Every hostel I've ever been to (school, Brownies, work, etc) has been immaculately clean. Yes, children share, usually in large, secure rooms with a few bunk beds, but the provisions are perfectly adequate, warm, safe, comfortable and the food planned to give them good nutrition and energy for their daily activities and expeditions.
A Youth hostel is completely different to a hostel for the homeless and, in some ways, is often superior to the facilities provided in a 2* (which are fine in any case, they just aren't tailored to the specific requirements of a large group of children and supervising staff).
It's a different experience to go away without family present. Not better or worse, just different - and whilst some might only ever have seen a 5* hotel room before, some equally might never have been away from home and some have only ever been the centre of attention or never had the enjoyment of talking late at night with friends away from houses - or of the sense of achievement possible from a group of children working together to solve problems or complete challenges in a structured and professional setting.
I found out I wasn't as scared of heights as much as I loved abseiling. And that I'm a natural with horses and don't get sick on boats - seeing seals outside a shitty Sealife Centre, with sunshine on the waves and more birds than I'd ever seen in the city was a revelation. None of those things would have happened in a week in a caravan with family that wanted to play cards, watch television and chuck a rod and line out into the lake all day and night (but not allow anybody else to take part). I went to museums, cathedrals, castles and medieval towns.
But what I loved best was breathing fresh, clean air and seeing greenery and blue sky, waking up to hear birdsong, rather than grey concrete, graffiti and hearing sirens.
It's so important for children to learn there is a world outside their home for themselves, not just in books or on the telly - and school trips, including ones with hostel accommodation, are perfect for that.