Tiny Hotels: Yotel Sees if They'll Fly in U.S.

PHOTO: Capsule hotels have been housing satisfied Japanese clientele for many years.

If your mental image of a Japanese capsule hotel is a wall of 'people drawers' -- a scene somewhat reminiscent of a morgue -- then you're not alone. There's a reason the concept hasn't yet spread to our shores.

But while it may not be everyone's cup of tea, capsule hotels have been housing satisfied Japanese clientele for many years; the first capsule hotel to open was in Osaka, 1979. They're extremely popular there, offering very low cost, usually last minute accommodation for people, in the words of Wikipedia, who are often: "too inebriated to travel safely to their homes, or too embarrassed to face their spouses".

They haven't, however, gained a great deal of traction outside of Japan; hotel developers in the US have flirted with but ultimately rejected the idea of opening capsule hotels here. Not just because Americans tend to be much larger than their Japanese counterparts - but also because, if the Hummer and the Big Gulp are anything to go by, size matters over here. It's hard to imagine the average American eagerly signing up to sleep in a drawer. Shelling out for a hotel after getting too drunk to face a spouse... maybe.

The idea of keeping room costs down by reducing space, however, continued to be something of a no brainer for hotel developers everywhere. The question was, other than budget, what would be the enticement factor? The answer came to Yotel co-creator Simon Woodroffe when he was bumped up to first class on a British Airways flight in 2003, and had a lightbulb moment. If British Airways could pack luxury into a small cabin space, so could he. Woodroffe married his epiphany with Yotel CEO Gerard Greene's vision for an affordable design hotel -- and Yotel was born.

Woodroffe is the brains behind the British Yo! empire, which includes popular UK chain Yo Sushi! Capitalizing on the success of the Yo! brand, Woodroffe and Greene opened the first Yotel at London's Gatwick airport, later expanding to London Heathrow and Amsterdam Schilpol. Opening a Yotel in New York was always a goal because it has the perfect storm of factors that, in Greene's opinion, would guarantee Yotel's success.

"I knew land prices were high," Greene explains. "I knew demand was very strong both both from leisure and corporate, i knew even budget hotels in NY got very high rates and I knew that designer hotels charge $500 plus in NY, so whether it was London or NY, I knew Yotel was going to work."

New York certainly has its fair share of budget conscious visitors, hungry for affordable accommodation. According to New York tourism specialists NYCgo, the average NYC hotel price was a wallet flushing $255 per night in 2010 - compare that to Hotels.com's estimated $165 in Chicago and $185 in London. Add taxes and fees, and a couple staying in one mid-range NY hotel for a three-day weekend are looking at dropping, on average, close to $1,000 on their room alone.

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