In reply to Postmanpat:
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> Like it or not the big city locations account for the bulk of visitors.
Right, from my window I can see three large city YHA's, it would take me about 45 mins to walk the circuit. In a 4 mile radius of where I am there are in total 6 YHA's. I know from having stayed in some of these they operate with a fair amount of spare capacity at any one time. Now given there only competition at the price levels they charge are fairly scummy independent hostels they could close one of these down, save the running costs, liquidize the land asset and probably not lose very much in the way of custom.
>The ones that were disposed off were either loss making or too expensive >to bring up the standards required nowadays by their visitors.
To view the small rural hostels as totally loss making rather misses the point that it is essentially a network. The small rural hostels (where there often is no alternative) get people to join your organization and experience it, making them more likely to use it again when they go somewhere else. You are aiming to break even across the whole network, this does not necessarily require you to break even at every hostel.
The standards argument doesn't hold up as it was a rather misguided attempt to apply a "minimum standard" across the whole system that was just too high. You don't need three-star rating if your hostel is in the middle of nowhere and has no competition.