The business rates for the property would have been calculated as follows. Firstly you need to know the 'rateable value' for the property. That's an estimate of the annual rent which could have been obtained for the property, if it was available on the open market, on 1st April 2003.
That's then multiplied by the 'standard multiplier' or the 'small business multiplier'. For the current tax year those are 0.414 and 0.407 respectively but they've previously been higher. (Last year the multipliers were 0.485 and 0.481 respectively).
If the hostel was paying around £1000 per year in business rates, that appears to suggest that the Valuation Agency believed that (at 2003 prices) the property could be rented out at little more than £2000 per year.
Well, that's the basic theory, but it ignores the 'Small Business Rates Relief'. If a property has a rateable value of less than £6000 the lower multiplier (above) is used but, far more importantly, the bill is reduced by 50%.
So the Valuation Agency must have decided that (at 2003 prices) the property could have only been worth a bit more than £4000 per year rental.
Chris