The Hostel Market in Amsterdam What do backpackers spend and what is the market value of the hostels? Jesse van der Vaart (062101) Nationale Hogeschool voor Toerisme en Verkeer International Tourism Management December 2007 Table of Contents Summary 04 Word of thanks 07 Chapter 1: Introduction 08 1.1 Background 08 1.2 Thesis goal and approach 08 1.3 Research questions 09 1.4 Methodology 10 1.5 Structure of thesis 11 Chapter 2: Theoretical Framework 12 2.1 Tourism Product 13 2.2 Market Value 14 2.3 Spending Power 14 Chapter 3: The backpacker market in Amsterdam 15 3.1 Backpacker market in general 15 3.1.1 History 15 3.1.2 Backpacker market in definitions 16 3.1.3 Travel career ladder 16 3.2 Backpacker market in The Netherlands 17 3.2.1 Backpacker market in Amsterdam 17 3.2.2 Characteristics of the backpacker market 18 3.3 The structure of tourist accommodation 19 3.4 Hostels and the chamber of commerce 21 3.5 Department for research and statistics 21 3.6 Other initiatives 22 3.7 Conclusion 23 2 Chapter 4: The market value of the hostels 25 4.1 Number of beds 25 4.2 Prices and room types 26 4.3 Actual market value 26 4.4 Hostels versus hotels 29 4.5 Expenditure based on accommodation type 30 4.6 Reasons to expand 30 4.7 Ownership and legal form 32 4.8 Financial results of BV’s 33 4.9 Conclusion 35 Chapter 5: The spending power of the backpackers 36 5.1 Research style 36 5.2 General information 36 5.2.1 Undertaken activities 37 5.3 Outcomes 37 5.4 Spending 39 5.5 Conclusion 40 Chapter 6: Conclusion 42 Bibliography 45 Appendices Appendix I Overview of all hostels in Amsterdam 47 Appendix II Map overview of all hostels in Amsterdam 64 Appendix III Market-Analysis hostels in Amsterdam 65 Appendix IV Article: city soft spot 68 Appendix V Questionnaire for backpackers 69 3 Summary The thesis is written for the commissioner Stayokay hostels. Stayokay is a Dutch hostel chain with in total 30 hostels in the Netherlands. The goal of the thesis is two-fold. The first goal is to determine the market value of all hostels in Amsterdam. The second goal is to find out through research what the backpacker spend in Amsterdam, e.g. the economic value of the backpacker. Why to determine the market value of all hostels? One of the answers lies in the marketing plans of the local municipality of Amsterdam (gemeente). The gemeente promotes Amsterdam with specific theme years. The goals of these theme years is to communicate Amsterdam more directly and specifically towards the travel industry. A second goal is to generate more visitor numbers. Stayokay would like to see that the theme years are more focused towards the backpacker market. Some theme years will not reflect the interest of this type of travel. Stayokay also would like to get a good in-depth insight in the hostel-market in Amsterdam. The total hostel market has been analysed for Stayokay, which gained the company a good insight into the market. The market-analysis (appendix III) is already used by the sales and marketing department and during meetings. After the thesis statement, a number of research questions come up. The answers to these questions can be found back in the last chapter. 1. What is market value? 2. Why is it important to determine the market value of all hostels in Amsterdam? 3. What is the chain of the ‘Amsterdam Tourism Product’? 4. What is the target group of the different hostels? Are there different target groups for different hostels? 5. What is the economic value of all the overnight stays in the hostels in Amsterdam? 6. Are clients of hostels of any value for the municipal of Amsterdam? 7. Why do backpackers go to Amsterdam, and how much do they spend? Research have been conducted to come to answers. A lot of data concerning the hostels has been collected through desk research. However, information like total amount of beds was more difficult to find. This information is retrieved through interviews by telephone. This way, the different prices for different rooms have been found. The goal was to find out how many beds each individual hostel has, and for which price. This information is useful, together with occupancy rate, to calculate the total market value. 4 A total of 35 hostels have been called to retrieve this information. In some cases the hostel- owner did not want to give the needed information. In this case the researcher called back a few days later, and with a false story about a group booking, came to the answers anyway. Interviews by telephone have been chosen because this was the only way to get the information needed. Total bed numbers is not such a form of information that hostel owners put on their website. Questionnaires have been used to collect data concerning backpackers. The specific target group where backpackers staying at a hostel. Most of the questions where closed, in this way the researcher could do more quantitative research. One time is asked for an opinion, this is a form of qualitative research. Questionnaires have been chosen because it reaches many recipients in a short period of time, in a way that the information from the questionnaires could be used Excel. The original plan was to set out 350 questionnaires across seven hostels. Unfortunately, only three hostels decided to cooperate, resulting in 150 questionnaires from which 94 got back. The data is processed in Excel. The questions are put down in a horizontal way, (column 1 and 2) under which all the answers are represented in a vertical way (column A till BD). The second sheet is used to add up all the data and to calculate percentages of the total population. The Vietnam War, the students revolutions in the 1960’s and the Grand Tour are often named as the start of backpacking. The term backpacker is simultaneously used with other definitions like global nomads, drifters, travellers and tourists. In general backpackers are young people, at a juncture in life, college educated and not just aimless drifters. Backpacking started in The Netherlands in 1929 with the establishment of NJHC. Amsterdam has a total of 35 hostels located in and around the near city centre. Different hostels attract a different clientele. Some hostels are just a good place to sleep, with (strict) rules regarding alcohol and cannabis. Tourism in Amsterdam is growing. Especially Amsterdam’s budget sector booked a lot of success in 2006, with visitor numbers and overnight stays rising quicker compared with the overall growth. The major players in the hostel business in Amsterdam are: the Stayokay hostels, Hans Brinker the Flying Pig hostels, Inner Amsterdam and The Bulldog. The total number of hostel beds is around 4.400 beds. The 6 major hostels provide more then 56% of all beds. The number of 5 total ‘Stayokay beds’ in Amsterdam is 1224. This is 27.8% of the total beds. Most hostels offer different types of rooms. The average price for a bed in a dormitory is between € 25,- and € 30,- Market value is calculated by multiplying the total amount of beds, times occupancy rate, times average price per bed. Ten hostels are worth more then a million euros, another eighteen more then € 500.000,- and the final seven less then € 500.000,- There has always been more marketing efforts towards the hotels compared to the hostels. In total 80% of the visitors stay at a hotel. These guests account for 87% of total expenditures. The average spending is higher of hotel guests compared with other guests. Although only 1% of all visitors stay in hostels (100.000 people) and although their expenditure is lower compared with hotel guests, it is still advisable to expand the hostel market and spend more marketing effort and money on this sector. Besides market value, spending power has been researched in the form of questionnaires. 56% of the respondents were male, 44% female. The average age of the respondents is 24 years. The youngest person was 15, the oldest 67. This reflects the idea that there are different target groups within the backpacker segment. Besides the ‘official backpacker’ e.g. young adult, who finished university and is in a gap year before finding a job there are other groups to be found. The main reason to travel to Amsterdam was exploring a new city, just a holiday and nightlife and smoking. Other answers included ‘to find out if the stories about Amsterdam were true’ and on a business trip to visit a congress. The questionnaire also asked the backpacker to estimate the average he or she spends per category per day. Most is spend on accommodation. Next to accommodation it turns out that the interviewed backpackers spend most of their money on shopping followed by café/bar/clubs. Very interesting to note is the fact that they spend more on museums and attractions (€ 12,20) than in the coffee-shop (€ 10,50). Dinner scores a 64% on the activities list, translating in a average spending of € 11,40. Not much is spend on breakfast, the main reason being that this is included at most accommodation providers. In total the average spending is € 120,- per day. 6 Word of Thanks This feels like writing once you’ve finished a CD. If you read through such a CD-booklet you always find the artist thanking many people, and this time its my chance to thank people. First of all I would really like to thank my mum, Elly Ottens, for always guiding me. From the MAVO to the HAVO, to Australia up to the HBO. She’s always been by my side, supporting me when necessary. Thank you. Next I would like to thank Rene van Schie for giving me the opportunity to write for Stayokay. The following people I also would like to thank. Anske van den Berg, my commissioner from Stayokay for supporting my thesis, the time she made free to meet and discuss the thesis with me, and for making full use of all the facilities at Stayokay. Also thanks for all the financial back-up such as printing, binding, calling, copying etc. Thanks to all my colleagues supporting me and handing out my questionnaire to the backpackers. Special thanks to Mikaela for reading my questionnaire and perfecting it on my English. Thanks to Jim Zielinski and his colleagues and the Bulldog Hotel, for taking care of my questionnaire over there, and the pro-active approach. I also like to thank Art for getting useful information out of my questionnaire. I’d like to thank my proofreaders Iza, Judith and John for going through my thesis. Thanks for all my friends like Marieke, Dymph, Verena and Renske for reminding me to finish my thesis. Finally I’d like to thank my supervisor Marjolein Visser for the clear information and structure I’ve been given. 7 Chapter 1: Introduction This introductory chapter will explain what the problem area and thesis statement is, and how the researcher will arrive to its answers. Next the research questions and methodology will be described. 1.1 Background From the four ITMC specialists area’s I have chosen for a topic which originated from the hostel Stayokay in Amsterdam, or a so called ‘company based topic’. Stayokay would like to know what the total market value of all hostels in Amsterdam is. The market value can be presented in total overnight stays in all hostels and total turnover of all hostels per year. Stayokay is a Dutch hostel chain with in total 30 hostels in the Netherlands. Stayokay is a foundation (stichting) but they do make profit. This profit is used to strengthen its position and to, for example, open up new hostels or refurbish older ones. The 30 hostels are divided in three categories namely: city-hostels, water-hostels and green (area) hostels. 1.2 Thesis goal and approach The goal of the thesis is two-fold. The first goal is to determine the market value of all hostels in Amsterdam. The second goal is to find out through research what the backpacker spends in Amsterdam, e.g. the economic value of the backpacker. This leads to the following thesis statement: The market value of Amsterdam hostels should be determined because it is important to know where the Amsterdam hostels are standing in the chain of the Amsterdam Tourism Product and it is important to know the ‘spending power’ of the backpacker visiting Amsterdam. Chapter two will visualise the thesis statement and will explain market value and spending power in more detail. To determine the market value of all Amsterdam hostels, we first need to explain what a hostel is, and which hostels will be included in the report. Chapter three will give an in-depth insight in the hostel situation in Amsterdam. Market value can be described as; the total market price of a given quantity of a good 1 and a second definition is; the amount that a seller may expect to obtain for merchandise, services, or securities in the open market.2 In this report the market value will be described as the total turnover of all hostels per year. 1 http://en.wikipedia.org/wiki/Market_price 2 http://www.answers.com/topic/market-value 8 One might think that research has been done towards the market value of hostels in Amsterdam. But the Department for Research and Statistics categorises ‘hostels’ under the heading ‘remaining’. More about this ‘missing part of research’ can be read in chapter three. Why does the researcher want to determine the market value of all hostels? One of the answers lies in the marketing plans of the local municipality of Amsterdam (gemeente). The gemeente promotes Amsterdam with specific theme years. Examples are; Architecture and Design (2004), Amsterdam Water-City (2005), Rembrandt 400 (2006) and Feel the Rhythm (2007). The goals of these theme years is to communicate Amsterdam more directly and specifically towards the travel industry. A second goal is to generate more visitor numbers. Stayokay would like to see that the theme years are more focused towards the backpacker market. Some theme years will not reflect the interest of this type of travel. For Rembrandt 400 a total of € 280.000,- has been spend on marketing and promotion. The main sponsors of the theme years are The Amsterdam Diamond Group and Canal Bus.3 The interest of the main sponsors is high, so they most likely have a great influence on the theme years. 1.3 Research questions After the thesis statement, we arrive to a number of research questions. 1. What is market value? 2. Why is it important to determine the market value of all hostels in Amsterdam? 3. What is the chain of the ‘Amsterdam Tourism Product’? 4. What is the target group of the different hostels? Are there different target groups for different hostels? 5. What is the economic value of all the overnight stays in the hostels in Amsterdam? 6. Are clients of hostels of any value for the municipal of Amsterdam? 7. Why do backpackers go to Amsterdam, and how much do they spend? Questions 1,2 and 3 will be answered in the next chapter and are also explained in thesis goal and approach. Question 4 will be answered in chapter 3; The backpacker market in Amsterdam. Questions 5 will be answered in chapter 4; The market value of the hostels. 3 Rembrandt 400 ‘Evaluatie Themjaar 2006 voor gemeente Amsterdam, economische zaken’ 9 Finally, questions 6 and 7 will be answered in chapter 5; The spending power of the backpackers 1.4. Methodology How will the goal to find out the market value of the Amsterdam hostels is, be achieved? First, we will define what a hostel is, and by desk research map out the hostel situation in Amsterdam; next will be determined which hostels will be included in the report. The hostels will be compared by desk research. Points to look at are amount of beds, location of the hostels, and the price charged by the hostels. By being a NHTV-student, I can also access a lot of data-bases, which can hold a lot of interesting information. The third step will be to retrieve financial information at the chamber of commerce. Other sources of interest include: data available from the Amsterdam Tourist office, Statistics Netherlands (cbs), Amsterdams Department for Research and Statistics, and the Amsterdam Leisure Consultancy. The second question of the thesis statement is ‘to determine the spending power’ of the backpacker in Amsterdam. This can be done by primary research. I have chosen to hand out questionnaires to backpackers, which they can hand back at the reception of different hostels. More about the research style can be read in chapter five. I can compare the outcomes of my research with the outcomes of the research done by the Department for Research and Statistics. After all this data collection, recommendations can be made. As stated before, the Department for Research and Statistics has numbers of total overnight stays in hotels in Amsterdam, but not specified in categories of accommodations like hotels, budget hotels, hostels, guesthouses and camping’s. It is the researcher’s task to try and specify those numbers. If it turn out to be to difficult to get access to all these numbers, estimates can be made to come to an answer. 10