The Analysis of Hostel Business in Ratchathewi Districtl, Bangkok : Market Structure and Competition

Abstract

The objectives of this paper were: 1) to study the market structure of the hostel business in Ratchathewi District, Bangkok; 2) to study both price and non-price competition behaviors of the hostel business in Ratchathewi District, Bangkok; and 3) to propose policy recommendations for the development of hostel business by conducting the in-depth interviews with 12 hostel entrepreneurs out of 14 from such area. The results of the study revealed that: 1) the Four-Firm Concentration Ratio and the Herfindahl - Hirschman Index were 54.28% and 11.68%, respectively, indicating that the hostel services were similar, but they were not perfect substitutes. The barriers to entry were quite low. To conclusion, hostels in Ratchathewi district are in the monopolistic competition. The distinct characteristics of this district causing the cluster of hostels were the location of the interchange stations of public transportations, and being closed to the Bangkok’s main shopping districts; 2) for strategies, entrepreneurs adopted more non-price competitions rather than price competitions. Product differentiations could be made through hostel designsand interior decorations.Entrepreneurs’ successful strategies were to easily access to hostels in terms of location and online reservation system, the online advertising, as well as launching new promotions to respond various consumers’ needs; and 3) to keep the hostel business in Thailand sustained, the policy recommendations from entrepreneurs to the government are to clearly inform and amend regulations for opening and operating hostels as well as to provide the financial support to small hostel entrepreneurs.