Abstract
The O’Hub is a conceptual, up-and-coming hostel that will be located in the heart of Dublin. Dublin has long been a center of tourism for people around the world, and it seems likely that Europeans and international guests will continue to flock to the city (Failte Ireland, 2016; Bacon, 2009). Indeed, there have been suggestions that the hotel and hostel industries in Dublin are over capacity; this indicates that there is a need in the market. The overarching vision for this particular project is to create such a unique design and atmosphere that the O’Hub is able to establish itself as an iconic hostel in the heart of Dublin, differentiating itself from any of the other major hostels in the region. This project investigates a potential business proposal for the O’Hub hostel concept, located at the heart of Dublin near Saint Andrew’s Church and Trinity College.
Executive Summary
The overarching vision for this particular project is to create such a unique design and atmosphere that the O’Hub is able to establish itself as an iconic hostel in the heart of Dublin, differentiating itself from any of the other major hostels in the region. The goal, then, is to create a new space for visitors; one that is high in demand for young people searching for community in their travels. The goal for this document is to flesh out the major issues associated with developing the O’Hub concept. Because the O’Hub concept is a massive undertaking, this proposal attempts to elucidate the most important features of the proposal, and illustrates the main benefits and potential pitfalls of beginning work on the creation of this hostel. The hostel will offer an excellent meeting area for people to gather, and a close partnership with local rugby teams—these partnerships are fundamental to the success of the business. This hostel will be privately owned and operated in the form of an independent company.
The document contains the concept proposal and the operational considerations for the project, including the market analysis, the analysis of both microeconomic and macroeconomic factors associated with this potential project, and the potential partnerships suggested for the project as a whole. A more thorough analysis of the potential financial issues associated with the project is contained in the operational considerations section of the proposal.
Concept Proposal
The O’Hub is a conceptual, up-and-coming hostel that will be located in the heart of Dublin. Dublin has long been a center of tourism for people around the world, and it seems likely that Europeans and international guests will continue to flock to the city (Failte Ireland, 2016; Bacon, 2009). Indeed, there have been suggestions that the hotel and hostel industries in Dublin are over capacity; this indicates that there is a need in the market. This need is not only for budget hotels and hostels, but also for more refined experiences as well (Byrne & Skinner, 2007; Bacon, 2009; PwC, 2016). The development of a booming hospitality industry is likely to be a benefit to the Irish economy, but there are potential issues at play as well. This hostel will be privately owned and operated in the form of an independent company.
The purpose of this business proposal will be to examine and outline the concept that has been developed, including the operational considerations necessary for the completion of the project overall. This will also include a thorough analysis of both micro and macroeconomic future factors that could potentially impact the development of a secure financial investment in the hospitality industry. The mission of the O’Hub Hostel is to establish a creative, sustainable, and affordable environment for young people where they can socialize with each other in the heart of Dublin. The overarching vision for this particular project is to create such a unique design and atmosphere that the O’Hub is able to establish itself as an iconic hostel in the heart of Dublin, differentiating itself from any of the other major hostels in the region. The goal, then, is to create a new space for visitors; one that is high in demand for young people searching for community in their travels.
However, before determining the finer details of the project itself, it is important to investigate the microeconomic and macroeconomic trends that are currently playing out in the marketplace. Ireland is a relatively stable country, but the financial situation is not excellent: currently, Ireland is struggling to recover from the economic downturn (Failte Ireland, 2016). Microeconomic factors can be used to reasonably assess whether a new venture is going to be successful in years to come; tourism is one of the key indicators for the development of a coherent model (Gray, 2015). Gray (2015) notes that 2009 and 2010 were very difficult years for the Irish tourism and hotel sector, and that the steady increase and growth in the sector in recent years is very promising for the future.
One of the important microeconomic trends that will affect the tourism sector—particularly the niche hostel sector—is the development of new technologies and services like Air B&B (Gray, 2015; PwC Ireland, 2016). These services allow for more flexibility, and thus, they are attracting greater numbers of the target market for hostels and hotels, particularly hostels like O’Hub. Maintaining competition may be difficult in the face of these new services, which is why the company must be willing to offer new and different services regularly, along with F&B options for the customer. Because this model is designed to appeal to customers in the 16-24 and 25-34 age brackets, there must be varied services available to attract individuals from both of these different brackets (Brotherton, 2012; Lennon & Seaton, 1998; Bunda, 2014). Maintaining competitive pricing and remaining abreast of new technological trends will also be fundamentally important for the development of this particular customer base (Brotherton, 2012; Bunda, 2014; Go & Govers, 2000; Fitzgerald, 2014).
‘Low cost accommodation’ and shared bedrooms are always mentioned about hostels, but that is not the goal of this particular project. This hostel will be developed in the conceptual penumbra of the “poshtel—” a hostel with a wider range of target market of 16-34, and an increasing number of private rooms. Branding becomes more and more important as young travelers seek picking a place to stay associate with their personalities; it brings a much more personal feeling to the room and to the experience, which is in demand even in budget hotels today (Ruetz & Marvel, 2011; Sandoff, 2005). When branding of a hostel starts to be important, what a hostel offers should be differentiated with traditional hostels – cheap, our hostel takes this opportunity to develop the hostel being more luxurious by differentiating the design and furniture used in the room, to avoid the image of normal hostel (Keating & Harrington, 2003; Hospitality Recruitment, 2016). Because this organization will be large for a hostel but still smaller than the typical hotel, the staff size will be kept to a minimum to keep ADR low—however, staff that is hired will be highly educated on customer service and expectations for the organization (Nolan, 2002; Quinn, Larmour & McQuillan, 1992).
Developing a business plan that allows the hostel to walk the fine line between hotel and low-cost accommodation is foundational to the business strategy of the organization. There are numerous microeconomic features in the Irish economy that support the foundation of the hostel in the current environment. However, there are also geopolitical trends and issues that could potentially be problematic for the hotel and hospitality industry in Ireland as a whole (Jim Power Economics, 2015).
There are macroeconomic factors that must be considered as well. Ireland’s economy is currently heavily dependent upon both the success of the United Kingdom and the success of the European Union. If the United Kingdom votes to leave the European Union, the Irish economy could face serious potential problems; in addition, travel would be made more difficult for Europeans and United Kingdom citizens if the United Kingdom indeed votes to leave the European Union (Failte Ireland, 2016). Some estimates suggest that the loss of GDP would be both imminent and significant if the United Kingdom did indeed choose to leave the European Union (Failte Ireland, 2016). Preston (2016) writes, “there’s the problem of the border between northern and southern Ireland. Relatively fluid and even continental under the current system, it would become a major international frontier, manned by border patrols and customs guards Currently, Britain exports more to Ireland than to China, India and Brazil combined, trade worth over €1bn a week” (Preston, 2016). While this economic outlook is bleak, Failte Ireland (2016) estimates that it would not, in fact, decimate the hospitality industry in Ireland as a whole. The loss of this financial support—even if the support is not removed entirely—has the potential to be problematic for the economy as a whole, however, and might affect the partnerships that the O’Hub makes in the community.
Understanding the current and future trends in the Irish hospitality industry allows for a critical look at the F&B concept and the potential partnerships associated with this business venture. Although the future market in Ireland is uncertain, the proper development of strategy and partnerships could provide an excellent basis for a sustainable, long-term venture in Dublin (PwC Ireland, 2015).
The concept for the O’Hub establishes the business as a hostel rather than an ordinary hotel, which eliminates the need for a star rating for the business as a whole. Because the goal for the business is to attract a very specific set of customers, the business loses nothing by failing to utilize the star rating system that is commonly given for hotels. The building size allows for ninety rooms, which is a significantly larger number than most hostels; many hostels have only a handful of rooms for rent, and many of these rooms are commonly shared. Most of the rooms that are to be developed for this particular business will be private, giving this hostel a hybridized feeling: it is not quite a hotel, but at the same time, it does not have the same association as other hostels. What our hostels offers and differentiates itself from others is the fact that we propose shared bedrooms with in addition private rooms. By doing so, we’re not only targeting the 16-24 age group but also the 25-34 year olds. Both groups have a 20% segment share of the total number of visitors Ireland welcome, which means that our hostel targets 40% of the total number of visitors to Dublin (Facts ad Figures). This number of course doesn’t take into consideration that business travelers and families are not very suitable for our accommodation. Our shared bedrooms will be divided in 4 different types. We have shared rooms of 6 beds per rooms with bathroom included, and then some of 20 beds per room with or without bathrooms also. For the private bedrooms, there are single, double, triple and quadruples to satisfy the needs of everybody and try to attract the most guests.
A thorough market analysis is important for a coherent business plan. The target market has been decided for this particular venture as the Social Energizers and the Culturally Curious. These are the two main markets the city of Dublin wants to attract, as these two categories are the early adapters and have an effective “word of mouth” communication around the world—even though, in the modern world, the “word of mouth” communication is really social media prowess and connection. As the hostel will be based on online ratings, word of mouth associations and recommendations are the perfect medium for building a name. Social energizers in particular are always looking for new places that are vibrant and different which is exactly what our hostel proposes (McManus, 2001; Baum, 2002; Gray, 2015; Jim Power Economics, 2015). The hostel will offer an excellent meeting area for people to gather, and a close partnership with local rugby teams—these partnerships are fundamental to the success of the business. However, because this is the target market for many hostels in Dublin, there exists some competition in the hostel sector already; some of these hostels have been established for a number of years as well. Drawing potential guests away from established hostels will be one of the key barriers to entry into the market as a whole. This is a unique opportunity for the hostel industry; as real estate prices rise, so too do costs associated with hosteling and hotels. The large size of this particular hostel will allow for stiffer competition against established hostels.
Food and beverage service also requires market analysis for a more thorough understanding of the benefits associated with this particular hostel plan. A common kitchen is standard in a hostel, and a common kitchen is planned for this hostel; however, a restaurant, bar, and vending machine are also planned for implementation. The bar will be integrated into a local partnership with a beer crafter, and the food and beverages will be given kitschy names that are associated with local flavors and sports teams.
Local partnerships will be fundamentally important for the success of this particular business venture. Currently, the organization plans to cooperate with a local beer distributor, as well as the local rugby and sports teams. In this area of Dublin, there are a lot of colleges, and the rugby rivalries are intensely popular; however, the goal will be to make a partnership with one or more of the local colleges to ensure that when these colleges have international teams come, they choose the O’Hub as their place to stay. External partners will be used to improve services and to make the lives of our customers easier. In the establishment, thanks to the easyDublin desk, the guests at the hotel will be able to book their trips and buy tickets for museums, music festivals, Rugby matches, and so on with relative ease. The business benefits of forming these partnerships will be financial and non-financial. Of course, by partnering with local service providers, the hostel will be able to receive bulk discounts; however, the goal will also be to generate more revenue by attracting guests in the low season through partnerships with the colleges.
Operational Considerations
There are a number of important operational considerations to make when considering this business venture. Hostels in Dublin are relatively inexpensive in terms of daily fare; as such, they are also relatively lackluster in their offerings to customers. Most hostels in Dublin have an ADR of approximately €13-20; most of these hostels also have shared rooms. For the purposes of this particular hostel, the assumed annual ADR per customer might be as high as €30, depending on the types of services that are eventually offered by the hostel. Again, ADR will vary based on the type of room that the individual customer rents as well; a customer that rents a private room will, of course, have a higher ADR than a customer who rents a shared room in the hostel.
Determining the revenue per available room requires the assumption of ADR. Assuming that a private room has an ADR of approximately €30 and a shared room an ADR of €18, and assuming an occupancy rate of approximately 75%, the revenue per available room could be as high as €1,500 depending on the type of room and the demand for rooms at any given time of year. This was calculated using the assumption that approximately 65 of the rooms in the hostel will be utilized as private rooms rather than shared rooms; the revenue per available room will change based on the shared rooms that are made available to the customers at the hostel.
There are a number of significant costs that are associated with any kind of hotel or service industry that offers F&B services to clients or customers. There are costs associated with the purchase and procurement of food and drink—for instance, the development of a full kitchen in the hostel will require a certain amount of fresh food purchased on a daily basis. In addition, alcohol adds as significant cost to the development of the F&B budget. Finally, staff is required to ensure that customers are served and that the food is cooked safely and correctly in the kitchen. All of these features are incredibly important for the organization as a whole, and for consideration of the F&B budget for the organization. In addition, the development of a menu can be quite a pricey prospect for an organization.
The goal for the operationalization of the hostel, then, will be to introduce new facilities and services over time rather than all at once. Alcohol and drinks can be introduced to the business first, and then later, the development of a full kitchen and the introduction of wait staff can be added if there continues to be demand for this service from the customers as a whole. It is likely that the organization will face struggles at the beginning of implementation, and these struggles may lead to changes in expectation and development over time. However, there is no reason to believe that these struggles cannot be overcome and that O’Hub cannot meet its overarching goals of becoming a focal hostel in the city of Dublin based on this particular design.
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