a&o Hostels secures €874m refinancing for European expansion

European hostel network a&o Hostels has finalised an €874 mln refinancing deal with funds managed by Apollo.

a&o hostels Berlin

This senior multi-year loan, secured by a&o's portfolio of 44 high-performing hostels across 32 major European cities, will replace a previous Apollo facility.

This financing marks a crucial step for a&o, enabling the company to embark on the next €500 mln phase of its growth strategy in core European markets. The move builds upon the initial €500 mln expansion program launched after StepStone Group and Proprium Capital Partners sponsored a&o's management-led acquisition at the close of 2023.

Over the past two years, a&o has added approximately 11,500 beds (both operational and under development/refurbishment), taking its total to roughly 30,000 beds under management.

The company aims to capitalise on strong demographic trends driving the rapid growth of the hostel sector, which is increasingly becoming an institutional-quality asset class. Factors like rising inbound tourism, a surge in budget-conscious travellers, and technological advancements are projected to fuel a 5.8% CAGR in the European Hostels Market from 2025 to 2030. Recent strategic acquisitions include properties in key cities such as Manchester, London, Berlin, Brussels, Antwerp, and Heidelberg, alongside the Schulz Hotel platform, with further transactions in other leading European cities actively being pursued.

Josh Cleveland, head of EMEA, StepStone Real Estate, commented: “Owners and the management team have built something exceptional at a&o, growing the platform at pace while maintaining real discipline. Apollo's commitment to extending this relationship on competitive terms is a strong endorsement of the strategy—and of the partner group delivering it.”

Philipp Westermann, partner, Proprium Capital Partners, said: “Despite its highly defensive characteristics and outperformance in recent years, underpinned by the attractive income profile, the hostels sector remains fragmented. This facility provides us with the firepower to capitalise on this opportunity and rapidly scale the platform, through both asset and corporate acquisitions, alongside a long-term financing partner with a shared conviction in the sector’s fundamentals.”

Ben Eppley, partner and head of Real Estate Credit, Europe, at Apollo, added: “This transaction, in a sector benefitting from attractive, compelling demographic and technological tailwinds, continues our track record in Europe of providing scaled financing alongside leading sponsors seeking holistic portfolio solutions.”