24 August 2019
Edman Ma (left) and Anderson Lam started their hostel business just two and a half years ago. Photo: EJ Insight
Edman Ma (left) and Anderson Lam started their hostel business just two and a half years ago. Photo: EJ Insight

How two travel buddies started a hostel business in HK

Many people think of hostels as low-end establishments that offer substandard accommodation and service. But two young Hong Kong entrepreneurs are determined to change that image by injecting artistic and managerial vigor into the business.

Starting an enterprise isn’t easy, especially in Hong Kong where rents and other operating costs are among the highest in the world. But that didn’t deter Edman Ma and Anderson Lam from chasing their dream. Two and a half years ago they launched the stylish hostel brand Just Inn, and just last month, they opened their third branch in Taipei.

One of their hostels is located in a busy, unpretentious corner of Tsim Sha Tsui. Entering a drab, seven-storey building, you might even think you got the direction wrong for all you could find are a motley collection of tiny commercial establishments including foot massage parlors and tailoring shops.

The somewhat chaotic setting doesn’t suggest anything chic or stylish until you step into the hostel, which is meticulously designed with a tasteful array of wooden ornaments and paintings.

Lam and Ma aim to present a welcoming ambience to guests, one that assures them of safety and comfort.

“We both love to travel,” Lam said. “The idea of starting our own hostel together popped up after we made a trip to Russia a couple of years ago.”

There were lots of unexpected challenges. First, they had to spend a year looking for a suitable place.

Often, building owners don’t want to lease their properties to hostel operators: they think strangers who come and go all the time will disturb the other tenants and adversely affect the value of the properties.

“We have to convince the owner that the hostel that we operate is different, so we made a formal proposal for him, explaining the concept and idea behind the business,” Lam said. The landlord relented.

Ma and Lam were roommates when they were studying in the university. Coming from different professional backgrounds, their specialties complement each other in the business they chose.

After finishing his master’s degree in fine arts, Ma worked as an art consultant. He is now responsible for all the designs and artworks in Just Inn’s hostels.

Lam was a senior manager in a property developer. One of Lam’s duties was to assist clients who want to start a hotel. His expertise has helped the team to overcome many obstacles, including one of the biggest hurdles, which is obtaining a guesthouse license.

Guesthouse operators must fully comply with fire safety and building regulations. The rules specify the number of guests allowed, fire safety equipment to be installed and fire exits and corridors that must be available. License will be granted only when all the requirements are fulfilled.

Ma said that since the location is an old building, they have to shoulder extra costs to comply with the regulations.

They ended up spending almost their entire initial capital of HK$4 million before the opening, leaving them with a very thin budget for daily operations.

The two complained about the discouraging government policy toward the hostel business. The license application process requires lengthy and tedious paper work, including securing the signatures of architects, lawyers and many others, and each could easily cost over tens of thousands of Hong Kong dollars.

But as Lam has had lots of experience dealing with Home Affairs Department officials, Just Inn secured the guesthouse license in just five months. That’s fast; in some cases, applicants have to wait for a whole year to obtaining a license.

And while waiting for the license, they had to pay the HK$40,000 monthly rent without any guest coming in.

Just Inn’s two hostels in Hong Kong, both in Tsim Sha Tsui, provides a combined 23 rooms. The rate of a standard double room is around HK$650 per night, compared with the average room rate of HK$1,870 in a Hong Kong hotel, according to data compiled by Bloomberg.

The budget and boutique concepts behind the hostels have attracted visitors from all over the world, assuring Just Inn of an occupancy rate of 90-95 percent most of the time.

Ma said they have guests of all kinds, from young budget travelers, to university professors and even bankers.

So far so good. But as the two founders said, “Running a hostel in Hong Kong is a long fight. There is a new challenge every day.”

One potential threat is the government’s plan to tighten guesthouse licensing regulations, triggered by a fire at Continental Mansion in North Point last December that sparked public concern over the safety of such establishments.

According to Ma and Lam, the government may use the Deed of Mutual Covenants (DMC) of the building owner as one of the criteria for issuing the license.

That means the government can refuse to issue or renew licenses, or cancel existing licenses, if the Deed of Mutual Covenants with the building owner explicitly prohibits the operation of guesthouses.

It is believed that many DMCs do not encourage hostel operation.

If the licensing process does change, many guesthouses may be forced to close down as a result.

Still the Just Inn duo are upbeat about the business. At the same time, they are also hedging their bets with the investment in Taipei.

“A few years ago, industry players thought that mainland visitors will remain a stable source of income forever, but look at what is happening now [the number of mainland tourists keeps falling],” Lam said.

“We have our niche. Just Inn is not the kind of hostel that serves only Chinese tourists. We need to build up our brand in order to sustain it. That’s why we choose Taipei as our latest foothold.”

Actually, they have long been dreaming of making Just Inn an international chain. Hong Kong and Taipei are just the first stops.

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Just Inn hostels are located in old commercial buildings in Tsim Sha Tsui, surrounded by tailor shops, foot massage parlors and other small establishments. Photo: EJ Insight

The rooms are meticulously designed with wooden ornaments and paintings. Photo: Just Inn

The hostel has chic and stylish interior settings. Photo: Just Inn

Just Inn has just opened its third branch in Taipei. The founders spent a lot of time designing the reception area. Photo: Just Inn

EJ Insight writer

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