Updated on June 13, 2010
Do you really want to start a hostel?
There are countless people enamored by travel who fantasize about “one day opening a hostel on a beach.” These people can be identified by the dreamy look in their eyes and inability to understand why the owner of a business in such a beautiful place could be stressed. This will be the first post in series about starting a hostel in a foreign country. Many of the principals discussed could be applied to most any small business venture.
You can’t just decide to build a hostel somewhere that you enjoyed being and expect it to be a success. There is considerable planning and number “crunching” to be done in order to find out if a location is suitable. Being in love with a certain location and business type is a sure way to set yourself up for failure. Making sure an idea has a chance of success is crucial to getting a project off on the right foot.
Do you have the resources, skills, and connections to put together a project in a foreign country? Do you at least have the means to get these things together? How well do you speak the language? It’s one thing to be able to converse but you will need to have the means to understand legalese in whatever language you will be working in.
Do you have any idea where to start putting together financing? US commercial banks are out of the question. Foreign property can’t be used as collateral and in the current state of the US banks they probably wouldn’t loan it to you even if they could. Foreign banks in many areas will loan you the money, but only at exorbitant interest rates. Convincing private investors that you can put together this project will be very difficult as any project abroad will be seen as a risky investment. If you don’t have experience or credentials that would suggest that you can pull off starting up a business in a foreign country, they may not even talk to you.
In many areas business deals are made only through connections. In Uruguay business is conducted almost solely on who you know. If you don’t have connections you will pay much more in land acquisition, construction, and supply chain. The costs may be inflated enough to sink the venture, but then there is politics. Did you go through the right channels to get the project approved? You did get approval, right? If you don’t make friends in high places you may end up having unexpected roadblocks thrown in your way around every turn.
The day to day
So now you have a shiny new hostel in a foreign country or whatever business type it was that you dreamt of building. Running a hostel is not like having a bunch of new friends over all the time. I am not saying there won’t be any fun moments, but it is a business and those “new friends” are paying guests. Can you handle the impermanence of everyone you meet leaving just when you start getting to know them?
This post isn’t meant to discourage anyone from taking a risk on a new life and business abroad. It would be an exciting and challenging chapter in your life. It could certainly be very rewarding, but first you need to seriously ask yourself if it is what you want to do. Look for an interview with Brian Meissner; founder and owner of El Diablo Tranquilo hostel in Punta del Diablo, Uruguay in an upcoming post.