The end of temperance after 67 years is one of the most dramatic steps the YHA has ever taken to spruce up its image.
In recent years, the association has seen the rise of independent "backpacker" hostels and budget hotels, which appealed because of their more relaxed approach.
It is launching a pounds 30m expansion drive into cities like Liverpool and Birmingham, previously not on the hostel map. But its chief executive, Colin Logan, believes that if it is to appeal to young travellers mainly from abroad, it has to open premises close to where young people want to be - in clubland.
Mr Logan said that a decision had been taken "to roll out quietly" the sensitive change in the drinking policy, which allows hostellers to consume their own beer, wine and cider at all its premises for the first time.
The move had not been put to a vote of the YHA ruling body, said Mr Logan, because of the strong feeling that it was time for change. If it had, he acknowledged, "two or three board-members" might have voted against it but the relaxation of the historical temperance stance in all hostels would still have been passed. "Five years ago, anyone suggesting such a change would have been strung up," he said.
Mr Logan stressed the liberalisation only extended to guests over 18 bringing in their own alcohol at meal-times. They could not drink outside the dining room and there were on plans to open bars.
The youth travel market, said Mr Logan, had changed beyond recognition in recent years. While young people still wanted to explore the countryside, increasingly, they wanted to visit cities for their museums, shopping and nightlife before venturing off into the wilds.
The new hostels would have televisions in every room and would offer similar accommodation to many three-star hotels.
Part of the push was coming from cities themselves, previously immune from tourism but now keen to cash in on the booming youth travel market.London, Manchester, Birmingham, Liverpool and Leeds, said Mr Logan, were cities which young people were interested in visiting for their sporting and cultural events. It was pointless in such places, said Mr Logan, in forcing them to return by 11pm, when city centre nightlife was still going strong.
Originally from Australia and New Zealand, independent "backpacker" hostels had spread to Europe. "They are not as efficient as us, their facilities are not as good and their standards on the whole are not as good," maintained Mr Logan.
Where the new independents were scoring with customers, admitted the YHA chief, was in providing a more relaxed atmosphere - hence the move to allow alcohol and to abolish curfews.
One problem was the range of visitors using hostels. While Australians and South Africans wanted a more carefree environment, growing numbers of Japanese appreciated efficiency and cleanliness.
A bugbear which Mr Logan is likely to raise this week when he presents the YHA's annual report at Westminster is the Government's refusal to free youth hostel charges from 17.5 per cent VAT, although the YHA still enjoyed turnover of pounds 26m last year, producing a surplus of pounds 1.5m. Its hostels in London enjoyed occupancy levels of 87 per cent, comparable with the best hotels, while outside the capital the average was 55 per cent.
The murder of Caroline Dickinson, the girl found dead in a hostel on a school trip to Brittany, has sent shockwaves through the industry. The YHA now employs a former senior police officer to advise it on safety, and is installing closed-circuit cameras at some sites and night security staff.