Pod-style hotels emerge; Savills cites UK developments

A new hotel segment is emerging with the expansion of “pod” hotels and the likes of limited-service hotels with smaller guestroom footprints such as Marriott’s Moxy, Yotel, CitizenM and Whitbread’s new Premier Hubs.

In a research report just released by real estate advisor Savills, UK regional cities could see an expansion of pod and smaller format hotels, similar to that seen in London, with up to four new hotels planned to open in regional cities for 2014/15.

Savills states that the recently announced (yet to be named) 76 pod hotel in Bristol could be the first one delivered this year, with Moxy, the Ikea and Marriott International backed hotel, also acquiring a site at Liverpool’s Cropper Street.

“The rise of pods and smaller format hotels throughout the UK can largely be attributed to cost,” said Martin Rogers, director of regional hotels at Savills. “If room count can be increased by providing smaller rooms without significantly impacting on average daily rates there can, in the right circumstances, be a positive impact on value. Land values have also contributed, for example in cities where land values have increased by between 10-20%, in UK cities such as Bristol, Manchester and York, developers are now having to intensify sites and making rooms smaller is the easiest way.”

Savills reported that with most pod hotels costing between £45 – £100 per night, the expansion of the format across the UK could require traditional hotels to become more competitive.

The issues relating to converting existing stock in historic regional city center is also contributing to the rise of smaller formats and pod hotels, according to Savills. These buildings may not have the floor plates necessary for large traditional rooms. However, Savills does caution that smaller format and pod hotels may struggle to meet the star rating of a traditional hotel. The smaller size may mean that brands have to provide excellent communal facilities and services in order to maintain rates.

Marie Hickey, associate director of research at Savills, added, “Star ratings can be subjective but smaller formats and pods introduce a new element that the industry will have to decide how to adapt to and rate. While we don’t expect them to replace traditional hotels, for some visitors size really does matter, but ultimately they will provide greater consumer choice to overnight visitors.”

Savills also finds that pod concepts work best in locations where visitors don’t necessarily plan to spend a lot of time in their room. It will therefore not be a trend for all regional locations but will be limited to those with a significant number of tourist attractions to draw guests out of their rooms, such as Bath, Oxford and Edinburgh and business visitors.

“What these regional pod hotels will offer guests is a central location at a smaller price, two strong motivators to give up that extra bit of space,” Martin continued. “Improved technology and construction innovations such as flat screen TVs and improved storage will also mean that the small space will begin to feel less and less like a sacrifice.”