Pubs sought for hostel profit 'bunk-up'

Journeys Hostels, the hostel operator, is looking for 15 to 20 pubs to take on its

franchises and add a hostel operation to their business in 2011.

The firm already operates at four sites in London, plus one in Brighton, and aims to expand this year.

To take part, operators pay a £12,500 upfront fee for a five-year franchise agreement. There's a management service fee of 8% of overall turnover, plus a marketing and promotional charge (2% of bed turnover) and a systems fee of 1% of bed turn-over (all exclusive of VAT).

In return, Journeys said it offers expertise to help add hostel facilities to the venues and to operate the new services, including guidance on regulations and best practice. Help with marketing, training and revenue management is also promised.

Total investment, including physical changes to the premises and initial fees, works out at an average of £75,000 per venue, said a spokesman. Venues would need space for at least three bedrooms. The spokesman added: "The more unique the properties the better. We help licensees maximise the space they have.

"The big hostel chains focus on just the big centres and are not interested in rural areas. Journeys is interested in any area.

"But it has to be the sort of place that tourists are likely to visit."

Profit bunk-up​

The company claims that under the agreement, franchisees can earn between £35,000 in year one, based on a 50-bunk offer, rising to £48,000 in year two and £57,000 in year three.

For a 150-bunk offer, projected earnings are claimed to be £57,000 in year one, £68,000 in year two and £97,000 in year three.

Pub operator Charles Graham spent £125,000 adding 93 rooms to redundant space above the former Rosie O'Grady pub near London Bridge in 2008.

Since then turnover at the Admiral Taverns leasehold site, which has been renamed Journeys Hostel, has trebled to around £360,000, although Graham said it requires a "lot of work" to run.

"I didn't have a lot of passing trade. If it wasn't for the hostel I would have closed within a year," he said.