My daughter and friends wanted to do the "book as they go" route for their 3week trip to Europe. As it turned out they really had a pretty set itinerary -i.e. days where the transportation was already booked (cheap flights, couchettes on the overnight train) or a set day to meet others in a particular city. There really wasn't much wiggle room in the route they would travel except that they could have had the option to stay a day longer in one or two of the cities if they really liked it.
They ended up reserving all of their hostels ahead of time. They found - to their surprise and mine - that many of the hostels with good reports were already booked. It was definitely not like when I hosteled through Europe as these places are online and take Internet bookings just like any hotel. Sometimes they would find a place that had room for 1 or 2 but not the 3 or 4 that they had. They even enjoyed looking at and discussing where to stay - just made them more excited about going!