Life at sharp end of hostel distribution as mega-brands close ranksNews / DistributionBy Viewpoints | February 18, 2014Share This article was originally published on There has recently been some rather seismic activity taking place in that often little known end of the accommodation distribution debate - hostels.NB: Ben Julius is the founder of Tourist Israel and Tourist Berlin, and advises Abraham Hostels on its online marketing.Almost one year after Web Reservations International (WRI), parent company of HostelWorld, acquired its main competitor in the online hostel reservations market, HostelBookers, the new joint company announced to hostel owners that commissions would be increasing from 10% to 12%, and in some cases 15% from the end of February.The move was somewhat inevitable, with the company owned by private equity company Hellman Friedman, however, the way in which WRI broke the news to hostel owners has created great waves of discontent in the industry, and the direction of the tide is somewhat unclear.Background - distribution in the hostel industryThe hostel industry is generally less sophisticated than the hotel sector when it comes to inventory and distribution, arguably for three main reasons: The smaller average size of properties with less resources to devote to direct marketingUntil recently, major OTA’s including Booking.com and Expedia didn’t focus on the hostel marketHostel owners have been reluctant to pay higher commissions demanded by Booking.com and Expedia, with thinner margins than hotels and a genuine desire to keep beds affordable for budget travellersWaves are beginning to formThe news of WRI’s commission hike has sparked a lot of anger among hostel owners, but beyond the words and emotions, major hostel groups have begun taking action to boycott HostelWorld and HostelBookers, with some associations withdrawing all inventory for a set period of time, and individual hostels beginning to ignore the (perhaps now unenforceable) rate parity cause and hiking rates on HostelWorld.For example, the ILH (Israel Hostels network. comprising 30 independent hostels in thee country), sent an open letter signed by 17 members which threatened the removal of all inventory from HostelWorld and HostelBookers for one month.Board member Maoz Inon stating "your decision is a breach of our trust and a sad deviation to our relationship" and that "somewhere along the way HostelWorld has lost its 'hostel' spirit."Changes in hostel distribution?Indeed, with generally smaller properties and less business motivated owners, as well as strong industry associations between hostels, the loss of the support of hostel owners could be a crucial blow to HostelWorld and HostelBookers at a time when competition in the OTA arena has never been stronger.Many smaller hostel owners have reacted to this as an opportunity to move away from WRI as a primary source of online bookings, in particular in cases where HostelWorld’s engine is powering their own websites (albeit as an affiliate).Larger hostels and chains have already begun moving away from reliance on OTAs with many of the dormitory beds being sold only directly.The Abraham Hostel in Jerusalem, for example, which HostelWorld ranked as number eight in the world last year, now receives over 40% of its total revenue from bookings via its own website, a rate which is higher than many large hotel chains, and twice the average for hotels.On an emotional level, hostel owners feel a strong connection to their customers, and the backpacker core of customers who are passing between hostels, will be quicker to pick up on waves of concern in the industry, and understand that hostel owners (who are often not afraid to say directly to guests) would prefer direct bookings, especially when understanding from emotional owners, how "faceless corporations are damaging their business", as one hostel owner described it.Many other owners, such as Michael Olszowy of the Mosquito Hostel in Krakow, Poland, feels that HostelWorld has "changed from being a backpacker friendly website", and wider industry relations are severely damaged.Many hostel owners have also spoken out about how HostelWorld has fallen behind the times.With all this in mind, owners are beginning to make efforts to bring their customers back directly, offering big incentives to encourage direct bookings, and upping investment in their own online marketing.Is there a way back for HostelWorld?Whilst a backtrack on the commission hike would prevent a lot of the immediate inventory loss facing WRI, many of the loudest voices in the industry have undoubtedly lost their trust in HostelWorld and HostelBookers, and will begin to reduce reliance upon it as a distribution network, no longer viewing them as the "partner" that they were before.Perhaps in order to alleviate the reliance, there will be a spread of inventory onto other sites such as Booking.com and Expedia, or a resurgence in older sites such as Hostels Club, but in the long run four obvious dynamics, based on the enthusiasm of key industry voices are clear: Increase in the role of hostel organizations, national networks of independent hostels, or regional, such as Europe’s Famous Hostels, where hostel owners own the network and thus, their distribution channel is guaranteed.Increase pressure from hostel owners to increase direct bookings. With no love lost with WRI, there is no doubt that owners will try to undercut prices or offerings on their own websites.Greater importance placed on positioning on review sites such as TripAdvisor (with which the hostel industry is in another battle).Greater cooperation between hostels and blogs and local information sites who provide an outlet for hostel owners, as well as a possible resurgence of the traditional guidebooks. Whatever happens, these coming months will be very interesting for the hostel industry as distribution will possibly change more than ever before.This month’s HostelWorld conference for owners in Dublin, Ireland, will undoubtedly see many of the issues come to light, and the handling of these for WRI could be crucial for its future direction as a company.NB: Ben Julius is the founder of Tourist Israel and Tourist Berlin, and advises Abraham Hostels on its online marketing. Follow him on Twitter.NB2:Backpacks hostel image via Shutterstock.