The hostel business is expected to grow 10 per cent this year thanks to an increase in solo travellers from all over the world.
"New developments will be seen in major tourist destinations such as Bangkok, Chiang Mai in the North and Phuket Island in the South," Burim Otakanon, deputy dean of the College of Management at Mahidol University, said yesterday.
As operators offer beds for as little as Bt300 (S$11.80) per day, academics have urged new players to conduct market-research studies before investing in order to reach targets and differentiate themselves from existing operators.
Thai tourism remained in growth mode last year despite many negative factors and safety concerns.
More than 2,000 hostels are in the market, accounting for 12 per cent of total accommodations.
In Bangkok alone, the number of hostels doubled to 400 last year.
The capital cost of a hostel is much lower than big hotels, while owners can run their properties using their own strategies and business plans.
According to "Visa Global Travel Intention Study 2015", individual or solo travel has increased in popularity. Solo tourists were 24 per cent of total tourists in 2015, up from only 10 per cent in 2014. The hostel business has boomed and is expected to keep thriving in the future.
Visa also found that 64 per cent of tourists aged 18-30 preferred to stay at hostels rather than big hotels.
A team researching the hostel business at Mahidol suggested that new developers study five areas if they want to open a hostel.
Those areas are customer needs (mostly of youths and backpackers), location, accommodation and services, communications (particularly via the Internet), and customer experience.
The researcher also urged new investors to conduct business and marketing research studies to get the right customers and stand out in the market.
Thammanoon Visitsak, co-founder of Old Town Hostel in the Charoen Krung area, said the hostel business has been growing and becoming popular overseas for many years.
Hostels can provide more experiences and also help guests save money compared to big hotel chains, he said. Guests of hostels also have the chance to make new friends and that helps make new relationships among international travellers.
"I myself have stayed at hotels in more than 75 countries around the world. I have learnt that if operators can provide more common rooms for the public they will gain more customers and business in the long term," Thammanoon said.
Launched 14 months ago, Old Town Hostel charges Bt300 per bed with shared bathrooms, which is nearly half the price of budget hotels, guesthouses and home-stay houses.
"For a total of 111 beds, 100 per cent of our customers are foreigners. We hope our occupancy rate will be about 80 per cent this year," he said.
The Internet and social media were key tools helping operators drive the business and reach customers, Thammanoon said.
Newcomers should invest in quality materials and standard equipment for long usage, instead of opting for low quality construction that might lead to renovation expenses later.
In some cases, hostels have been associated with negative trends such as sex in a shared bed, smoking, stealing and drug use. However, those problems can be mitigated if hostel guests abide by clearly communicated rules.
The definition of a hostel is ambiguous, so the government should clarify what the term means and promote it as a category of accommodation to help boost tourism.