At Adler Hostel in South Bridge Road, guests can sip tea and enjoy gourmet desserts in a colonial chic lounge. Their beds, which are designed to have the privacy of train cabin beds, feature hotel-quality linen and a blackout curtain. There is also complimentary shampoo, conditioner and shower gel.

Adler is part of a growing wave of "poshtels" in Singapore - upmarket hostels, in other words - that fills a gap in the tourism market. Their quality and price range lie somewhere between backpacker accommodation and budget hotel and they often feature add-ons such as mood lighting, feather-down pillows, cafes and interesting design features.

Venturing beyond the no-frills hostel experience, operators here are offering everything from themed and private rooms to ladiesonly floors.

From about $60 a night, these rooms are more expensive than the usual $20-a-night dorm bed, but are drawing sophisticated yet budget-conscious travellers who do not mind sharing rooms and bathrooms.

Several local hostel brands are doing so well that they have ventured overseas to run vacation homes and hotels.

There are 60 to 80 hostels here, up from about 40 in 2012.

Industry experts say the sector started getting jazzed up from 2009, with operators wanting to change the utilitarian image of hostels here and differentiate themselves from the competition.

The changing face of local hostels can be traced to early entrant Rucksack Inn, which opened its first outlet in Hongkong Street in 2009.

Ms Samantha Chan, 36, who co-founded the chain with a business partner, says they introduced free Wi-Fi and all-day breakfast of toast, condiments, coffee and tea, which were novelties at that time, but are now standard-issue hostel fare. Rucksack runs three hostels in Singapore.

The biggest chain here is 5Footway Inn, which runs five hostels.

Demand for beds was consistently high between 2009 and 2012, with occupancy rates hovering between 70 and 90 per cent, say hostel owners.

During peak periods such as the Formula One season, hostels would be flooded with bookings.

Says Mr Joshua Goh, 36, co-founder of 5Footway Inn: "Some travellers even offered $15 to sleep on our common-area couches, but we said no."

Dr Michael Chiam, Ngee Ann Polytechnic's senior tourism lecturer, says the hostel scene here has thrived because more budget tourists are coming to Singapore via low-cost carriers.

"Many prefer to stay in hostels. All they want is clean and comfortable accommodation and they do not want to pay a premium for this," he says.

But since 2011, with the mushrooming of hostel operators, competition has become stiff.

Ms Chan of Rucksack Inn says: "Everyone now offers free Wi-Fi, free breakfast and is trying different styles and themes."

Singapore's small market size, coupled with the drop in tourist numbers in recent years, has led to some hostel operators downsizing their operations and others closing down.

But others have ventured overseas.

In 2012, the owners of Rucksack Inn opened their first The Rucksack Vacation Home in Sarawak, Malaysia. There are now two such properties that sleep up to 23 people. They have been used for team retreats and weddings as well as by families travelling in a big group.

Another development, The Rucksack Caratel, a caravan park- themed hotel in Malacca, will open in October. This RM4 million (S$1.4 million) project is a joint venture between The Hip & Happening Group, the parent holding company of the Rucksack brand, and Indonesia-based hospitality conglomerate PT. Peputra Group, that was facilitated by International Enterprise (IE) Singapore.

For 5Footway, its first overseas venture saw it transforming a budget hotel in Macau in 2013 into a 22-room boutique hotel called Project Ponte 16.

Last December, it opened Cue Hotel, a 38-room boutique hotel in Hong Kong. This project was also made possible with the assistance of IE Singapore.

Other hostel operators have been biding their time with expansion plans.

Adler's founder Adler Poh, 27, who increased the hostel's capacity from 40 to 100 beds last December, says he is waiting to venture into a first-world country.

"Where land is expensive, average hotel rates are also high and people will be looking for alternatives," he says.

Dr Chiam believes that local chain hostels should try to expand overseas as there are more young budget travellers exploring the region.

He notes that there are business obstacles, however, including a lack of understanding of foreign markets, rules and regulations of doing business in a foreign country, and language and cultural barriers.

Some have delved into other businesses to overcome the competition.

Radiance Hospitality Group, which oversees the Bunc Hostel chain, opened a cafe called The Daily Press in Toa Payoh last December.

Mr Damien Ko, 24, who manages Bunc Hostel's two outlets here, says it also links up with gyms, clubs and local attractions to offer discounts to its guests.

Besides travellers, hostels also serve the needs of students such as Mr Kohei Kawai, 19, who has stayed at Bunc's Little India outlet on at least four occasions. The Japanese teenager comes to Singapore periodically to attend courses at a private school.

He likes that the hostel is near shopping malls and night markets like the one in Bugis Street and offers various facilities to its guests.

"There is never a dull day for me at Bunc and the hostel staff have become like my family members," he says.