EDITOR'S Note:

Shanghai's strong economic growth should be attributed to not only the robust performance of state-owned enterprises but also the emerging power of the private sector. The number of private businesses now account for 72 percent of the total in the city, according to the local statistics bureau. Shanghai Daily has launched a biweekly column about small business people in Shanghai and how they cope with the challenges of entrepreneurship.

Business: Hostel

Company: InnJoy

Interviewees: Zhou Zhou

Age: 28

Business started from: 2008

Monthly cost: About 70,000 yuan a month, including rent and salaries.

Current status: The hostel has 13 bedrooms with a total capacity of 92 guests and employs five permanent staff.

Future expectation: To create an online payment system

Feng Jianmin

How happy we are to have friends from afar," Confucius said.

And that's the way Zhou Zhou feels about it, too.

Zhou, 28, runs a hostel called InnJoy in Shanghai. With World Expo in full swing, he has his hands full and relishes every minute of the hustle and bustle.

His hostel fills a valuable niche in a city glistening with ritzy five-star hotels that are off the radar screen for budget-minded travelers. Zhou provides dorm-style rooms at low prices and a gathering place for young travelers and students who like to unwind at day's end and share experiences in a casual, communal setting.

"It's not what you can get in a five-star hotel," he said of InnJoy, "but it offers a cozy, fun and relaxed ambiance that is akin to everyday life in Shanghai."

InnJoy sits on the fringes of a giant industry in Shanghai, a city that boasts about 6,600 hotels, including some of the most posh accommodation in the world.

In terms of cheaper backpacker-style hostels, Shanghai leads most Chinese cities but lags many tourist destinations in the West. For most Chinese travelers, it's still weird to share a room with strangers.

"Guest numbers have grown dramatically since Expo opened"

InnJoy is located in what was once a Jewish quarter of Shanghai inhabited by refugees from European and Russian wars and pogroms. Some of that historical character remains in a neighborhood marked by small shops and gardens. There is a backstreet marketplace near the hostel, where guests can find inexpensive wares and reasonably priced food.

"We love the cultural heritage of the place," said Zhou as he looked out of the window, "and most foreigners love it because it has the flavor of everyday life in Shanghai."

The accommodation industry at large in Shanghai has recovered from a severe slump in late 2008, when occupancy rates for high-end hotels dropped below 10 percent amid the global financial crisis. Though back on its feet now, the industry still has to cope with low seasons for tourism.

When visitor numbers trail off, InnJoy organizes home parties every weekend, treating guests to traditional Chinese foods such as jiaozi, or stuffed dumplings.

"It's a pity that we cannot arrange activities like that with large guest numbers," said Zhou. "But during a busy time, we have too much to do."

He said the hostel requires a lot of attention and maintenance. Water leaks develop. Doors get damaged. Windows stick.

"Old houses bring problems along with character, and many needed repairs are impeded by full occupancy," he said with a shrug. "But some guests are so nice and understanding that we don't even know about a leak until we find a basin on the floor, half full of water, after they leave."

"Old houses bring problems along with character."

InnJoy occupies an old three-storey villa on Zhoushan Road built by a Jewish merchant in 1924. The building still retains the historical exterior d??cor, giving visitors a glimpse of Old Shanghai.

After the original owners, the building became the headquarters of the Health Bureau for Shanghai's Hongkou district. About 10 years ago, it was leased to a man who turned it into overnight accommodation. But the business languished until Zhou, a former office worker and enthusiastic travel aficionado, took up the lease with a few friends several years ago.

He has been pouring money, labor and most of all love into the venture ever since.

"I fell in love with the atmosphere of shared dorms when I travelled to Europe several years ago," he said. "There is something special about the friendships you form."

His hostel has 13 bedrooms in various sizes, with a total capacity of 92 guests. Six of the rooms are ensuite and room rates range from 60 yuan (US$8.85) to 70 yuan a night including sheets, a fraction of what most hotels charge. Towels cost 5 yuan each for rent.

There are three communal bathrooms with 24-hour hot water, and a staff kitchen which is open for guests except for lunch time. A spacious communal sitting room is located on the ground floor, equipped with sofas, bookshelves, computers, microwave, and fridge. Access to Internet is free all over the house with a wireless network.

According to Zhou, 80 percent of the beds are currently occupied, and many of his guests are foreign-exchange students studying in Shanghai and other parts of China. Some have stayed for several months.

"Guest numbers have grown dramatically since Expo opened in May," said Zhou. "And probably due to the financial crisis, we are also getting more middle-age foreign travelers looking for inexpensive accommodation. I love meeting all these different kinds of interesting people."

His staff is friendly and helpful, dispensing information on city transport, bargain shopping, cheap eating places and, of course, World Expo. The hostel maintains a flexible attitude toward its guests.

"Some months ago, a Korean girl asked if she could pay part of her hostel fees by sewing some cushions for us," Zhou said, pointed at a sofa across the room. "We thought it a good idea."

"Our success depends on the market and on our management."

Zhou employs five permanent staff, including cleaners and receptionists, and several part-time receptionists from nearby Tongji and Fudan universities.

"The student staff are particularly helpful because of their high language proficiency and general creative talents," Zhou said. "They did a lot of the beautiful paintings in the guest rooms upstairs."

Zhou's overhead costs amount to about 70,000 yuan a month, including rent and salaries.

"It's fairly profitable in the high seasons, but we need to prepare for the low season and a lot of renovation work." Zhou said. "To compete with local economic chain hotels, we have to keep prices low."

He wants to turn a ground-floor room into a board game bar, which would be open to the general public when occupancy is down.

To keep costs in line, Zhou has had to reduce advertising.

"We cooperate mainly with foreign travel websites because of their low costs," he said. "Besides, Chinese travelers' preference for private accommodation is quite difficult to challenge."

It's not cost effective to spend between 30,000 yuan and 50,000 yuan a year to join the Youth Hostel Association (YHA) in China, he said. And advertising on Chinese travel websites can amount to several thousand yuan a month, excluding the commissions they charge.

InnJoy does maintain an online booking presence on the popular website Douban.com, however.

"Our next step is to create our own online payment system so we can take advances on rooms," Zhou said. "Our cancellation rate is about 50 percent now, and we have to eat all the losses."

He is hoping to form an alliance with other small hostels to share information and resources.

"Our success depends on the market and on our management," he said. "As more and more foreigners come to China to study and travel, we want to be in a position to attract them to our hostel."