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Is Hostel Rocket Set to Take Off?

Dennis Pitcock
Written by Dennis Pitcock

Hostel Rocket is a digital advertising company that prices like a SaaS (software as a sale) company. HostelRocket could be the holy grail hostel owners have been dreaming of, or it could just be that they’re desperate and would sign up any other option out there.


UPDATE: (2/18/2015) HostelRocket has seemed to pivot and drop their HostelsClub inventories. I will have an update on this within the next week. For a snapshot of their product, please read below.

There has been lots of chatter about HostelRocket in the sector. Clients of mine have been asking me about this solution, so I figured it is about time to let the world know what I think about HostelRocket. To illustrate my view, I will introduce you through some general hostel management, online travel agent, and digital advertising terms mixed in with some simple math. Hostel owners and operators can take from it what they want, and hopefully it offers some good criticism to the HostelRocket team too.

HostelRocket’s launch comes in a time where hostel owners and managers are facing increasing costs of distribution. The largest booking channel, Hostelworld acquired its largest competitor HostelBookers, and then raised its commission rates in 2013. Now many hostels are bidding away their margins through the elevate program. Hostels are desperate for an alternative to being so reliant any one distribution channel, especially when a majority of the bookings come from one company with a 12% commission. At an allegedly 0% commission, HostelRocket could be the holy grail hostel owners have been dreaming of, or it could just be that theyre desperate and would sign up any other option out there. Their claims are quite confusing as well. Are they an OTA? Hostel metasearch? Both? Neither?

HostelRocket claims to be an OTA, which it is not

First note that HostelRocket claims to be an OTA (online travel agent), which it is not. That would entail an entirely different business model, taking bookings, processing payments, having the hostels load their rates, etc. They are an affiliate advertising channel for what looks to be HostelsClub. I might add that they beautifully pull data and take bookings on through HostelsClub flawlessly. What they sell themselves as, to the hostels and their investors, would be a niche metasearch company (see here), which they aren’t either, well not until they add another OTA as their customer. They make it seem like they are pulling data from the booking engines of SiteminderMyallocator, which is a way more complicated than the OTAs.

Hostel Rocket also claims to be the first hostel metasearch company, however I met the founder of HostelZoo in 2012, and I was excited about his product then. added meta-search functionality not too long after. HostelZoo and Hostelz have illustrated that a hostel specific metasearch company faces nothing but an uphill battle. Metasearch fuels on a fierce competition between their customers. In hotel metasearch, Priceline (Booking, Priceline, Agoda) is competing heavily with Expedia (Expedia,, Travelocity, and now Orbitz) with a few other OTAs and wholesalers and chain reservation systems in the mix. These companies either boast heavy user traffic, like TripAdvisor gets from its reviews, or a strong advertising, both traditional and digital, like TripAdvisor, Trivago, and Kayak does (Room77 is unique because they thrive off of licencing their tech to Google). Now hotel metasearch companies can get away with adding a direct booking functionality akin to an OTA such as TripAdvisor’s new direct tool, Kayak’s that is powered through Priceline, and Room77 because their customers, the OTAs, still need to advertise with them. They still are pushing the boundary of friend or foe. Hostels have trouble doing this because, any hostel operator can tell you, Web Reservations International (Hostelworld and HostelBookers) has positioned itself as a monopoly in the space. They have no reason to give HostelRocket their API if HostelRocket’s interests are not aligned. Also Metaserch needs deep marketing budgets to survive. Not just social media, like HostelZoo used. They need top places search ads and even television ads to pull it off. This really dwindles the margins considering the top spots are pricey with the OTAs taking up the space.

Maybe HostelRocket is on to something, so let’s investigate further. Allegedly has 86,000 hostels signed up (that’s about the same number HostelsClub lists…. coincidence?). This shows it has some traction, but it also raises some flags. A global scale is a two edge sword. At one side, it gives the company a high traction number, but at the other side, it leads to question the quantity over quality. 1,000 paying customers in locations with a high ABR (Average Bed Rate), high currency, high occupancy rate market should hold more value than 100,000 of any customer, any where. That’s why many successful OTAs in other industries curate their content to the right markets first, seeking the largest margins first to offset their anticipated smallest margins down the line. This is what has been happening in the activities sector right now.

Cost-wise, HostelRocket is charging a flat rate $200 US per month for their service. Which is weird because their site include a 10% booking fee, like other OTAs. So they are double dipping, getting affiliate revenue from HostelsClub (you can too), and charging their customers a flat rate on top. We don’t mind the affiliate program, let HostelsClub pay them, but $200 a month needs to be accounted for. A majority of our commissions are at 12%,  that means we need an extra $1667 (=(100*200)/12) worth of revenue will need to be generated justify the cost, or it is just easier to stick with Hostelworld. That’s even more difficult if 10% is taken by HostelsClub.

Again, this raised flags. 86,000 customers paying $200 a month means they must be pulling in $206.4M in annual revenue on top of HostelsClub affiliate fees. That is a squeeze from a market that is known to be tight. For comparison reasons, Hostelworld’s parent company was purchased by Hellman & Friedman Capital Partners for $200M in 2010, and they purchased HostelBookers for half that. So if is safe for us to assume that not all of those 86,000 customers are paying. Many could be on the free trial. Many could be on it, and not even know it if they don’t look at their analytics. Building a metasearch engine or affiliate model is one thing, restricting its listings based on paying a customers is another.  I wonder how they plan on excluding non-paying customers. There are a few hostels I know who would like to remain anonymous are saying their inventories are listed on Hostel Rocket and they have never registered. They also confirmed that they haven’t had any visitors from Hostel Rocket yet either.

In order to send the $1667 worth of bookings, they need to attract many, many visitors to be of any value to their customer. Say a hostel had an ABR of $32 (common in Philadelphia), that means they would hope to get 52 (=$1667/$32) bookings a month to recover their cost . Ok. Now, here is the tricky part; their average conversion rate -that is when a visitor converts into a customer- is 2%. Hostels can find this if they use the right booking analytics tool, or you can get in the ballpark by asking an OTA account manager for a performance report. Than means they should be sending me approximately 2600 (=(52*100)/2) visitors.

Tracking conversion will be easy as an affiliate, but difficult as a metasearch without the proper digital advertising contracts and functionality. Typicality, a company have an agreement with the referral site and provide a conversion postback tracking ID, which is easy to find in the URL. It is basically just a guessing game without that.

Ok, back to the rate,  2% is an average conversion, and HostelRocket is special. Let’s half that and give the hostel a post HostelRocket conversion rate of 4%, a rate in which any eCommerce site, travel or retail, can dream of (though they boast a “24% conversion rate from social media,”which I am unsure about the context, but 24% conversion as an eCommerce rate is unheard of). Their true model, as digital advertising company, should do just that (more than 2%). This still is 1,300 visitors a month just for the hostel to break even. Now they also have their own internal conversion rate to consider as well, the rate at which they convert their visitors into leads for their customers. That rate is definitely lower than a typical conversion rate, but to be safe, let’s give it 2%. So in order to send the hostel those 1,300 visitors, they need to attract 65,000 (=(1300*100)/2) visitors a month for just this hostel.

65,000 visitors is a hefty challenge outside the major destinations of say London, Paris, New York, and Lisbon. That’s a difficult task even with the funding they raised. If your ABR, occupancy, or conversion rate is low, you’ll need even more visitors too break even on that flat fee. It is nearly extremely difficult to generate that kind of traffic, especially without expensive SEM campaigns.

HostelRocket boasts over million visitors, but this number worries me. That is 11.6 visitors per hostel or .97 visitors per hostel per month (=1M/86000/12). They would need many more visitors than that. If you look up their estimated traffic on Similarweb, their peek traffic was estimated at 55,000 per month in September, coinciding with that TechCrunch jolt. Even if they were able to keep it at that rate, it still is 660,000 visitors a year.  There are too many factors to determine the ABR of the world, so modestly using the example above they would need to attract 5.6B hits a month (many will be duplicate of course). To give you some comparison, Skift mentions Booking as being the top trafficked travel site at 210M visits per month,with TripAdvisor following at 159.6M, and Expedia in third with 63.5M visitors a month in their State of Travel Report.

Now to attract a volume on par or higher than Booking, TripAdvisor,or Expedia, you must pay for the traffic acquisition costs to compete with them. This is where even Hostelworld struggles. Right now, HostelRocket is 100% organic. Which will have to change. Similiarweb also shows they have a strong direct traffic, however their social media advertising is dwindling. Many”disruptive” hostel concepts come and go, and the reason is that they don’t offer any value to the user. The hostels will love a flat rate, if it is correctly priced, but what do the users get? Frankly, the users don’t care to book direct. Hostelworld guarantees the booking, and they have the power to leave a review too. If there is an overbooking, will find their customer another place, at no cost to them. HostelRocket really needs to determine their value proposition for the user, to attract and retain them.

HostelRocket has the typical conundrum many digital advertising companies face. From the start, they need to attract both the users and the suppliers. Just like the timeless question, “What came first? The chicken or the egg?” the answer comes with a logical and scientific thought. The egg came first, laid by a bird that was a genetic ancestor of the chicken (sorry if you do not believe in evolution). As for HostelRocket, the answer is even easier. Without any inventory, the user adoption and retention will be impossible. That’s why the are listing everyone from HostesClub with no way of telling who is paying them and who is not.

HostelRocket is an affiliate advertising company that prices like a SaaS company on top of taking affiliate fees.

HostelRocket is an affiliate advertising company that prices like a SaaS (software as a sale) company, on top of taking affiliate fees, and does not justify the cost. Plus any hostel signing up on HostelsClub will most likely get listed regardless. Even if they chose to go the metasearch of direct booking inventories route, they should be pricing on a Cost per Click (CPC), Cost per Lead (CPL), of Cost per Action basis (CPA) over the flat rate fee. This is the heard of TripAdvisor, Hipmunk, Kayak, Room77, Trivago, etc’s revenue model. This way, hostel owners, as customers, can check performance metrics, and perhaps even bid for the top placement.

Hey, if hostel owners are willing to pay the fee in hopes there will be change, then great. The cause is just, and hostel owners everywhere honor you. It surely is a great cause. However, they are charging a monthly fee, while sending bookings through another OTA that is taking a commission too. Hostels are known to be tight on the margins and not stand for that. They will eventually learn to check analytics (and number of HostelsClub bookings) to measure the impact of HostelRocket.

Other than that, I am really impressed with the design they put into their product, and I do want to see them do well. Perhaps they can prove me wrong and reach success, however misleading hostel owners about the product and the double dipping model isn’t promising and too overburdening. Also if you are a current customer, or are considering opting in for the free trail, be sure to voice your concerns and give them a great feedback. If they listen, then there still is hope, and that HostelRocket could take off, keeping their visitors, they customers, and even their investors happy too.

About the author

Dennis Pitcock

Dennis Pitcock

Dennis jumped into the hostel industry after a summer backpacking Europe in 2008. He went from being a guest to a manager within weeks, and currently does consulting for large and small hostels alike in 3 continents. Prior, he worked in eCommerce, so he has passion for the tech side of the industry and is now deeply entrenched in the hostel and activities industry.


  • Most of this information is entirely untrue. While we appreciate the post I would have appreciated an interview so you can understand our business model before writing an essay based on information pulled from random websites.

    We no longer use hostelsclub inventory, we have our own hostels registered.

    We do not “Double Dip” on commissions or fees for that matter.

    We send the traveler directly to the hostels website so they can book direct.

    We are a New Age OTA

    You can learn more here:

  • Very interesting. It seems that is owned by Hostelsclub. They are the only agent that I use at the LONDON EYE HOSTEL that take 10% at point of Sale…

    I see that My hostel is advertised on the website although I have not registered with them.

    Richard Gandy
    Business Owner
    London EYe Hostel

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