Asian owners seem done with size issues of microhotels

SINGAPORE – Yotel is putting behind it skepticism that microhotels would work in Asia as it looks ahead to open a Yotel in Tokyo and Bangkok in fourth quarter 2024. Two other properties in Kuala Lumpur, one a Yotel and the other the extended-stay Yotelpad, are expected to open 18 months from now.

The additions come six years after the first Yotel in Asia opened in Singapore in prime location Orchard Road, suggesting Asian investors may be done with size issues of microhotels.

Yotel CEO Hubert Viriot believes so. “I think we’re done with the apprehensions. It wasn’t a problem with the customer but with the investment community,” he said in an interview with Hotel Investment Today in Singapore.

“This part of the world is dominated by large real estate players, and they are used to doing business their way,” Viriot added. “In my entire career, I’ve heard people telling me, and not necessarily just in Asia, that what you do at home doesn't work here.”

Skepticisms aside, COVID-19 also dampened expansion in Asia. On the other hand, it made models such as Yotel more relevant, Viriot said. At opening in 2017, Yotel Singapore was already introducing trends that are on fire today, such as co-working, social and well-being, smartly designed rooms with luxury bedding and smart TV, and technology including self-check-in/out and robotics.

Yotel CEO Hubert Viriot

Large Asian real estate players are finally tuning in. Yotel Bangkok, for example, is developed by Magnolia Quality Development Corp. (MQDC), which owns the Waldorf Astoria and Six Senses Residences The Forestias in Bangkok. The 250-room Yotel is part of its $1.2 billion, 250,000 sqm mixed-use development, Cloud 11, which aims to be a hub for creators in gaming, music and podcast, film and animation, and digital.

Yotel fits in well with Cloud 11, said Cloud 11 Project Director Onza Janyaprasert, pointing to its “modern and sustainable smart design,” “creative use of technology,” and “connectivity among people.”

Yotel Tokyo, with 244 rooms, is developed by an established extended-stay player based in Singapore. As with all city Yotels, it is in a prime location, i.e., Ginza, and close to Tokyo’s main Shinkansen high-speed rail terminal. Viriot declined to reveal the owner, or the two owners of the Kuala Lumpur properties, as the developers are announcing the projects soon.V

Greatest opportunities

“Japan is the market with the greatest opportunities for our brand in Asia,” Viriot said. “We are in discussions with investors, and I seriously think we could have 20 deals in Japan. We plan to open an office specifically for Japan. Of course, we also want to grow in Thailand with MQDC and other partners. It is one of the most visited countries in the world.”

But microhotels aren’t a novelty anymore in Japan, which invented pods and capsules some 40 years ago, while Thailand has possibly the most diverse range of accommodations in Southeast Asia to suit any style or budget.

Viriot said pods in Japan were designed primarily for domestic business travelers. And at the time, Japan didn’t have 32 million international tourists (in 2019), just a couple of millions.

“We are bringing an interesting offering for international tourists in Japan at a price within their reach, and it will also appeal to the Japanese customers,” Viriot said. “Typically, a luxury hotel is super expensive in Japan. We are disrupting [the segment] between midscale and upscale.

Yes, there are other affordable brands that appeal to younger travelers and students throughout Asia, such as modern hostels, but we're not in that market. My business model is not to do small rooms, but to do a smart room.

Hubert Viriot

Share this quote

“Yes, there are other affordable brands that appeal to younger travelers and students throughout Asia, such as modern hostels, but we're not in that market. My business model is not to do small rooms, but to do a smart room.”

Yotel’s promise to investors include:

• 50% more keys in the same square footage/meters than any traditional hotel. That's because its room size is typically 16sqm

• +40% stabilized net operating income and +25% leveraged internal rate of return

It has Yotel Singapore to demonstrate these deliverables. The hotel packs 610 rooms of 14 sqm each on a gross floor area of 31,100 sqm. According to its general manager since pre-opening, Brendan Daly, the hotel rakes in a GOP of around 60%, thanks to high occupancies and an efficient cost structure.

“We finished our first full year of operation in 2018 at 81% [occupancy], and at 86% in 2019. This year, we are looking at 88% and maintaining it at high 80s to 90s next year,” Daly said. “Our room rate today, averaging S$220, is 25% higher than in 2019, pushing up our RevPAR to around S$200.”

Daly added, “If going by revenue per sqm, although that’s not really a metric for our type of product, we’re yielding as much if not more than some of the luxury brands. Because those rooms are 40 sqm at, say, S$600. We are 14 sqm at S$220-S$250. If you do the numbers on that, our revenue per sqm is very good.”

On efficient cost structure, Yotel Singapore runs a staff to room ratio of 0.15, lower than the 0.23 ratio for Yotels globally, according to Daly. He attributed this to automation and practical workflow.

“Facilities such as the pool, gym, meeting area, bar and restaurant are all on one floor, so one team is able to look after them,” Daly said. “At the lobby, if we didn’t have the check-in/out kiosks, there would be thrice the number of team members to cover the volume of arrivals each day. We don’t offer porter services as people are here for two or three days. We have automation in housekeeping, for instance, a uniform conveyor belt, which minimizes the number of staff we need there. So, we don’t have a headcount structure that adds to our ratio.”

The hotel is owned by Hong Fok Corp., a Singapore listed company that develops offices and residences. According to its financials for the six months ending June 30, 2023, Yotel Singapore cushioned the impact of softer residential sales likely due to a doubling of stamp duty to 60% for foreigners in April.

The group’s revenue was down S$4.8 million to $50.8 million for the period YOY, “mainly due to decrease in sales of the residential units in Concourse Skyline but this was cushioned by increases in rental income of its properties mainly from the hotel, Yotel Singapore Orchard Road, and property management income,” it said.

The owner further stated, “The group expects the tourism and hospitality industry outlook to remain positive and is optimistic on the performance of Yotel despite some challenges in areas like staff recruitment and other fixed operating costs.”