Hostels emerged as important lodging facilities by the new millennium. Together with low-cost aircraft carriers, hostels offered affordable accommodation alternatives to a globally growing youth and low income travelling population.At first, hostels targeted costs, offering the lowest level of service at the cheapest price. With the advent of internet based booking and as competition increased, owners started focusing on differentiation, acknowledging how little separated them. The search for the best possible service, while trying to keep costs at bay, induced a first change in hostels management. Some ancillary services, neglected before, become important to attract a still growing clientele.

The hostel market is quite different from the hotel industry. The hostel market is fragmented, with multinational chains accounting for very little, in Europe. The standard hostel has a private owner (or group of owners), who offers his own personality with the hostel, embedded in the local community. The hostel ownership might be a recently discovered passion or a job opportunity, requiring, not only, a relatively small initial investment, but also without a major burden on the operational cost side. This type of management structure also provides explanation on how the hostel industry navigated the recent crisis reasonably well.

In Portugal, around 2010, hostels were an instant hit, both in Lisbon and Porto. The growth of low cost carriers in both cities, provided sufficient appeal to local entrepreneurs. In Porto and Lisbon, there is a widespread perspective that short-term, tourism driven apartments provide the best possible returns in an ever growing tourism sector. A closer look at hostels hints otherwise. Although new challenges are just ahead, hostels have adjusted well to different forms of competition and an ever changing demand, while prospering throughout. And the recent investors’ appetite for the largest hostel chains across Europe, can only attest there are still good opportunities to find in the hostels’ market.