Earlier this month, the Youth Hostel Association, the institution famed for musty dormitories at bargain prices, announced it is to close 32 of the 227 hostels it operates around the country.

Among the reports covering the "rationalisation" were several suggesting it was the end of an era, that the rudimentary accommodation so welcomed by generations of hikers after a long day on the trail, was struggling to compete in an increasingly international budget travel market.

The closures, which start in November, follow a 12-month "strategy review" by the association's senior management, the principal aim of which is to bring the organisation back to its core market, youth. A registered charity, the YHA's property portfolio is worth an estimated £100m yet a number of hostels have, in recent years, outlasted their usefulness, according to the YHA chief executive, Roger Clarke.

"The publicity has been all about closures, but while the hostels earmarked for closure have great sentimental value, many of them are practically empty for most of the year," Clarke explains.

"Some of our bunkhouses in mid-Wales, for example, are in wonderful wilderness locations but they've been operating at less than 10 per cent occupancy. We need our hostels to be in places young people want to visit rather than at the end of a muddy lane with nothing to do when you get there."

The point of all this, he argues, is that while the YHA's current membership of 250,000 seems healthy enough, too high a percentage of that total comprises life members and "renewals", both of which groups tend to be older people. "Fundamentally, we're a youth organisation and we need to renew our efforts to attract that market," explains Clarke.

To that end, he says, the closure of less popular hostels will help generate much needed funding which will go towards modernisation. "We need to realise some capital in order to plan long-term investment. While few if any hostels make an outright loss, we do have between 50 and 100 properties that don't make enough to cover repairs. They meet their operating costs but if they needed a new roof or showers they would run into trouble."

Investment will, Clarke says, reflect modern tastes. A popular hostel in Keswick, for example, with toilets and showers that "belong to another age" is being remodelled, converting dormitories into smaller bunk rooms offering more privacy. "We're not moving into the hotel market, but if people want more privacy we can provide that," says Clarke. "Dormitories are proving less popular but backpackers from around the world are still travelling on very tight budgets. When we build new hostels, we plan dormitories with no more than four or six beds.

"The bottom line is that our hostels will remain consistent with our objective of introducing young people without much money to Britain's countryside and historic towns and cities."

The price of YHA accommodation varies nationwide. "A little place in the hills," says Clarke, will set you back around £10 a night, while £20-£25 will get you a berth in central London. However, Clarke insists the closures are "not about a move from rural to urban." He also points out that fewer people are walking long-distance trails [traditional youth hostel locations] such as the Pennine Way than did 20 or even 10 years ago.

Despite the increasing number of options available to the budget traveller, the association is rightly proud of the fact that usage levels at more popular hostels have remained steady over the past decade.

"We attract around 2 million overnight stays a year, although during foot and mouth [in 2001] that went down and dipped again after 9/11," says Clarke.

"What has improved is our occupancy level. In the past 10 years this has risen from about 38 to 45 per cent, but there is still the need for improvement before we reach the travel industry's 'norm' of 50 to 55 per cent."