Youth hostels have a history in China of less than 20 years, but now they are becoming increasingly popular despite loose regulation and some being based in residential apartment buildings. Photo: IC

When university graduate Song Zhixuan recently planned her month-long vacation to Ji'nan, capital of East China's Shandong Province, she decided to stay in a four-bedroom youth hostel dorm for 50 yuan ($8) per night. The dorm appeared new and stylish with wooden furniture, its price was affordable and staying at a hostel would give Song, 24, the chance to make new friends also traveling. Song stayed at the Happy Youth Hostel, which became Ji'nan's first youth hostel when it opened in December 2013.

Since the world's first hostels opened a century ago in Europe, they have been a popular accommodation choice for globe-trotting Western backpackers.

China's first youth hostel only opened in 1998 when the first group of international youth hostels was opened by local tourism authorities in South China's Guangdong Province.

The soaring number of Chinese backpackers has driven a boom of hostels in major cities and tourism hot spots around the country in recent years. But as an inland city not high on many travelers' wish lists, Ji'nan was overlooked as a suitable destination for hostels until recently.

Running a hostel might sound like an idyllic dream, but turning it into a profitable business venture depends on hard work, clever commercial sense and familiarity with youth traveler culture.

Guests pin photos to a bulletin board at the Happy Youth Hostel. Photo: Courtesy of Sun Qiang

Starting a trend

Sun Qiang, owner of the Happy Youth Hostel, has been inundated with questions about how to run a hostel from people around China since it was profiled on china30s.com, an online platform for young Chinese to share life and career experiences.

Sun, 29, decided to open Ji'nan's first hostel last year following a gap year of traveling after he quit his job as a marketing manager at a company in Xi'an, Shaanxi Province. 

During his research he learned Shandong only had hostels in three other cities: Taian, Qingdao and Qufu.

"Investing in a hostel in Ji'nan can be risky. Many people in the past had considered it but never gone through with it," said Sun.

Unlike cities that attract backpackers from home and abroad like Lijiang, Yunnan Province or Beijing and Shanghai, Ji'nan just didn't seem primed for the hostel-staying crowd.

But Sun's research told him there was no reason a hostel couldn't succeed, provided it was marketed and operated right. In June 2013, he posted his business proposal of more than 20,000 words on social networking site douban.com to seek investors and business partners.

"As a provincial capital, Ji'nan is suited to having a hostel. It is also home to several universities, which means there is an abundance of young people," said Sun, whose research led him to believe his hostel had a 200,000-strong target market. Sun opened the Happy Youth Hostel two months after securing 1 million yuan ($160,100) from investors. 

Based in a 300-square-meter apartment in a residential complex near Shandong University, the hostel has seven rooms and can accommodate 30 guests.

"Our current occupancy rate is around 40 percent, 5 percent lower than my expectation," said Sun.

A possible reason why the Happy Youth Hostel's occupancy rate isn't as high as Sun would like is that he now has a host of competitors. Not long after his hostel opened, more than 10 others sprouted up in Ji'nan after seeing the buzz Sun created.

"The market expanded too rapidly. If each hostel gave guests a coupon for free accommodation for a couple of nights, guests would be able to stay free for months," said Sun. Despite the stiff competition, Sun is already preparing to open his second hostel in Ji'nan in 2015.

"It was difficult to find a suitable apartment for the Happy Youth Hostel, which represented an attempt to realize the dream. My second [hostel] will be more spacious, providing more public spaces," he said.

A communal area for guests at the Happy Youth Hostel.Photo: Courtesy of Sun Qiang

Going into business

Huazi and her boyfriend Laosi, both who declined to give their full names, opened the Yichang Yiyi Youth Hostel earlier this year in Yichang, Hubei Province. Like Sun, finding a proper dwelling for the business was the biggest hurdle.

Aside from its close proximity to the Three Gorges Dam, a massive hydroelectric dam that spans the Yangtze River, Yichang isn't a city that inspires many travelers to stay overnight. Huazi, 24, said it is more like a city for "senior citizens to live quietly in retirement" rather than a hub for backpackers.

But that doesn't mean there are no opportunities. Yichang is a popular stopover for travelers bound for Shennongjia Nature Reserve, a vast expanse of forests and sanctuary for endangered wildlife in west Hubei, and Chongqing's Wushan county, home to the second gorge of the Three Gorges Dam.

"Cycling along National Highway 318 to the Tibet Autonomous Region has become extremely popular in recent years. Yichang is a stop on that route where many cyclists like to rest," said Huazi.

After failing to find an entire residential building for their hostel, the couple settled on a top-floor apartment for the business. Measuring about 300 square meters with a rooftop garden for guests to socialize over a barbecue, the hostel is located close to Yichang's tourism transport center.

Ahead of Qingming Festival in April, Huazi and Laosi opened the Yichang Yiyi Youth Hostel despite the couple still lacking a business license.

"We estimate that we can recoup our investment of about 700,000 yuan within two years," said Huazi. 

Sun Qiang, owner of the Happy Youth Hostel in Ji'nan, Shandong Province. Photo: Courtesy of Sun Qiang

Embracing the culture

Running a youth hostel requires more than just sharp business instincts. Both Sun and Huazi said Chinese hostel owners need to be familiar with youth travel culture to ensure they provide an experience rather than merely cheap accommodation.

"A hostel is a public place where students and young travelers can gather to exchange ideas. These gatherings are informative and encouraging," said Sun, whose hostel has a public area for guests to dine, play chess and watch movies.

"People in southern China are more open to youth hostel culture. Now, it is the time to promote it in northern China too." 

The Yichang Yiyi Youth Hostel organizes regular activities to engage with the community and provide a platform for talks targeting youths. On June 11, Hong Kong LGBT activist Cheung Kam-hung spoke at the hostel to more than 40 attendees.

Huazi and Laosi also actively try to promote history related to the Three Gorges Dam. "Yichang underwent extensive reconstruction when the dam was built. Laosi had been collecting old items from demolished buildings, such as doorplates, to exhibit them at our hostel," said Huazi.

Backpackers leave illustrations and comments in a guestbook at the Yichang Yiyi Youth Hostel.Photo: Courtesy of Huazi

Hostels in rural areas 

Away from cities, there has also been a trend of hostels opening in rural areas, according to Yin Chen, secretary-general of the Guangzhou-based Youth Hostel Association (YHA) China, an organization authorized by the International Youth Hostel Federation to promote the youth hostel movement in China.

The Chinese mainland currently has more than 270 youth hostels registered with YHA China.

"Thirty-four out of 57 new Chinese hostels that became YHA China members in 2013 were located in rural regions, mostly in Yunnan Province and the Guangxi Zhuang Autonomous Region. There were even some in townships we had never heard of," said Yin.

China's current state of development of youth hostels is comparable to Europe in the 1900s when hostels emerged as a way for teachers and young people to have lessons learn from nature off campus, said Yin.

"Cities are becoming bigger and bigger, evoking urbanities' desire to get in touch with the quiet, natural life in rural areas," said Yin. 

In some cases, hostels have helped destinations become popular among travelers rather than vice versa.

For example, Manjuelong is a rural area in Hangzhou, Zhejiang Province, that people previously only visited for short periods during autumn when osmanthus flowers came into bloom. When a hostel opened in the town in 2011, only one bus operated between it and Hangzhou. The youth hostel attracted a surge of travelers, and today it has become a popular place to visit for tourists in Hangzhou, said Yin.

"Some young people, most of whom are well-educated, want to escape the big city to open a hostel in a small town where the cost of living is low. They also bring new ideas and resources to people living in rural areas, finding an environmentally-friendly way to live with nature," said Yin. "Others hope to find a place to stay relaxed for a while."

Yin said YHA China receives 10 to 15 requests daily from hostel owners hoping to join the international chain, but business owners must meet strict requirements to be accepted. "Staying at a hostel is different from running a hostel. It is better if one can work at a hostel for a year to gain experience, because you have to be a jack-of-all-trades," said Yin.

Backpackers dine together at the Happy Youth Hostel.  Photo: Courtesy of Sun Qiang