Group 3 - YOHO Hostel - Business plan and budget

Executive summary

The business plan and budget provide details on our social enterprise, YOHO hostel. Our social
enterprise aimed to be part of a collective impact to solve the homelessness problem in Australia by
providing employment and shelters to homeless individuals. The proposed solution addresses the
problem and covers the social and commercial value of our enterprise. The market segmentation
and the opportunities are identified and addressed using Porter's Five Forces and SWOT analysis
within the hospitality industry. Next, our marketing plan includes a promotion strategy,
advertisements, and details about our first hostel in Northbridge operation, the management
system, and the key stakeholders. Lastly, our budget plan to indicate the business sustainability in
the coming years. YOHO hostels aim to address the social cause and grow with sustainable
competitive advantages.

The Homelessness problem

The social cause of our business is targeted to be part of the collective impact in solving
homelessness in Australia. Western Australia will be the start of our business establishment
and effort in addressing homelessness. Homelessness is defined as an individual who is
either rough sleeping, staying in emergency accommodation, staying temporarily with
others, lacking private facilities (e.g., toilets) and not having any security with a legal
tenancy agreement (Kalevald et al.,2018). These further lead to individuals or groups being
excluded from the standards of the majority social life (Bower et al., 2018).

Homelessness in Western Australia has been a consistent problem for decades. However,
the significance of the problem has increased in the last few years (Kaleveld et al., 2018).
The homelessness issue is significantly present in Perth and the surrounding metropolitan
local government area (LGA). Following the above definition, in 2016, more than 9,000
people were homeless in Western Australia (Kaleveld et al., 2018). Around 1,000 people
lived in the streets for various reasons, such as family violence and financial instability.
Existing, the state government established the Western Australian Alliance to End
Homelessness (WAAEH) program to address the social problem (Kaleveld et al., 2019).

Our target demographic is to work with homeless individuals and at-risk within aged 16-45
years old by addressing their need for a sense of security because they fear for their own or
children's safety, lack income and are socially isolated. YOHO hostels aim to provide
employment opportunities and subsidise short-term accommodation for up to 6 months for
individuals employed by YOHO. 50% of our profit will be reinvested into our social cause by
upskilling the individual and covering the cost of subsiding short-term accommodation.

Our Value propositions

YOHO hostel is designed around our social cause in resolving homelessness. The business
aims to impact our target demographic by employing with long-term sustainable job
prospects via continuous upskilling of an individual, minimal wage, and subsidies short-term
accommodation to address any immediate need for shelter while the individual kick starts
their employment with us. Being part of a collective impact will provide us access to other
services for individual referrals for the matter that we could not address (e.g., mental health
and counselling services).

Commercially, our impact and value to a potential customer are providing a unique
hospitality service by providing warm and friendly hospitality service, affordable and
competitive pricing, increasing local tourism and ensuring that each customer dollars is well
spent in addressing our social impact and not solely focused on commercial profits or gains.

Combining the impacts help to elevate the individual's self-empowerment and prospect in
the hospitality industry as we invest in their immediate need and unlock their future
potentials.

Target Market and segments

We will provide short term accommodation at a subsidies price for homeless and at-risk individuals
and training and employment as staff to work in our hostel. For travellers, our main customers are
university students, young people, and backpackers. These target groups, who love to travel on their
own, have financial pressure and do not have high requirements for housing and food. This aligns
with our business plan in providing unique, comfortable, and safe accommodation at affordable
prices to attract consumers.

Our target customers are young and potential digitally connected customers. We aim to promote
through social media, such as Instagram and Tiktok. It helps to reduce marketing costs as this may be
done internally and via digital formats. The saving can be reinvested into helping our social cause
home. We will open official accounts in Tiktok and Instagram to share our hostel's environment and
surrounding attractions. Our primary expansion method is through chain and franchise, with the aim
to open our branches in all states of Australia from the fifth year onwards.

 Table 1. Summary of target market segments

Market segments Homelessness Traveller

Demographic Age: 16-45 Age: 18-32

Segmentation
Income: no steady income Income: below average

Level of education: low Level of education: basic

Role: unemployed people, victims Role: students, employees, backpackers

of domestic violence

Geographic Religion: Western Australia Religion: Australia

segmentation (headquarters)
 Australia (branches)

Psychographic Lifestyle: free Lifestyle: travel enthusiasts, environmental

segmentation awareness, free and independent, adventurous
Personality characteristics: self-
abasement Personality characteristics: optimistic, open-
minded

Behavioural Spending habits: Price-conscious Spending habits: Price-conscious

segmentation
Loyalty to brand: low, do not care Loyalty to brand: low, do not care about brand
about brand

Porter's five forces and SWOT analysis

Bargaining power of suppliers (Low)

The core of a hostel is accommodation and facilities. The facilities such as beds and tables
and chairs have low variation in the products. Hostels have a lot of choices, which can
weaken the supply side's bargaining power.

Bargaining power of customers (Medium)

The hostels are in fierce competition but with low differentiation, so customers have a wide
choice. At the same time, customers can compare the prices of other hostels on the Internet
and choose a better deal. However, if the hostel has the advantage of location, in a place of
interest, or a well-connected area, it will have the advantage of bargaining.

The threat of new entrants (High)

The barriers to entry for hostels are quite low and do not require a large capital scale.
Moreover, the product differences between hostels are minimal, and all have basic
accommodation conditions. The only significant difference is the location. Customers have
no switching cost to a new brand, so it is easy for a new entrant to take away market share.

The threat of substitutes (Low)

For hostels, the target group is young people and backpackers seeking low-cost
accommodation. Most customers are simply looking for a place to stay, so they do not focus
on service and food. They will favour cheap and affordable accommodation over expensive
hotels. So, in terms of the threat of alternatives, hotels do not pose a significant threat.

Competitive rivalry (High)

There are currently many hostels in Australia with a clear trend towards geographical
concentration and a high degree of homogenisation. Consumers have a wide range of
choices and low switching costs.

Table 2. SWOT analysis

Strength Weakness

 Tapping onto value align customer market  Highly dependent on tourism and front-
for businesses addressing the social cause. facing customer segments.
 Cheap and unique hospitality service  Low to zero switching cost for potential
 Personalised value-added services (i.e., Pay customers to choose between
only for the services you need) competitions.

Opportunity Threat

 Working with states government and  Big hospitality industry player in

potentially social impact bonds when social established locations.
cause and program is proven effective.

YOHO hostel will enhance our strength by promoting our social cause and personalised paid
services to the customers through our marketing plans to create awareness and link our
branding to our social cause and values. The strategy to address our weaknesses will depend
on external factors such as unexpected pandemics (e.g., COVID 19) and market competition.
Mainly, the aim is to convert our hostel to temporary accommodation while collaborating
with the state government to address homelessness during a situation such as COVID 19,
offer seasonal promotion (e.g. AFL season, Perth carnivals and Hort shows) and target group
booking via tour agencies to address the low to zero switching cost for the customer.

Customer source
YOHO hostel is known as the "Hilton for the poor" and the "Backpacker's Paradise". The
"home away from home" where young people grow up is now the world's largest
accommodation chain organisation. Our hostels integrate public welfare, tourism and other
functions. In addition, youth hostels provide customers with a safe environment, convenient
facilities, sanitary and clean rooms, and cheap services to promote backpacker tourism.

For tourism types, most tourists now prefer to focus on nature and eco-tourism. Western
Australia has such an advantage; there are many beautiful natural sceneries, a natural
attraction to tourists. According to statistics, 34.6 million people choose to go on vacation in
Western Australia (Paddenburg, 2019). In addition, most young tourists are college students,
and backpackers are budget conscious of staying in a star-rated hotel. The student market
may not have enough financial capacity as they are not financially independent; their travel
funds mainly come from family support and casual employments.

Market positioning
1. Mainly serving backpackers
YOHO hostels are mainly aimed at budget travellers and have the characteristics of meeting
the needs of backpackers. The facilities in the house are simple, clean and well equipped.
There are public facilities such as a shared laundry room, living room, dining area, etc.). Our
hostels are divided into private rooms and communal rooms, and the communal rooms are
cheaper to meet the expectations of backpackers. In addition, the communal room creates a
social environment for individuals to make friends.

2. Low price strategy, low price, and good quality

Generally, a bed in a multi-person room is equivalent to the price of a meal for one person
outside, which is about $50. This price is about one-third of a single room in a 3-star hotel.

Marketing Plan

At the beginning of its establishment, the popularity of our hostels is expected to be low and
is necessary to increase publicity and awareness. We are combining a variety of marketing
methods to attract the target customer market as soon as possible. Adding on, the hostel will
partner with travel agencies and booking websites to expand market visibility. We are
tapping into international festivals and the Australian festival season to provide seasonal
activities to attract media reports and customer participation.
1. Enter various universities and schools for publicity.
2. Promote YOHO hostels on major travel websites.
3. Establish our official website, conduct publicity, online booking, online payment and
communication with customers and other services.
4. Establish a membership database, use the database to give promotional discounts
such as 15% off packages in the hostel, and collection of points where it can be
exchanged for accommodation and services.
5. Strive to join the International Hostel Federation, which can attract publicity in the
media and promote YOHO hostels.

Development Plans for the next three years

Year Development Goals

Gain market awareness, rental rate up to 80%.

1. Increase publicity to attract tourists.
Year 2. Focus on service quality.
1 3. Collect customer feedback.
4. Try to help some homeless people.

Establish a brand with an occupancy rate of 90%, and plan to open the next chain
hostel.
1. Establish a position in the target market.
2. Analyse customer feedback and make improvements.
Year 3. Create a management system.
2 4. Increase assistance to the homeless, such as food and shelter.

Maintain regular customers, maintain brand image, maintain occupancy rate, and
open a second hotel chain.
1. Expand the scale of youth hostels and improve the overall quality of
employees.
Year 2. Build a customer source database.
3 3. It provides jobs to homeless people who can work and accommodation to
 homeless people who cannot.

Management & Operations

Location
The identified location is buying over the existing hostel in Northbridge, Western Australia.
The location is within the Perth Central Business District (CBD), nearby transportation hub
(Perth train and bus station) and myriads of food cuisine to meet the various customer
budget.

Operations
The facilities and equipment required to operate YOHO Hostel include kitchen, barbecue
equipment, kitchen fridge, dish dryer, washing machine and clothes dryer, tables and chairs
for eating, gathering and talking, wireless internet access, cable TV, computer, clock,
bedding and beds, lockers, plug and change, hot water shower, hairdryer, towel, shower gel
and shampoo, supply catering vending machines, coffee utensils and tea sets,
entertainment and leisure facilities like books and DVD board game.

YOHO Hostel will contain five people, who are the manager responsible for recruiting,
training and daily operation of the hostel. Another four employees are recruited, and they
are under the manager mentioned above. The manager will need at least three years' hostel
or hotel operation experience. At the same time, the requirements for the other four
employees are quite low as our homeless individuals take them up. They will be trained
before they are given frontline roles and dealing with the guests. They may also be deployed
to other roles such as cleaning, maintaining and customer service.

The key stakeholders of YOHO Hostel are their employees, guests, joining traders and the
local community and government. Whether the employees can serve the guests well and
whether the hostel is being managed and maintained well are critical for the success and
sustainability of the hostel. In contrast, guests' satisfaction will determine whether many
more guests will choose YOHO Hostel soon as their comments are available online. They
influence the choices of potential guests when they select hostels nearby. The franchisee
decides whether YOHO hostel can expand its scale and while relating to our brand. The local
community and government are critical, and it is vital to ensure YOHO Hostel operates
legally and ethically by building a positive relationship with the locals.

A second location has been identified in 30 Darlinghurst Road, Kings Cross, Sydney i for
YOHO Hostel to locate because Sydney is a popular destination for domestic and
international visitors to visit. This location enjoys many potential guests. This location is not
in central Sydney, making the rent less costly. However, it is just two railway stations to
Darling Harbor, Hyde Park, the Westfield building and shopping centre, and a series of other
urban attractions. At two stops in the other direction, the famous Bondi Beach is available.
Also, within walking distance, various restaurants and bars are available for young guests to
enjoy their nightlife.

Conclusion
Budget plan

Income & Expenditure Budget Year 1 Year 2 Total

Income
Room occupancy income 180000 220000 400000
Misc income (Event space rental, business
120000 180000 300000
rental, catering)
Government funding assistance 200000 200000
Franchisee capital investment 200000 200000 400000
Total Income 1300000
Expenditure
Setup Costs
Building 150000 150000
Furnish 65000 6500 71500
Basic furniture/supplies 50000 50000 100000
Subtotal Setup Costs 321500
Costs to Provide the Good/Service
Recruitment 3500 2200 5700
Employee training 4500 2500 7000
Subtotal Costs to Provide the Good/Service 12700
Operating Expenditure
Advertising plan design 6800 6800 13600
Advertising 8300 6000 14300
Salary 280000 300000 580000
Subtotal Operating Expenditure 607900
Total Expenditure 942100
Surplus/Deficit 357900
Annotations & Reference：
1.The data in the table are approximate forecasts.
2.50% of profit is reinvested into our social impact cause for training upskilling,referral
services and subsidizing short term accommodation.
3.Business Registration fee:
https://ablis.business.gov.au/service/wa/registration-of-a-lodging-house-city-of-perth/18720
4.Buying over exisitng business:
https://bsale.com.au/listing/backpackers-hostel--northbridge-wa-552860
Key Assumptions Driving The Model
Sales
We plan to provide 20 beds, calculated at a price of US$50/day per bed. Assuming that half of
the time each year is full, we may have an income of US$180,000 in the first year. There will
be a corresponding improvement in the second year. Then the sales growth rate in the first two
years will likely reach 18%.
Expenditure
The cost of Building comes from the direct purchase of Backpackers Hostel.
The cost of Furnish refers to the price of a renovation company called G2 Double Glazed
Windows and Doors.
The cost of basic furniture refers to the price of a furniture company called New Idea Furniture.
Employee training costs refer to the prices of some training institutions.
Salary refers to the minimum wage standard, and is slightly increased on the basis of the
minimum wage standard.
GST
This budget does not consider the impact of GST, because the consumption part is uncertain.
Reference

Kaleveld, L., Seivwright, A., Box, E., Callis, Z. and Flatau, P. (2018). Homelessness in Western
Australia: A review of the research and statistical evidence. Perth: Government of
Western Australia, Department of Communities.

Bower, Marlee, Elizabeth Conroy and Janette Perz. (2018). 'Australian Homeless Persons'
Experiences of Social Connectedness, Isolation and Loneliness' 26(2) Health & social
care in the community e241

Paddenburg, T. (2019, May 26). Tourism revival: WA travel figures rise sharply, spending
also up. The West Australian; The West Australian.
https://thewest.com.au/news/tourism/tourism-revival-wa-travel-figures-rise-sharply-
spending-also-up-ng-b881211338z
Appendices

Figure X. Our business canvas model

Business Canvas Model – Group 3
Key Partners
Be part of the solution or strategy to end
homelessness in WA and grant
applications -
• State government - Local
Government Partnership Fund for
Homelessness
• WA Department of Communities
As part of supporting and aligning our
social cause to end homelessness and
referrals to other needed services -
Social Partners:
• WA Alliance to End Homelessness
• Shelter WA
• Everybody's Home campaign
• Women's Council for Domestic
and Family Violence Services
Business Partners and suppliers:
• Potential investors
• Tour agencies/companies
• Australian Hotel Association (WA)
• Hospitality Group Training (HGT)
• Perth Energy
• Hospitality Total Service
• Hostplus (Super funds
management)
• RW Clean Hands
Social enterprise: Hostel/Budget accommodation – Social Impact focus: Homeless/At-risk homeless individuals
Key activities Value propositions
• Develop and manage the hostel.
• Provide choices to the local
marketplace (balance supply and
demand).
• Provide customer support.
• Organize professional training.
• Physical and online marketing of
hostel.
• Continual partnership with
hospitality and event industry.
Key Resources
• Skilled staff
• Financial capital
• Operate the hostel as a brand.
• Develop partnerships with other
enterprises or organizations.
• Build a platform or application for
physical and online presence.
• Data analytics (For maintaining
customer relationships and
creating business strategies).
Customer Relationship
Impact Value:
• Employment: Sustainable jobs
and reasonable wages
• Local tourism
• Training: At the pre-job stage,
there will be a training section
taught by professional people.
• Subsidies shelters for homeless
people.
Commerce Value:
• Affordable price performance and
homelike condition of residence:
The hostel provides a warm and
friendly environment to visitors
and the staff.
• Unique hospitality service
experience.
• Alternative accommodation
choices.
Customers:
• Professional hospitality services
that align with personal social
values.
Impact customers:
• Professional portfolio: Let the
homeless experience professional
guidance and training in obtaining
professional skills.
• Social relationship: Let the
homeless experience community
support from hostel patrons.
Channels
• Promote on the Internet via social
media, YouTube, website
presences.
• Booking via our website,
partnering tour groups company
and accommodation apps such as
Agoda, Booking.com etc.
• Cooperate with local charity
organizations to jointly promote
and create awareness.
• Maintaining hostel membership
database for marketing and
receiving feedback.
Customer Segments
We provide value for the homeless, low-
income tourists, backpackers, tour
companies or agencies and customers who
believe in our social impact values.
Commercial customers:
• Tourists, backpackers, investors,
tour groups and local people who
may require short term alternative
accommodation.
Impact customers：
• Homeless and at-risk homeless
individuals.
• Providing professional training as
employees, such as cleaning staff,
chefs, administrative staff, etc., and
provide subsidies on-site
accommodation and referral to
other partnering agencies.

Cost Structures Revenue Streams

Our cost is mainly value-driven in providing value creation to our impact customers by providing training and job in the • Tourist/backpackers - Low prices, clean rooms and well-equipped facilities
hospitality sector. attract many tourists to stay in hostels.
• Investment - Investor to invest money in the hostel.
Impact cost: • Joining trader - Create a chain and branding belonging to our hostels.
• Professional training/courses, salary, subsidies lodging for the homeless. • Corporate bookings – Mass booking from corporate and tour group companies.
• Procurement of merchandise with local characteristics and hotel branding to spread our social impact awareness. • Rental – Renting of commercial space within the hostel to retail business and
event uses (e.g., café, tourism services group and rental of event spaces)
Commercial cost: • Participation in seasonal major events – Concerts, AFL matches, carnivals, etc.
• Land or rental costs, equipment, tourism management funds, souvenir, construction, labour, material transportation
costs, security, and relevant business taxes.
• Marketing and commercial partnering.
• IT hardware and software.