Hostel chains find their footing in India with a premiumisation push

From barely existing a decade ago to now dotting the map with hundreds of properties, the idea of backpacker hostels has evolved into a structured, scalable segment of the travel industry—they are no longer just for scrappy backpackers or international gap-year students. 

And with growing demand from young Indian travellers, a shift in lifestyle post-COVID, and the rise of experiential travel, hostel chains are riding the wave. Once positioned purely as budget-friendly alternatives to hotels, hostel chains like The Hosteller and Zostel are now rolling out premium offerings—private rooms with smart automation, curated experiences, and design-forward properties—to meet the rising demand for experiential yet value-conscious travel.

Rise of aspirations

“The Indian traveller today seeks value, but that doesn’t mean cheap. It means: if I’m paying ₹1,000 or ₹7,000 a night, I want full value for that spend,” says Pranav Dangi, founder of The Hosteller, which operates 60 properties across 13 states and hosts over 75,000 guests each month.

That realisation has led to the launch of a premium line called Hosteller BAM (Backpack And More), where rooms can cost up to ₹7,500 a night and come equipped with automated lighting, sleek interiors, and even bathtubs. “We’ve realised that premiumisation in India isn’t about going upmarket for the sake of it. It’s about convenience, comfort, and being experience-led,” Dangi adds.

Zostel is witnessing a similar evolution. Its Zostel Plus category offers resort-like experiences—complete with curated activities like axe-throwing, hiking, and adventure sports—while still retaining the community-focused ethos of hostels. “People want to pay more, but they want more in return. Take ₹500 more, they say, but give us a great time,” says Dharamveer Singh Chouhan, co-founder and CEO of Zostel.

The post-COVID traveller is markedly different from the pre-pandemic one. Travel frequency is up, planning cycles are shorter, and leisure is no longer a once-a-year indulgence. “Earlier, people would travel twice a year. Now they go out four to five times, often without a set plan,” Dangi says.

Importantly, the idea of spending on travel has evolved. “There’s a new wave of consumers who no longer associate travel with just hotels or resorts. They’re looking for places that help them disconnect and rediscover,” says Chouhan. “The demand for experiential, self-reflective travel is rising—and we’re adapting to that.”

Zostel’s Zostel Plus properties often feature larger spaces, boutique designs, and immersive activities. But the demand spans the chain’s broader network too. “We have 92 Zostel properties and they’re seeing 68–70% occupancy year-round,” Chouhan adds. “The customer might still be budget-conscious, but their expectations are much higher.”

Who’s checking in?

Both brands primarily serve travellers aged 18–35, and both report a surge in solo female travellers. “We have more solo women than solo men now,” says Dangi. Chouhan adds, “We had to educate people early on, especially women, that hostels are safe and social. Now, they’re our strongest demographic.”

Demand is largely domestic. The Hosteller estimates that 90% of its guests are Indian, and Zostel sees a similar trend. “Indians are high-spending, value-conscious travellers,” Dangi says. “If we promise them 10 things, they would love to have 12 things on their plate. It keeps us on our toes as well.”

Both companies are 100% digital in their booking flows. Half of The Hosteller’s business comes via OTAs like Booking.com and MakeMyTrip; the rest via its website. Zostel too relies heavily on digital platforms and has rolled out Zobu, an AI-powered concierge aimed at enhancing trip planning and experience discovery.

“We want to be everyone’s trip partner,” says Chouhan. “Whether you’re a solo traveller or a remote worker, we want to be part of your life journey, not just your holiday.”

However, both the hostel chains work on divergent business models.

The Hosteller follows a predominantly leased-property model, with 50 out of its 60 properties on lease, a few owned and others under management contracts. “Leasing helps us scale quickly while maintaining operational control,” says Dangi. All properties are operated by the company’s in-house team—no franchises, no third-party operators. “This helps standardise quality and guest experience.”

Zostel, in contrast, is structured as a franchisee-owned, franchisee-operated (FOFO) model. “We take a 21–30% commission on bookings and F&B and guide partners in every aspect,” says Chouhan. “It’s a decentralised model but with strong cultural and operational integration.”

Interestingly, Zostel has also taken a grassroots approach to expansion. Many of its locations are in Tier 3 and Tier 4 towns, often places the brand has helped turn into destinations. “Bir wasn’t on the travel map a decade ago. Now there are four direct buses to Bir from Delhi. That’s what Zostel does—we create demand,” Chouhan says.

Founded in 2014, The Hosteller today operates 60 properties across 13 states with nearly 4,000 beds, hosting 75,000–80,000 travellers every month with plans to scale to 15,000 beds across 150 properties in three years. Zostel, launched a year earlier in 2013, has 92 operational properties in India and a pipeline of 30 more by end of this year.

The scale has been built gradually, driven by a demand that both founders say didn’t exist when they started. “We created the category,” says Dangi. “Hostels didn’t exist in India then. Today, 95 out of 100 people know what a backpacker hostel is.”

For Zostel, the mission was personal. “We wanted to make travel in India more accessible, more human. It started with helping people discover themselves through travel,” Chouhan explains.

Financials & footprint

The Hosteller is EBITDA positive, generating over ₹10 crore in monthly revenue with operating margins in the 5–10% range. ts three primary revenue streams are accommodation, F&B through in-house cafés, and concierge services such as airport transfers, adventure activities, and rentals. “When we build a property, we invest ₹1 lakh per bed. So, for a 100-bed property, we typically spend ₹1 crore,” Dangi explains.

The Hosteller leverages unsold inventory for collaborations and has built a large social media following with 10% of monthly revenue being spent on marketing, all digital.

Zostel, meanwhile, processes $20 million (₹166 crore) annually in accommodation bookings, with a 40–50% year-on-year growth rate and has made its current focus on institutionalising the business to support future growth.

“We’re now looking at Nepal, Sri Lanka, and Thailand for international expansion,” says Dangi. Zostel is already present in Nepal, Sri Lanka, and San Francisco, and is opening a property in Phuket.

Market opportunity

India has around 1 lakh hospitality properties, of which only 2%—around 1,500 to 2,000—are hostels. That number is expected to hit 10,000 hostel properties in five years, reflecting a significant market opportunity.

Both brands see themselves as category definers. “We’re still in early innings,” says Chouhan. “But this is a silent revolution. Young Indians want community, safety, adventure, and a break from routine. Hostels are answering that need.”

Dangi concurs. “Hostels are no longer just about cheap beds. They’re about curated experiences, discovery, and connection.”