Yotel unleashes new ambitions with a view of vacant office buildings

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We hadn’t heard much about Yotel as a hotel chain for a long time. It turns out that it has recharged its ambitions for world domination. We’re intrigued by the fact that the micro-hotel design fits well with conversions of decades-old office buildings. courage or bravery?

Sean O’Neill

Do you think you know Yotel? think again

  • Before the pandemic, hotel chain Yotel was best known for operating a handful of airport locations with tiny rooms measuring about 200 square feet, or 16 square meters.
  • In the wake of the pandemic, the UK-based hospitality management company has signed or contracted 36 hotels. These projects are a mixture of city hotels. A minority of properties are located at airports.
  • Its new brand is YotelPad, which it calls “long-stay residences,” with rooms of various sizes, including up to 600 square meters and even a two-bedroom version. Accommodations offer kitchenettes, laundry facilities, and co-working spaces, and are sometimes located above flagship Yotels.

Yotel is not a clone of Japanese pod hotels.

  • Japan’s capsule hotels are an extreme concept. “Those are coffins,” jokes Viriot.
  • Yotel rooms (referred to as “cabins”), especially at airports, are quite small by western standards and usually have fold-out or extendable beds. But they are not as small as pod hotels.
  • In July, Yotel said it would open a hotel in Tokyo in 2024. Did that mean it stole the capsule hotel concept from the Japanese and is now selling it back to them? No, said CEO Hubert Viriot.
  • “I invited some Japanese architects to look at my spaces at Yotel and they said, ‘Where’s the Japanese influence?'” Viriot said. “Our company founders were inspired by Japan, but the product is adapted.”
  • “In Japan, the Yotel is a step up in size and amenities from the typical business hotel — which is itself larger than a pod hotel,” said Viriot.
  • The typical city yotel keeps about a fifth of its rooms in larger sizes. YotelPad, the company’s extended-stay brand, is about as roomy as CitizenM. (Other overlapping competitors include EasyHotel, Pod Hotel, Generator Hostel, and Mama Shelter.)
Yotel Amsterdam opened in November 2019, just before the pandemic. Source: Jotel.

Yotel says its development pipeline is lively, though it’s been making little marketing noise for years.

  • Founded in 2007, Yotel is approximately 30 percent owned by Barry Sternlicht’s Starwood Capital Group and approximately 70 percent owned by the Al Bahar family’s Jassim Al-Bahar Group. Starwood Capital owns three of the hotels.
  • The asset-light company expects to close 50 open and signed development contracts in key destinations worldwide in 2024.
  • Yotel started managing properties itself. Leasing is avoided. It recently began franchising after opening its first franchises in Park City, Utah. Manchester, UK; and London (with Tristan Capital).
  • “It’s going to cost us a lot more from an operational perspective to go global,” Viriot said. “But once we’ve created global brand awareness, there’s no limit because we can then expand to any market, like 20 hotels in Japan, for example.”

The pandemic has revived rather than undermined Yotel, despite its original reliance on business travel at airports.

  • In order to increase, Yotel recruited new staff during the crisis.
  • “We hired a new commercial team and strengthened the revenue management team, digital marketing team and CRM [customer relationship management] team,” Viriot said.
  • The company also changed its operations.
  • “During Covid we furloughed many local hotel staff and had to carry out administrative tasks on behalf of the hotels at headquarters,” Viriot said. “The good thing is that we’ve been able to understand the business better and our team of 60 now has a more accomplished way of managing the portfolio.”
  • The company demonstrated its cost model to potential investors.
  • “We’ve also shown that we can be operationally profitable at very low utilization,” Viriot said. “London was breaking even at 20 per cent occupancy with a price of around £50 a night.”
Common area at Yotel Amsterdam
Common area at Yotel Amsterdam. Source: Jotel.

Yotel claims not to be a budget brand.

  • “We’re ‘affordable luxury,'” Viriot said, although of course he would say so.
  • “You get great locations in great cities,” he said. “You will get a well designed room with basic amenities. Each Yotel has a gym with peletons and other equipment and a restaurant and lounge.”
  • “For owners, we unlock the value of real estate because we are viewed as a premium product in our competitive proposition and can provide owners with a higher rate of return per square foot of building,” Viriot said. “In the second quarter, our RGI [revenue generating index] showed that we have outperformed our competitors.”
  • It helps the company accommodate an average of two paying bookings for each typical-sized hotel. The brand can thus claim to generate an average net operating result of 40 percent. It also suggests that an investor could repay a loan on a typical project in about five years.

Yotel claims to have overcome a major stumbling block in courting potential owners by demonstrating that the brand can both convert — and not convert in years.

  • Some potential business partners had a problem with Yotel’s design looking too niche.
  • A prospective owner might say, well, if 20 years from now, for whatever reason, they don’t want their property to be a Yotel anymore, how hard will it be to convert.
  • Viriot said his company’s success in converting buildings to Yotel simplicity demonstrates that the process can also be reversed if necessary, to undo a Yotel in the future with no additional hassles compared to other hotel concepts.
  • “The real opportunity that we’re talking about today with most of our investment partners isn’t building hotels, it’s building conversions,” Viriot said.
  • “Adaptive reuse is a very interesting option, because in many cities you can find office buildings from the 1960s and 1970s that nobody wants to rent anymore,” said Viriot.

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