rewards and/or offers listed by a company in its campaign are subject to the terms and conditions applied by that company and listed above. It is the company’s responsibility to honour such discounts, rewards and/or offers and Seedrs does not take any responsibility for them.

Intended impact

We have identified a gap in the tourism market between generally high-priced hotels and hostels which typically don't offer the quality and standards sought by travellers. The Airbnb model is becoming increasingly restricted by governments and new regulations. Budget hotels, usually part of larger chains, offer cheaper prices usually at the expense of service and limit guest interaction with a sleep-and-go policy.  At Hostel Of, we intend to fill this market gap by offering the social experience and affordability of a hostel while maintaining the comfort, security, cleanliness, and familiarity of a hotel, with a price that sits in between. With thousands of square meters of land secured, we have the potential to provide varied types and styles of venue, making the accommodation an unforgettable experience in itself.

Substantial accomplishments to date

Hostel Of has identified and obtained planning permission for tourism over land in Lofoten, Norway. We aim to purchase the land and are currently working with architects and the local authority to finalise building plans. Two building companies have been selected after a tender process where several companies took part and we are in the process of completing the requirements to secure a grant from Innovation Norway to support construction costs.  We have been granted copyright for our company name and logo and we are registered as a limited company in Norway. We have also agreed co-financing from a local investor and we are now in the process of negotiating a loan with a local bank.

Monetisation strategy

Our core revenue streams will be:

 - accommodation.
 - cafe and bar .
- restaurant .
- health spa.
- organised activities.
- equipment rental.  

We plan to take bookings through our website, online travel agents and on arrival. We intend to actively promote direct booking via our website in order to reduce third-party commission costs. Pricing starts at £45 per bed - including add-on services - and £120 for a double room.

Use of proceeds

70% of the investment will go towards land purchase with the remainder contributing to accommodation construction costs. All other operational costs and cash flow requirements will continue to be met from founders' investments. With the bank loan and Innovation Norway government grant currently under negotiation, we will finance the construction phase.

Market

Target market

Our target market are those aged between the early twenties to late thirties, often referred to as Millennials. Millennials make up around 20% of the world's population. We are focusing on North America - with 79 million in this target range - plus Europe and Australasia. In the United States alone Millennials will account for 1 in every 3 adults by 2020.

This segment tends to have higher levels of education and fast growing average disposable income. They are more likely to be unmarried and with no dependants. In the US, millennials are often described as:

- diverse and open-minded.
- adventurous and keen to experience alternative cultures and lifestyles.
- environmentally aware.
- interested in artistic pursuits such as music and photography.

Importantly, Millennials are believed to value experiences over assets and products. They also make up 70% of hostel guests. And this segment is the fastest growing in terms of money spent on travel and associated activities.

Characteristics of target market

Millennials are projected to become the largest generation in history, beating the Baby Boomers. As a young generation of considerable size and with disposable income, they have secured their status as leaders in travel and tourism. Millennials are 23% more likely to travel abroad than their older counterparts. They are also willing to budget more for trips, with Millennials on track to spend $1.4 trillion on travel each year by 2020. Given these figures, it’s evident this generation has become essential to the travel industry. They are also prioritising social interactions and shared adventures with newfound friends compared to the average traveller population. The demand from Millennials has made the hostel market in Europe increasingly popular as well as competitive, growing by 7-8 % per year. We believe it is outperforming the broader hotel industry in terms of market value growth.

Marketing strategy

Millennials are active users of the wide range of social media channels across the globe, and 87% of millennials on Facebook look to social media for travel inspiration for their next adventure. 97% of Millennials will post their experiences on social media. Therefore, our marketing focus will be on digital channel advertising and general social media presence. We will tap into the preference of this segment for personalised engagement and communication with their favourite brands. We aim to work with social influencers to promote and increase interest in Hostel Of at an early stage. We will develop our own loyalty programme, given that studies show that 78% of Millennials are more likely to engage with brands that offer reward and loyalty programmes.

Competition strategy

We believe there is a lack of major competitors in our market offering our unique choices for accommodation. We intend to differentiate ourselves by the location and quality of our venues coupled with an attractive price point. As opposed to most of the hotel market, we aim to provide an overall experience rather than simply a bed for the night. We feel that our remote location will also allow us to set a monetisation strategy based not exclusively on just accommodation, but also on activities, restaurant, spa, and others. Our local direct competitors struggle to be active on social media and their higher prices aren't likely to attract Millennials and they underestimate the potential of low season and different markets (eg Asian market). Our global competitors are active on social media, however, they are located in more crowded cities, going against the current Millennial trend for more adventurous and "wild" experiences.