A case study based on the 7-Key Model Business Model Canvas
Background of the entrepreneurs
How to find a business idea? What is the motivation to start your own business and why becoming an entrepreneur?
Remo and Dario met at the FHNW – the University of Applied Sciences and Arts Northwestern Switzerland – while earning their master’s degrees. Before entering the master’s program, Remo worked for big financial institution. Dario also had worked at a bank. Both always thought about setting up their own business. During their studies, Remo and Dario started having regular “business plan and beer” sessions, where they discussed innovative ideas and shared the passion of an entrepreneurial spirit.
In addition to the “business plan and beer” sessions, Remo and Dario got inspiration for creating a business from a German television program. The program was about a German couple that opened a hostel in Tanzania. Remo and Dario were so inspired by the couple that they decided to visit them in Africa.
When travelling to Tanzania, the dream of being self-employed grew, and their wish to set up their own company became stronger every day.
Remo and Dario had already had lots of travelling experiences up to that point. After Tanzania, they went to South America. They had seen many hostels during their travels, some quite well organized and others the opposite. Having had those experiences, they were confident that they could do better than many of the hostels around the world. One day, they were lying in hammocks and discussing options for the future, and they came up with the most obvious idea: opening a hostel with hammocks.
With two more friends, they started their business adventure in Brazil. When they arrived in Brazil, neither of them spoke much Portuguese, nor did they have any experience working in hospitality. Remo and Dario enjoyed great times with their guests and the relationships that were built, and they liked gardening and cooking as well.
They reached lots of their goals, such as becoming number one on the booking platforms Tripadvisor and Hostelworld and being mentioned in the backpacker’s bible, Lonely Planet. After some time, though, the founders’ motivation was gone. Thus, Remo and Dario sold their shares of Happy Hammock to the other two owners who had helped to start the business with them. Since Remo loves to travel, he started working as a flight attendant at Lufthansa. Dario currently has other ongoing projects and still dreams about opening another hostel, regardless of the location.
The core of a successful business model
The target audience of Happy Hammock can be found on Hostelworld — mainly young backpackers between 20 and 30 years old that usually have an easy-going lifestyle, like to share good times, are outgoing and like to be with other like-minded people. Most of them are students or workers who want to break out of everyday life from time to time.
Backpackers not only search for a place to sleep when travelling; they also relish good times with other travellers or locals by sharing meals, chatting, and going together on adventures. Backpackers usually look for low-budget but cosy places to stay. The budget per night varies greatly but usually costs between CHF 10 and CHF 60. Moreover, the budget depends on whether the accommodation is a dormitory or a private room.
Products & Services
Happy Hammock is a hostel located on the Ponta Grossa peninsula in Brazil, a quiet and peaceful place. The hostel has private access to the sea and its own pier. The lack of access by any roads and the beautiful green landscape free from dirt and pollution guarantee the possibility of escaping the daily grind. The founders’ ecological concept ensures conservation of water and other natural resources that are around the hostel.
The benefits offered to backpackers that stay at Happy Hammock are quietness onsite, ecological aspects (such as home-grown mangos), getting away from civilization, and “going back to the roots.” “Going back to the roots” refers to earlier times, when people did not yet have to care about digitalization and other potential stress factors. Happy Hammock provides only two hours of electricity per day and does not supply WiFi, but instead of looking at this as a shortfall, the founders sell this to their guests as a chance to disconnect from daily stress. Insolation, beautiful views, great food, and brilliant staff are highly appreciated by Happy Hammock’s guests, as can be read in numerous positive reviews.
Happy Hammock has three double rooms and two dorms that have mostly stunning sea views and private bathrooms. However, the hostel does not only offer a place to sleep. They offer a familiar atmosphere, daily-changing and simple menus, a delightful BBQ place with an amazing view of the sea with breathtaking moonrises and sunrises, a bar for jovial moments, and let’s not forget the cozy hammocks.
The offering of the hammocks is clearly where the name of the hostel originated.
Free breakfast is served every morning. Moreover, the hostel offers dinner, because the nearest restaurant is approximately 45 minutes away and is only open from 10 am to 4 pm. Most of the guests book for two nights but then extend to three or more nights on site. They mainly come from Australia, South Africa, Germany and the Netherlands.
The hostel’s employees help to plan and book boat trips and excursions. Furthermore, they have an employee who is a boat driver. He is in charge of bringing people to Paraty, the closest city, which has approximately 36,700 inhabitants and is around 20 minutes away from the hostel.
All about the revenue model and revenue streams, the financial plan and the financial goals
A bed in a four-person dormitory costs around CHF 18 per night. The charge for a double room is approximately CHF 62 per night. Dinner costs approximately CHF 10 per meal. The pricing was chosen based on comparisons with other hostels nearby. Happy Hammock increased their prices when the business started to increase.
Especially in the beginning, the costs for the founders were quite high, as the house was a mess. The rent, interior furniture such as beds and pillows, food, the salary of the boat driver, and eventually electricity were the primary costs for them. They arrived with a budget of CHF 24,000. Funding was not necessary due to the savings Remo and Dario utilized.
The marketing plan of the startup
Remo and Dario were highly motivated not only to do a job to make a living but to do a job with passion.
A business plan was necessary to give them guidance.
Happy Hammock was opened on January 24, 2015. The hostel got its first review on Hostelworld from the first guests – a rating of 10 out of 10. The rating consists of the following categories: value for the money, security, location, staff, atmosphere, cleanliness, and facilities. When Dario and Remo opened the hostel, there was no electricity available. In December 2015 they finally got a refrigerator. That was a big milestone for the founders. “This was a small step for the world but a huge step for us,” Remo said. Before that, they had to buy ice every day to keep the groceries and beverages cool, which was a huge effort.
They realized that it is very important to have good relationships with them, because it is a very small village. Hence, as soon as a guest asked for services that the founders could not provide themselves, they referred the guest to local operators and received a commission. For example, they organized pizza evenings with a local restaurant, intending a payback system for referrals. Another example of their good connections is that the hostel founders had such a good relationship with their neighbor that they could use his electricity with partial payment while they did not have their own.
The more bookings they got, the more they were rewarded. In 2016, they reached number one on Tripadvisor, and they also obtained a certificate of excellence from Tripadvisor. This is a certificate that cannot be bought, and therefore its value is high.
On Hostelsworld they were rated number one out of 192 locations.
After some time receiving consistently positive feedback and reviews, Remo and Dario realized that sometimes boredom caught up to them. They knew that they would rather make a change or just stop, because they were not passionate anymore. This realization was why they decided to stop operating the business themselves and sell their shares to the two other friends that had helped open the hostel. Finally, Remo and Dario managed to get out of the business with slightly more than what they had invested.
Both learned a lot from being entrepreneurs. The times were intense, because they had a 24/7 job and were responsible for their guests. However, they are convinced that they would set up this business again, especially considering all the experience they accumulated during the two years they were operating the hostel.
Remo and Dario never intended to expand by going abroad, but the house owner did once offer them a building next to the house. They wanted to keep things small and familiar, so they refused. Moreover, they did not want to lose focus and kept conducting business at their best.
Due to the disconnectedness of the peninsula, there are no competitors in the surroundings.
Regarding marketing activities, Remo said: “Hostelworld was enough marketing!” The excellent reviews that they received from their guests led to many more bookings. Thus, guests did not need to be convinced with an offer. When carnival 2015 started in Rio de Janeiro, they received more and more bookings; lots of people wanted to escape from the crowds and therefore booked a stay at the hostel. Furthermore, word-of-mouth marketing related to the Green World Route generated additional bookings. Backpackers recommended that other travelers try out the hostel. Moreover, Happy Hammock, the name of the hostel, was half of the selling point needed, since most people associate hammocks with coziness. More and more, Remo and Dario felt under pressure, as they had a reputation to lose.
The hostel still does not have a homepage, but it is registered on Hostelworld and Tripadvisor. There has never been an urge or necessity to set up a homepage.
Flexibility and creativity were often required. When the first booking came in, they were not ready at all; pillows and food were missing. However, it turned out very well, and it was, as mentioned earlier, their first 10 out of 10 rating.
The basic entrepreneurial knowledge was acquired at the FHNW. However, Remo and Dario did not just gather distinct personal experiences in Brazil; they also had a lot of key learnings. One of Remo’s was this: “Do it with passion or don’t do it.” Another one was that it is crucial to write a business plan and to stick to it long-term. The founders noted that it helped a lot to have a business plan, but they also realized that 80% of what they had planned turned out to be different. The business plan can be used as a flexible guidance tool and should continuously be updated.
Furthermore, Remo said: “It was definitely stupid to not know the language.” The rental contract for the house was in Portuguese, and the lady who set it up took advantage of their poor Portuguese skills. When in negotiations for renting the house, Remo and Dario wished to make contract adjustments.
She adjusted what they asked for but added other points in her favour.
Another key learning of the founders was thinking outside of the box. This isn’t the only important thing, but it’s also important to stick to an idea if it feels right. A future entrepreneur should rely on his gut feelings and believe in himself or herself. Remo and Dario were told by friends and family many times that their concept for Happy Hammock would not succeed. Few factors supported the inexperienced founders, as none of them had a hospitality background. In the end, the founders always believed in themselves and made their idea become reality.
Furthermore, partnerships are crucial for success. Especially in Brazil, the local community and the neighbourhood had a great impact on Happy Hammock’s business model success. Tour agencies and other hotels located in Paraty were valuable partners; their commission for referrals became an important source of income. Local assets proved to be very enriching. Lots of the neighbours became good friends and as a result, limited resources were shared. Partnerships with locals were helpful and boosted revenues.
The original founders’ vision was to create the best hostel in the area, and this vision was realized. “Only do business if you want to be the best in the market. Be different and be better. In the end, it’s all about passion and changing clients into fans,” said Remo.-
The founders: Remo Gisler, Dario Meyer
Thanks to the authors from FHNW: M. Affolter, B. Scarabino, T. Somogyi
This article was edited from the original
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