Josh Wyatt on Generator and the transformation of hostels

By Melodie Michel

- Last updated on GMT

Josh Wyatt, partner at Patron Capital, Generator's primary investor
Josh Wyatt, partner at Patron Capital, Generator's primary investor

Related tags: Hotel

Josh Wyatt is a partner at Patron Capital, Generator’s primary investor. He talks about innovations within the hostel world and how the sector is now the 'next major asset class in hospitality'.

Tell me more about Generator and how it got to where it is now in the market.

Generator has always been a growth based opportunity for Patron and the Generator team. We view hostels as the next major asset class in hospitality and really set out to support Generator to grow its position as the leader in the emerging space. Our vision has always been to have a truly global brand on par with the best retail and hospitality brands out there, so as we grow, we consider location and countries which drive the story.

How did the hostel sector go from basic facilities to boutique properties or ‘poshtels’? Did this come from consumer demand or from the sector’s need to reinvent itself?

We have always seen Generator as an innovator, and this is why we set out to create the world’s first truly global urban design hostel platform. Hostels, similar to hotels, had seen a stagnation of concept and lack of innovation for some time. We knew consumers wanted something more stylish and fun, and we set out to provide a unique blend of design and guest experience to drive demand.

Do you think basic hostels will disappear over time and be taken over by brands like yourself, or will there always be a market for them?

Similar to hotels, there will always be unique, independent hostel operators in each market, and we welcome these as friends and complements to the overall story of hostelling. One size does not fit all, and Generator is not trying to be everything to everyone. We have our unique, special offer which we are comfortable with, but there are plenty of others out there that have a fun and interesting concept.

How do you maintain hostel prices while offering more upmarket design and technology?

The ability to provide an amazing, valuable experience for a great price is something all great brands wrestle with. In part, scale helps as we can buy large buildings and we can operate a huge global company which drive synergies. If you consider how other worldwide brands have successfully expanded, one would look to their pattern of proof of concept, then fast growth to even out costs with profits. We think we have a great balance here where the customer is receiving superb value as well as the company earning a fair and reasonable profit to allow it to thrive.

Which other accommodation segments are you competing with for market share (budget hotels, boutique hotels, Airbnb, B&Bs)?

We truly do believe hostels are a unique asset class and offer, and thus carve out their own niche as compared to budget hotels, Airbnb, etc. One cannot get the social experience in Airbnb or budget hotels. Generator is not only on par pricewise with budget hotels, but it simply offers more experience for the same or lower price. This is, in our opinion, our secret sauce.

How is hostels’ clientele expanding and what are you doing to reach customers other than backpackers?

Travellers now, at all levels, crave experience combined with excellent sleep experiences, and hopefully at a decent price. Generator is now reaching out to business travellers who understand that they can get all the services they need in a hotel, but at a cheaper price and often times a far more engaging and fun atmosphere. We do see business travellers and corporates as the next big paradigm shift in the hostel customer segment.

The hostel industry is forecast to grow tremendously in the next few years – what challenges do you think could hamper that growth?

Growth can always be hampered by macro trends such as a big shock to the currency or economy. We fortunately do not see that happening, and believe there will be strong growth in all hotel and hostel market segments in the next 12-36 months.

What do you think other accommodation segments can learn from the hostel sector’s transformation?

Innovation and the ability to take risk is key to the success of any evolving sector, especially in hotels. It is critical that all the hotel brands and global businesses out there start to really think about how the 20-year-old customer today will use their hotels in 10 years from now. Fortunately Generator caters to the 18-35 year old segment so we have an incredible amount of data and perspective on how future hotel customers will likely use the hotel of the future.

What’s in the pipeline for Generator?

The USA is our next big frontier, along with a few other major deals in the Continent. We are aiming for a few years of strong growth based on our past successes to date.

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