UPDATE 1-AccorHotels joins the buoyant youth hostel market

(Add details, KPMG comments, background)

PARIS, Sept 27 (Reuters) – AccorHotels is launching a brand of youth hostels called Joe & Joe to harness the purchasing power of young adults, as part of its response to the challenges posed by Airbnb and entry into a fast-growing industry .

Europe’s largest hotel group announced Tuesday that it will open youth hostels in Paris and Bordeaux in 2018. Others are planned in Warsaw, Budapest, Rio and Sao Paulo with a target of 50 by 2020.

Joe & Jo is designed “to meet the expectations of millennials (people who became adults around 2000 and after and now between 20 and 30) all those who appreciate sharing, spontaneity and experience”, and will complement the portfolio of economic brands of group such as Ibis, the statement said.

Cost-conscious but stylish millennials are increasingly choosing hostels that offer higher standards of accommodation than the traditional backpacker rate.

Hosts Joe & Joe will offer services such as yoga classes, craft beer and music concerts as well as travel tips and craft workshops. One night will start at 25 euros per bed.

“The youth hostel sector is undergoing profound change, with renewed interest from investors. In this traditional non-profit sector, investors see new prospects for profitability through changes in product quality and offering, ”research firm KPMG said in a recent report.

A large number of beds, coupled with lower operating expenses, allow youth hostel managers to generate attractive levels of profitability, according to the report.

According to travel industry research firm Phocuswright, there are 18,000 hostels around the world, a market worth 5.2 billion euros in 2014, which could reach 7 billion euros. by 2020 thanks to an annual growth of 7 to 8%, according to Le Figaro.

France is lagging behind other countries like Great Britain in the youth hostel sector but in 2015, the public bank BPI France invested in New Nomads, a brand that has been developing youth hostels in France since 2013 while that the real estate group Foncière des Régions has set aside up to 400 million euros to invest in European hostels by 2018.

AccorHotels CEO Sébastien Bazin has long warned that the incomes of traditional hoteliers are threatened by companies like Airbnb, which offer travelers accommodation options other than hotels, and by online booking sites like Expedia.

Its response to the threat of the so-called sharing economy has been a wave of recent acquisitions in the sector.

Reporting by Dominique Vidalon; Editing by Leigh Thomas and Andrew Callus

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