Private property investor, Bridge Point Ventures, and Starboard Hotels are set to open the first Hoax hostel in Liverpool this summer.
The five-star Hoax hostel, due to open in July, will be located in a converted tea warehouse near the Cavern club on Stanley Street.
The building had been empty since fashion retailer Wade-Smith closed more than seven years ago.
The new chain aims to compete with budget hotels and take advantage of the rise in young, independent travellers taking city breaks.
This hostel comprises of 282 beds, as well as a street kitchen and bar split over two floors, which can cater for more than 200 diners, serving international street food in a tapas.
The beds are divided into four, six or eight bed dorms as well as double rooms.
Hoax will also contain a live music venue called The Hatch, situated on the lower ground floor.
Prices are expected to begin around £18 per bed.
Stay Wyse, the association of youth accommodation providers, said: "Outside of London, Liverpool is the only English city in the top five holiday destinations: beating destinations such as Manchester.
"When it comes down to it, in the most lucrative and relatively recession-proof of sectors – tourism – Liverpool are the ones to beat."