Capsule hotels: small spaces with big potential

Launched in Osaka in 1979 to enable local businessmen enjoy an evening out, capsule hotels are now mainly aimed at international travelers. Growing numbers of these hotels have opened in recent years across Asia and into Europe and the Americas to cater for the rise in single travelers looking for low-priced rooms for one which equally offer opportunities to socialize with others in shared leisure facilities.

“Capsule hotels offer budget tourists and backpackers a cheaper and more alternative to conventional hotels and hostels in “expensive” city locations such as Singapore,” says Frank Sorgiovanni, Senior Vice President with JLL’s Hotels & Hospitality Group.

The city state has seen more than 10 such hotels launch since 2012 with more in the pipeline. Australia opened its first capsule hotel in 2017 in Sydney, Australia’s most expensive city pitched at the solo traveler that might have outgrown the backpacker hostel. But, rather than competing solely on cost, the hotel is being designed to have a boutique design hotel feel.

Specialist hotel groups are leading the growth and development – including Yotel, which started at the UK’s London Gatwick Airport in 2007, now has bases in three other European airports and plans for more in the US, Middle East and Asia.

“Low cost travel and IT are the two main drivers behind the growth,” says Yasokazu Terada, Executive Vice President in JLL Japan’s Hotels & Hospitality Group. “The number of low cost travelers has been supported by low-cost carriers and they have become able to easily find good-quality capsule hotels through online booking sites.”

Indeed, good IT systems are key to a business model with high occupancy rates and a rapid turnover of guests. It’s this model that allows capsule hotels to charge competitive rates which, according to Sorgiovanni, tend to be about half the rate of hostels and a third of three star hotels.

The Yotel at Amsterdam’s Schipol Airport, for instance, charges about US$51 (€46) for a four-hour stay in its seven square meter cabins, $87 overnight and $17 for an hour’s use of a shower cabin. The NineHours chain of three hotels in Japan charges, for example, about US$50 overnight and has “nap rates” during the day of $10 for the first hour and $3 for additional hours.

The spartan, single-sex traditional model will not work for everyone – and many operators are creating niches as they adapt the formula to their local and international markets and to the prospect of increasing competition. Hanoi’s Noi Bai International Airport, for instance, now has double pods at Terminal T2, for instance; a free laundry service is provided at Bali’s M Boutique Hostel.

Yotel, with its ensuite facilities, luxury bedding and sound-proofing is a leader in the more luxurious end while South America’s first capsule hotel, the $12-a-day Capacete in Rio de Janeiro is hoping to draw “artists and thinkers” through Wednesday evening talks, a bookshop and ambience.

In Japan, capsule hotels have also become more than just places to sleep. The Anshin Oyado in Tokyo has a bar with craft beers as well as an artificial hot spring and mist sauna. The female-only Nadeshiko, also in the Japanese capital, provides guests with a free kimono during their stay. Terada says: “They typically have a guest lounge and host regular social events to facilitate communication among guests. They are selling “experience” rather than physical accommodation facilities.” Staff tend to be more “casual and friendly” than in traditional hotels, he adds.

With the capsule concept evolving to keep pace with demand, a “very positive outlook” is on the cards for the sector, says Sorgiovanni. “If capsule or cabin hotels continue to offer secure, technologically advanced and innovative designs at a much cheaper price point – those cost-sensitive travelers will continue to embrace this new offer.”

And, in Japan, Terada predicts growth “in line with an increase in the number of foreign visitors” over the next four years. Running up to the Tokyo Olympics in 2020, the Bank of Japan forecasts that construction investment, including in hotels, will increase substantially.

With many cities around the world grappling with the challenge of accommodating a growing appetite for international travel and a lack of city center space, capsule hotels could prove a useful addition to their hospitality offerings. Certainly, the growing capsule hotel sector is working hard to show that small can mean beautiful and, does not mean compromising on quality and creature comforts.