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

June 23, 2011— -- 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.

Astronomical lodging prices haven't thus far managed to repel New York's legions of visitors: NYCgo say 48.7 million tourists flocked to the city in 2010. But while there are plenty of plush New York hotels for those lucky few who've escaped the recession with cash to spare, those with budgetary constraints are left with few options. A random Kayak search for the 7th to 11th of July 2011 offered only two choices for under $100 in Manhattan - a 2-star hotel on Hester Street, or a YMCA. For under $150; mostly 2 star hotels, with a sprinkling of 3 star options. The lowest priced 4 star in Manhattan... $182 a night.

Christopher Heywood, VP of travel and tourism PR for NYC & Company says this year about 40 percent of hotels are opening in boroughs other than Manhattan; which will offer travelers more options for saving money - but there's something about staying right in the belly of the beast that visitors to NY tend to crave. And it's not just proximity... you have only to look at the success of the Andre Balazs and Ian Schragers of the world to understand that with hotels, style is everything.... although it comes with a hefty price tag. The gap that's left between the W and the Holiday Inn Express, or so the theory goes, is one Yotel will fill.

The plan for Yotel New York was, in many ways, similar to London and Amsterdam: to create what have been termed "cabin" rooms. Cabin rooms keep costs down first and foremost simply by being smaller, allowing the hotel to accommodate more guests, but at 12 square meters, are still heads and tails larger than their miniscule Japanese predecessors.

New York City, however, is a different animal hotel wise, and Greene admits building Yotel NY, particularly during a recession, was never a safe or easy bet: "I think the biggest risk has been construction, coming to NY and people saying 'bunch of Brits coming over and building a 700 room hotel'.....the biggest hotel opening in NY this year, the largest new built hotel for sx or seven years in NY, and an unproven brand in terms of city center concept."

Still, belief in the brand was strong enough that Greene and Woodroffe managed to convince investors that Yotel would make good on its promise to become what Greene terms the iPod of the hotel industry, and raised $240 million in financing.

To convince guests to forgo a more spacious economy room in favor of a cabin, Yotel had to make sure to stress the three Ls: location, luxury and leisure. Just blocks from Times Square, Yotel packs 669 units into a futuristic tower. While small , the cabin room nonetheless feels quite luxurious. Large windows look out over the city, giving a feeling of spaciousness.

During the day, a queen-sized bed replete with cloud like bedding, sits up against the wall like a sofa. A switch next to it glides the bed to its nocturnal position, at which point it's easily large enough for two. An ample bathroom comprises shower and curtained toilet area, and a tiny desk and flat panel TV round out the amenities. A tray sits in a bedside compartment... in the morning you take it to a breakfast area and help yourself.

For mid-July, the Yotel booking system showed queen-bedded cabins for $195 to $230. For any guests feeling particularly flush, larger cabins are available starting at only $20 per night more, and increasing through to $1,500 for a VIP suite - which boasts a fireplace, pool table, hot tub and terrace.

Yotel also realized its entertainment options would be key to luring guests away from other economy hotel options, which often fail to deliver on the hotel ambience front. Large public areas replete with cushiony Tetris-shaped seating give way to streamlined Japanese style restaurant areas, a Yoga and movie theater space and their crowning jewel: the largest hotel roof bar in New York City offering 180 degree views of the gleaming landscape. Snack and cocktail menus replace the traditional club sandwich, caesar salad and glass of chardonnay offerings of most economy hotels with items like spicy tuna sushi and mango and ginger martinis. Heywood puts it succinctly: "The location and pricepoint are great, and the hotel does not compromise with its style."

Will guests choose Yotel over, say, a Hampton Inn? Will it revolutionize the hotel industry? That there's a market for luxury for less is indisputable - in this economy, travelers parting with hard-earned cash want a comfortable and stylish experience. Whether people will take to diminutive quarters is another question.

Yotel does have one last card to play though...next to a bank of automated check in desks on street level lurks the biggest star of Yotel so far - the Yobot. This gleaming white monster is responsible for storing visitor's luggage, which it does so in a compartmentalized wall that bears a closer resemblance to the original Japanese capsule concept that the evolved Yotel itself.

Gimmick or not, the Yobot has garnered valuable attention.... passersby stop to gawk, and the robotic bellhop has even been featured on a recent webisode of Will Ferrell's "Funny or Die," competing for its position with such machines as R2D2 and Robocop. The Yobot has been somewhat temperamental thus far and when we visited was off color, hanging sadly, its luggage claw amputated. I'm reassured it is now back in action... just in time to handle the volumes of purchases that will surely be made by guests saving valuable shopping money by staying at Yotel..