I’m an overpacker and proud of it. However, even if you held a gun to my head and made me pack a 55-litre backpack, you wouldn’t be able to separate me from my trusty microfiber bath towel. 99% of hostels today provide towels. However, 1% don’t (and another 4% will probably have a broken washing machine during your visit… I once taught the staff at a well-established hostel how to clean the lint screen in their dryer!). Regular towels take up too much room and are too slow to dry, but a microfiber bath towel can be rolled up even smaller than your travel blow-dryer, and will air dry in less than an hour. When your hostel does provide towels, microfiber bath towels can still help you dry your hair quickly.
* Bonus towel trick! If you can, schedule your beach time at the beginning of your holiday. Pack a cheap beach towel (wash it a few times before you go as cheap beach towels tend to lose their color) and then leave it behind; now you’ve got room in your bag for a little shopping!