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Most people who stay in hostels are looking for a good deal on housing while they travel. Start by thinking about good locations that travelers frequent. Big cities with a lot of tourism are good starting points. Beach locations are also popular for travelers.  If you’re local to the area you want to open your hostel in, then think about the places people always visit when they travel to your area. If you’re relocating to a new area, ask locals or check online for popular local destinations. Get an idea of what people are looking for when they visit this area. Hostels can also work in rural areas if there is a local attraction nearby. For example, popular hiking trails can attract plenty of business to a rural location. As an added bonus, real estate is probably cheaper in these areas. Most people who stay at hostels aren’t bringing cars, so reliable transport is important. People won’t be able to reach your hostel if it isn’t near transportation, and they also won’t be able to explore the local area. Find a location near local trains and buses to make your hostel more attractive for travelers.  A location within walking distance of local attractions like historic sites and restaurants is even better. If there isn’t good local transit nearby, try to offer other transportation options. Partner up with local cab companies, for example, or consider renting bikes to help your guests get around. You may not be the first hostel in the area, and these other hostel owners are your competition. Investigate what these hostels offer their guests and how they operate. You could even book a stay at some of these hostels to really see what the guest experience is like. Then use what you learn to run your own hostel.  If an area is particularly saturated with hostels, then consider a different area. There may be too much competition here for you to get ahead. While you should pay attention to your competition, don’t feel like you have to copy them. This is your hostel, and if you have a unique idea that no one else is doing, then put it into action.
Pick a location that attracts budget travelers. Find a building near reliable local transportation. Research local competition.