The European based Generator brand is ultimately one of the top 5 hostel chains in the world. They have made some major moves over the past 5 years and are taking hosteling to an entirely new level. Generator recently received a capital injection at the end of 2014, which has it evaluated at 260.8 M EUR ($326 M USD). To put this in perspective, Kimpton was bought by IHG in 2014 for 400M. So, they’re huge. This cash will lead them to open new locations at a faster pace. Their new Paris location is already a hit, and Amsterdam is next (probably before Rome, because we know how fast things move in Italy).
Generator initially established a reputation as an organized party hostel to stay at in London and Berlin. They were boasting outstanding F&B revenues, and many guests, including my friends, were pseudo-complaining that they had such a great time they never were able to leave the hostel. Over they years, they used this success to strategically expand in way that the hostel industry has never seen.
Each time they expanded, the added a new level in design and sophistication. They brought on a rockstar executive team, such as their COO Karen Richardson, and expanded by taking over an old hotel in Dublin that they now use as their flagship wile simultaneously adding more properties in Berlin, Copenhagen, and Hamburg. They used the sales of their assets to not only bring their older locations up to their new standards, but also to opened their doors in Barcelona, Venice, and recently Paris. They have confirmed Rome and recently Amsterdam that are in their pipeline, and who knows where they are looking after that.
Generator contributes their success to their guests and their team, but there is more than that. They are successful because they found the sweet-spot, that perfect mix of a hotel like hospitality and management with the personal experience of a hostel. Professionally, they run their A-game. They have a brilliant design team that creates consistency across each facility yet each location has a personalized touch. In the office, they distribute across many channels and manage their revenue the best way possible given the hostelworld‘s and hostelbookers‘ lack of basic RM functionality (I’m not too sure about their pace modeling and basket analysis though).
They are exceptional at using their branding to relinquish their reliance on the OTAs. The removed “hostels” from their brand to show they are more about the experience, and also to attract guests who would otherwise avoid them such as young professionals travelling for business. They utilize a centralized marketing team to pull in direct and group bookings (I’m pretty certain they use a proper CRM), by aggressively marketing through social media, content, and search campaigns. Even now, after visiting their site, their retargeting is popping up everywhere within my browsers. Experience-wise they still know what the guests want. All locations have a bar and serve food, where they hold daily specials and events to get the guest to mingle.
What separates Generator from its rivals is its strategy. They have been continually updating old locations and moving off away from asset ownership. In new locations, they pick key cities that are proven backpacker hotspots. Instead of multiple hostels in one city, Generator would rather strategically place their hostels in multiple backpacker hotspot locations. If you notice, the cities all have a fairly high occupancy percentage and high ABR too. I wouldn’t expect Generator to hop into cheaper markets like Budapest, Lisbon, or Riga anytime soon however, it could be possible that every major backpacker city in Europe and beyond could have a Generator. Rumors keep circulating that they are looking at the USA too, although NYC is quite the barrier and its tough for their customers to hop the pond all the way to the other coast without NYC.
What the future holds for Generator is open to interpretation. It could perhaps be the first hostel IPO, and continue to expand globally. More likely, is that it gets acquired by a major hotel equity company or chain that is looking to diversify. They even rival hotel rooms in chains such as Premier Inn (Whitbread) and Ibis (Accor) if you consider the design of the hotel rooms. The “Poshtel”, or Posh Hostel, market is unique, and would greatly expand on any hotel companies market.
They most definitely have global expansion on their agenda. Perhaps they will boost this expansion by moving even more into the likeliness of the hotel sector, becoming a management and franchise company. Their name is more than appropriate no matter what the future has in store for them. One thing is certain: Generator will be generating revenue and growth for a long time to come.
For us we do not dislike generator, Wombats or St. Christophers. With their pay for everything and receive a high quality infrastructure they have moved as far away from the original Hostel brand as possible and leave more room for original Hostels. People that are looking for a community experience, a place where they can cook together, experience small events prepared with love and get to know someone without needing to take part in the nightly craziness at a bar with one obnoxious drinking game after the other, big TV screens and non-cozy atmosphere. They will still have to be looking elsewhere. And it so happens that we are more than happy to give them all that :). Even if they stay in one of the others tomorrow or the day before. But I can see that generators concept is enticing. It reminds me of Sky Europe and other brands. Fast expansion, big sums. Some stick around, others are gone again soon. That are what disruptors do and they are all the talk now. Aggressive capitalism is sexy, I can see that and we as Hostel are not afraid. Let’s never forget that disruptors also destroy traditional businesses. What about your neighborhood shop downstairs? Sure, the supermarket has everything, but aren’t you longing for real human interaction sometimes? For diverse experience instead of the same hostel in every city that exchanges their staff in a 6 month rhythm? Which is okay because they have a great training program that trains staff to react perfectly… always the same. All these places will someday soon be highly automated to make their owning conglomerates even more money. And we real Hostels? We will still be around, never forgetting why we are doing all this in the first place 🙂
The Generator Concept is more and more becoming a hotel brand and moving away from the Hostel fundamentals. Think you have missed that part,
Well they are not a mom and pop hostel. That’s a given. But they are, by all means, still a hostel. The hostel industry is full of many diverse solutions, and it is up to the guest to decide what their ‘fundamentals’ are, and the hostels to appeal to them. Hostels today have more resources and means to differentiate and market themselves to carve out their own niche than ever before. Generator has found theirs. It’s up to the other hostels to find theirs as well.
They indeed bring a whole new level of professionalism to the hostel sector but many travelers feel that they are not a hostel anymore – they are a factory for beds & bars and lack the personal touch that hostels are so famous about. They also don’t provide a guest kitchen which in my opinion is a MUST for any hostel.