Brands like Yotel and CitizenM are gearing up for growth — are tiny rooms the future?
Not small, but “compact” — that’s the message hotel group Yotel prefers when talking about the size of its rooms. But there’s no getting round the fact that business travelers will need to get used to less square footage after the pandemic.
Hotels are ceding more space to public areas, with corporate guests and local remote workers looking for desks or a place to hold a meeting.
Developers will need to focus on “revenue stream diversification” after the pandemic, JLL Hotels & Hospitality Group predicts in its new Global Asset Management Report. Hotels should also consider new fee models in the same way airlines charge for ancillaries, it added.
“As hotels reinvent themselves, we should be looking at the total revenue of the entire hotel and how every square footage of the hotel impacts the bottom line,” said Andrea Grigg, head of global asset management, JLL Hotels & Hospitality.
Now Yotel, whose major shareholders include an affiliate of Barry Sternlicht’s Starwood Capital Group, is on an expansion dive, and well placed to capitalize on the return of business travel.
“We are seeing real positive growth in our hotels, from in some cases low, single figure occupancy growing to levels we only expected to see in 2022 or 2023,” Kenan Davies, area director of business transient sales at Yotel.
The group operates 18 hotels around the world, and said it is on track to reach 50 hotels by 2025. That plan is supported by a franchise and hotel conversion model, which it’s just launched in the UK. Hotel management agreements are also part of its global expansion strategy, and follow the opening of a property in Manchester after it was bought by Tristan Capital Partners. It marks the third franchise agreement after Yotel Porto, in Portufal, and Yotelpad Park City in the U.S. state of Utah.
“Launching Yotel’s franchising business model in the UK and Europe comes at an opportune time as investors look towards partnering with unique brands which are best positioned for the post-Covid world,” said Rohan Thakkar, senior vice president, development and technical services at Yotel. The brand also has Yotelair properties at airports in Amsterdam, Paris, Istanbul and London.
Another brand known for smaller rooms is also gearing up for a global growth spree. Dutch hotel company CitizenM has just tapped existing investors for $1 billion to expand . It aims to have 24 hotels in its portfolio by year’s end, and more than 40 by the end of 2022.
Like Yotel, the company is known for having rooms smaller than a typical hotel room, and it encourages guests to utilize more public spaces.
Updated Dec. 2, 2021
Hotels are still popular for meetings, with booking platform Hubli seeing 52 percent of its on-demand meeting reservations going to non-hotels, and 48 percent to hotels.
Yotel’s current guest mix is 55 percent leisure, 45 percent corporate, but Davies is optimistic despite new variants of the virus and onging restrictions, saying his team has generated interest from local and international business travelers. “Although our cabins may be compact, they have been cleverly designed to optimize every square inch of space, offering everything a guest may need and nothing they don’t, whatever their reason for travel,” said a spokesperson.
However, not all corporate travel-focused brands are slimming down. Mint House, which has a partnership with American Express Global Business Travel, said it will continue to provide guests with larger, and more equipped apartment-style spaces, compared to traditional hotels, to address the pandemic induced habits.
“People are extending their trips, finishing out their work weeks at their destinations, bringing their families along, and generally staying longer. Business trips are expanding into ‘bleisure’ trips and our offering is perfectly well suited to accommodate this profound change in traveler behavior,” said founder and CEO Will Lucas.
“The ‘new nomad’ needs to be able to work from wherever they are. They are adaptable and nimble and expect effortless experiences and inspired environments, and want the option to work comfortably from their accommodations without having to be in a crowded workspace,” he added.
Mint House has more than 25 properties across the U.S. Recent and upcoming openings include New Orleans, Philadelphia, Seattle and Dallas, and it will be nearing 2,000 units by the end of this year. It now plans to expand to 3,000 units in 30 markets within the next 12 months.