Firehouse Hostel & Lounge: $75K Term Loan to Bridge a Slow Season

Nathan: We’re here at Firehouse Hostel, one of the most successful hostels in Austin, Texas. I invested many, many years ago, made all my money back and then some. Collin: Our all-time sales have been probably about 10 million. Nathan: This has to put you in like the top 1% of all hostels in the world, right? Now Collin and Kent, the owners, have big expansion plans. Collin: There’s a number of hostels I’ve seen where the owners are aging out. There’s one in New Orleans. Nathan: It is for sale. Collin: It’s for sale. It’s listed for six. Nathan: Hey guys, how are you? Collin: How’s it going? Nathan: Good to see you again. Hey, Collin. Hello, Kent. Nathan: For everyone watching, I met Kent and Collin a long time ago and I said, “Oh my gosh, this is a great business.” Tell us where we are right now. Collin: You’re in a hostel with a nice cocktail bar on the first floor. We have 64 beds upstairs, host travelers from all over the world, and serve delicious drinks. Nathan: One of the ways I found these guys is incredible online reviews. The lounge and bar has like 1,000 reviews, all good. The hostel has like 800. How did you two meet? Kent: We were both trying to open a hostel in Austin. Same concept. He had a building lined up, I had capital lined up. We joined forces — it’s worked out pretty well. Nathan: Collin is the personality bringing people in the bar; Kent’s the one with the home workshop fixing toilets. Kent: Excel and fixing toilets is basically my role. Nathan: Let’s start with the bar. Tell me the story on the bookshelf. Collin: We didn’t set out to be a speakeasy. We have classic cocktails. We call ourselves “Dive Craft” — a little cheaper than other craft cocktail bars, more laidback, but high quality. Nathan: In an average month, what does the bar do top-line? Collin: Generally around $100,000 a month. It used to be better before expenses crept up. Collin: Gen Z is drinking less. Millennials were binge drinking. We’ve seen nights that used to do $7,000 or $8,000 now in the $4,000 to $5,000 range. Nathan: What percent of the hostel guests come down for a drink? Collin: Maybe 30% make their way in. Nathan: Insurance has gotten really crazy in the last couple years. Kent: Yeah, doubled and then doubled again since 2020. We’ve actually had to lower prices. People expect happy-hour discounts and there’s more competition. Nathan: Let’s move into the hostel. Where are we standing now? Kent: This is our 8-bed co-ed dorm. Each bed has a fan, reading light, outlet, and storage underneath. We get a lot of backpackers — about 50% international. Nathan: How many rooms have eight beds? Kent: Four 8-bed rooms, then 6-bed rooms, then private suites — 64 total. Nathan: If I sleep here tonight, what does it cost? Kent: Slow season, about 30 bucks. Most of the year more like $40 or $50. During Southby or F1 it spikes to $100-plus. Nathan: What does the hostel do in an average month? Kent: Brings in a little less revenue than the bar but potentially higher margins. Between 60 and 100 thousand. Nathan: One thing that impressed me — your revenue per square foot beats Marriott. Out of 300 square feet you’re renting eight beds at $50 each. That’s $400 a night for 300 square feet. That’s great margin. Kent: Yes — once we’re above about $50,000 in a month, it’s almost all profit beyond that. Nathan: Where do most of your bookings come from? Kent: About 50/50 OTA and direct. Nathan: If someone pays Airbnb $100 for one of these rooms, what do you pay Airbnb? Kent: 15% standard. We block off the OTAs during big months — October, March, Southby. Only take organic bookings on weekends we know we’ll fill. Nathan: All-time sales? Collin: Around $10 million. Nathan: Pre-2020 there were six hostels in Austin. Now you’re the only one. Why? Collin: We’re good. Nathan: What do you guys want to do with the business? Collin: Once we got our footing, we’ve always wanted to expand. We got close in San Antonio and New Orleans, neither panned out. Set our sights on Dallas — opened in late 2018. About a year and a half later, COVID hit. We had to shut down both. Sadly Dallas didn’t make it through. I think I lost 25,000 bucks on that. Here was my rationale: I’d already made back the money I put here and then some, and you guys always communicated so clearly. Trust is huge. Collin: We came out of that with more knowledge and we still want to replicate the model. Nathan: Before we talk expansion — there are things at this location that need money. Kent: We’d like to solidify our space here. Some investment on the exterior windows. The elevator needs replacing — that’s a 25-year-old elevator. The landlord owns that. Nathan: Do you need capital here besides window treatments? Kent: We’re in a little cash crunch based on slow season and some decline in alcohol sales. We can get through it. With the elevator project happening, we’re looking to bridge the gap between now and Southby. Nathan: I know you closed a deal right before we started shooting. Want to summarize? Kent: We’re getting a loan for $75,000 — should pay it back in 6 to 8 months. Win-win. You make some money. We have a cushion through the slow season. Nathan: I love the deal — I know you guys, and 75K against total revenue is a very small amount. Nathan: Pivoting to expansion outside Austin. You don’t want to open more in Austin? Collin: Yes, geographic expansion. There are hostels where owners are aging out. Profitable businesses, great opportunities. Solo travel is the fastest growing travel segment. Finding spots with more privates, bathrooms close by, security, cleanliness — those are the must-haves for that demographic. Collin: There’s one in New Orleans. Open 30 years. Doesn’t make a lot of profit — like $150,000 a year. Very old school, hasn’t modernized. Lots of opportunity. Nathan: What would it cost to buy that hostel? Collin: It’s listed at six. Probably comes in low-balling around 4-something. Nathan: Hostel valuations — top-line multiple? EBIT multiple? Collin: The investment there is the property — half a block of the city. The income is only $150,000, so the multiple isn’t high. You’re really investing in the property. Nathan: I’m an existing investor. We just did the $75K deal. We’re actively exploring other locations. If everything’s running perfectly, what could revenue be in 2026? Collin: Perfectly — we could hit a million. Nathan: I make a lot of investments. Some founders you never hear from again. You guys default to doing the right things for partners and customers. I’ve made all my money back on my first investment. I hope to do more with you — cleaning up the cap table, investing in buildings, helping with New Orleans, brainstorming ads with Kent. Collin: Yeah, thanks Nathan. Appreciate it. Kent: Yeah, thank you. Appreciate it. 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