The United States lags behind the rest of the world, especially Western Europe and Australia, in the number and capacity of its hostels.

The US has roughly 350 hostels. For context, Germany has more Hostelling International hostels than the US has total hostels. HI has nearly 10 times more hostels in Germany (505) than in the US (54), despite the US having more than double the number of international tourist arrivals (67M vs 30.4M in 2012, according to UNWTO).

In general, Americans seem averse to staying in hostels, especially domestically. Students settle for hostels when they’re studying abroad and strapped for cash, but they aren’t returning post-graduation. Many Americans have never stayed in a hostel or don’t even know what one is.

But a new wave of “boutique hostels” are providing millennial travelers with a mid-priced, well-designed, and more social alternative to hotels.

Examples of boutique hostels in the US

Boutique hostels’ high-end design sets them apart from the stereotypical hostels many Americans imagine: cheap, bare-bones accommodations for partying students. Instead, these properties are the hostel equivalents of Standard or W Hotels.

The next generation of hostels aren’t just eye candy, either. They appeal to tech-savvy millennials’ desire for connectivity, including free WiFi and plenty of plugs.

For example, each pod (bed) at Podshare includes a 22″ flat-screen TV with its own Roku media-streaming box. Based in Hollywood, Podshare reimagines Asian capsule hotels as collaborative accommodations for young artists and entrepreneurs.

Designer hostels also offer spaces to meet other travelers, just as their traditional counterparts do. In addition to shared dorm rooms, the Freehand Miami features a guest lounge, mixology bar, pool, and courtyard where guests can socialize.

Like the Freehand, the Firehouse Hostel in Austin has onsite nightlife. Its downstairs lounge isn’t a typical backpacker bar with cheap shot specials. They serve handmade craft cocktails and local beers alongside charcuterie and cheese boards. Throughout the week, the lounge hosts local bands.

Having its own cocktail bar has helped Firehouse become part of the Austin community rather than catering solely to visitors. Co-owners Kent Roth and Collin Ballard say that the lounge “attracts a local crowd who then learn about the hostel and often recommend it to friends traveling into town.”

Anna Kojzar and Tania Cruz of Poshpacker, an aggregator of sub-$100, designer accommodations, have seen hostels host events like yoga classes, performances by local musicians, and art exhibitions, “becoming end destinations themselves by incorporating perks such as onsite bars, lounges, and restaurants.”

The rise of American hosteling?

Boutique hostels are creating a new, aspirational image of hosteling in the US, and attracting young Americans traveling domestically is an enormous opportunity for both new and existing hostels. According to the World Youth Student & Education Travel Confederation, “[b]ackpackers stay longer in a destination and spend more than the average tourist.” Cities will also benefit from the additional tourism dollars hostels can bring.

For these reasons, both established European chains and well-financed American developers are investing heavily in boutique hostels in the US.