Key Takeaways
- • Brookfield and Apollo have deployed significant capital into European hostels over the past 18 months, marking the sector's emergence as an institutional investment target after more than a century of independent operations.
- • Brookfield acquired Generator Hostels' European business for €776 million, while Apollo provided €874 million in financing to A&O Hostels (purchased by L&G Proprium in 2023); both operators plan to double their estate sizes.
- • The European hostel market is experiencing accelerated growth, with large hostels (100+ capacity) increasing 13% year-over-year to 83 properties in the 12 months to August, outpacing mainstream hotel expansion.
- • Private equity-backed standardization and "premiumization" aim to professionalize the sector, but industry observers warn that consolidation under institutional ownership risks eroding the authentic, local atmosphere that has historically differentiated independent hostels.
- • The sector represents a largely untapped institutional investment opportunity, with real estate advisers noting hostels as "the last space of the lodging sector that hasn't really been touched [by institutional investors]."
Summary
Europe's hostel industry has captured the attention of mega-cap private capital, marking a significant shift in an accommodation segment traditionally dominated by independent, owner-operated properties. Over the past 18 months, investment firms including Brookfield Asset Management (which manages approximately $1 trillion in assets) and Apollo Global Management have deployed substantial capital to acquire and expand European hostel chains, signaling institutional confidence in the sector's profitability and scalability.
Brookfield's €776 million acquisition of London-based Generator Hostels' European business and Apollo's provision of €874 million in financing to A&O Hostels (acquired by L&G Proprium in 2023) represent the largest institutional bets on the category to date. Both operators have committed to doubling their existing estate sizes, positioning themselves as professional, standardized competitors in a market historically characterized by fragmented, independently operated properties. The growth trajectory supports this strategy: large hostels (defined as properties with capacity exceeding 100 guests) grew 13% year-over-year to reach 83 properties across Europe in the 12-month period ending August, a rate outpacing mainstream hotel sector expansion.
The institutional thesis centers on "premiumization" and standardization—transforming hostels from budget lodgings into professionally managed, branded accommodation that maintains affordability while improving operational consistency, occupancy rates, and ancillary revenue. According to real estate adviser JLL, hostels represent "the last space of the lodging sector that hasn't really been touched [by institutional investors]," underscoring the untapped consolidation opportunity. However, consolidation carries a cultural cost. Evan Tzeng, founder of travel platform StayAltered, warned that private equity-backed chain expansion risks compromising "the local, authentic atmosphere that so many travellers love," highlighting the tension between financial optimization and the experiential differentiation that has long defined the backpacker accommodation experience.
Brookfield's €776 million acquisition of London-based Generator Hostels' European business and Apollo's provision of €874 million in financing to A&O Hostels (acquired by L&G Proprium in 2023) represent the largest institutional bets on the category to date. Both operators have committed to doubling their existing estate sizes, positioning themselves as professional, standardized competitors in a market historically characterized by fragmented, independently operated properties. The growth trajectory supports this strategy: large hostels (defined as properties with capacity exceeding 100 guests) grew 13% year-over-year to reach 83 properties across Europe in the 12-month period ending August, a rate outpacing mainstream hotel sector expansion.
The institutional thesis centers on "premiumization" and standardization—transforming hostels from budget lodgings into professionally managed, branded accommodation that maintains affordability while improving operational consistency, occupancy rates, and ancillary revenue. According to real estate adviser JLL, hostels represent "the last space of the lodging sector that hasn't really been touched [by institutional investors]," underscoring the untapped consolidation opportunity. However, consolidation carries a cultural cost. Evan Tzeng, founder of travel platform StayAltered, warned that private equity-backed chain expansion risks compromising "the local, authentic atmosphere that so many travellers love," highlighting the tension between financial optimization and the experiential differentiation that has long defined the backpacker accommodation experience.
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