Many hostels impose rules and restrictions because of security and safety concerns, limited staffing budgets, and the organizational morality that favors curfews for young travelers. I understand, but I certainly prefer hostels with fewer rules, more maturity, and free access. At all other times, an overfilled hostel is depressing. I might make the case that it's about money. Regardless, no overcrowded hostel has ever achieved greatness for me.
Some hostels are almost automatically great by virtue of a fantastic location.
It's not always just the wonders outside that make the difference. Often, a great location seems to influence the attitudes of staff and hostellers alike, adding to the excitement and making people smile. It's the equivalent of location, only involving the hostel itself. Perhaps the building is an old castle, lighthouse, or mansion. Possibly it's known as a center for climbers, cyclists, hikers, or partiers.