Tourist hostels typically target budget-conscious travellers by providing affordable accommodation and basic amenities. However, in recent years new purpose-built hostel accommodation has emerged to cater for a wider range of people with en-suite rooms and additional facilities such as bars and restaurants. This has widened the target market and, coupled with the shift in consumerism towards experiential spending, has created opportunities for more investment and development in the sector, both in Dublin and across Europe.
Operating on a low-cost, high-volume business model, hostels can offer higher returns for operators than typical hotels. A key advantage of the tourist hostel business model is that operating costs are kept lower than hotels by implementing dormitory-style rooms, allowing for higher space efficiency, combined with lower staff costs and less onerous management. Lower bed rates can then be offset with ancillary sales of food and beverages, and also key items required by travellers such as locks, left luggage and toiletries.
While the Covid-19 pandemic had an impact on some hostel operations in Dublin, the additional challenge of the housing crisis has ultimately led to the conversion of many older Dublin hostels to emergency accommodation. Some significant hostels in Dublin that left the tourism market in recent years include Isaacs Hostel, Abrahams Hostel, MyPlace and Avalon House. CBRE estimates that at least 1,300 beds have left the Dublin market in the past five years. The removal of such beds from the market has resulted in a shortage of beds and strong operational results for those who have remained.
In Dublin, developers, investors and operators have identified this gap in the market and there has been a flurry of activity in the sector over the past 18 months.
The primary tourist hostels now in operation include The Generator in Dublin 7, Abbey Court Hostel on Bachelors Walk in Dublin 1 and Jacobs Hostel on Talbot Place in Dublin 1. These have been joined by some new openings in the past 18 months.
Openings
At the end of 2023, Clink í Lár opened at a newly constructed stand-alone, purpose-built modern hostel on Abbey Street Upper. Clink also has operations in London and Amsterdam, with Dublin the third European city of choice due to the demand for rooms from young tourists.
The smaller Dawson Hostel opened on Dawson Street in Dublin 2 last year, offering about 200 bed spaces in a prime location.
Investment
The most significant hostel transaction in Dublin took place in 2024, with the Jacobs Inn Hostel being acquired by Spanish hospitality investor Azora from BlackRock for about €45 million. The same hostel previously traded in 2020 and in 2017.
Development
The development side of the market is where there is most activity. Firethorn Trust and SW3 Capital acquired a site on Sackville Place in 2024, which has planning permission for a 588-bed hostel operation. This will be operated by SW3.
Earlier this year, Red Rock Developments sold a site on Foley Street in Dublin 1, with planning permission for a 670-bed hostel to a local partner. Construction has now commenced on the site.
Marlet Property Group have also cleared a site on Macken Street in Dublin 2 with planning for a 496-bed tourist hostel scheme. NTM Capital have active planning permission for development of a site on Chancery Street in Dublin 7.
The underlying fundamentals driving demand for hostels are strong in Dublin, with supply having fallen in the aftermath of the pandemic. This has led to increased investment and development activity in tourist hostels in the past two years. The sector is relatively underappreciated, yet institutions such as Azora Group, Brookfield and Stepstone are active owners and investors in the sector across Europe. The sale of Jacobs Inn Hostel in Dublin last year highlighted the increased value of the sector, and we are expecting to see more transactional activity this year.
Cara McDowell is a senior research analyst at CBRE
