For the bootstrapped traveler, capsule hotels offer both an inexpensive solution and an alternative experience. And while photos of these pods abound on the internet, the question now is why capsule hotels have proliferated to the point where even backpackers and business travelers are now choosing to bunker down in these pods.
Capsule hotels have expanded past Japan and have doubled down on other Asian metropolises. A 2017 report conducted by research consultant WiseGuy Research Consultants reports that “the global capsule hotels market is valued at 159 million USD in 2016 and is expected to reach 226 million USD by the end of 2022, growing at a CAGR [compound annual growth rate] of 6.03% between 2016 and 2022.” While Japan undoubtedly plays a pivotal role as the pioneer in this industry, the same report singles out China as quickly rising in market share. Altogether, analysts forecast that Southeast Asia will lead with its projected growth of capsule hotels from 2016-2022.
This trend is also reflected in consumer booking websites. “In the last year, we've seen an increase in the number of capsule hotels listed on [travel website] Booking.com. This growth is coming primarily from Asia, with the nations showing the largest amount of capsule hotels being Japan, China, Taiwan, Singapore and also Russia. Cities with the most capsule hotels on Booking.com are Tokyo, Singapore, Taipei, Osaka and Xi'an,” says Oliver Hua, Managing Director of Booking.com in Asia Pacific.
“We've also seen growth in the number of bookings being made at capsule hotels year over year, with bookings being made primarily from travelers in Japan, Taiwan, South Korea and China, but also Great Britain,” he adds.
Whereas capsule hotels used to cater only to Japanese salarymen, nowadays you’ll find a mixed bag of business travelers and vacationers. Despite their namesake constraints, why are they now the preferred choice of accommodation for so many? The rise in popularity of these hotels can be drilled down to three reasons: cheaper price points, the flexibility they afford, and new offerings in experiential design.
Catering to new wave of young urban creatives and “flashpackers”
In Asia, notorious for some of most expensive hotel rates, capsule hotels beckon as a welcome alternative. Capsule hotels prices are priced around US$50 a night with “nap rates” that charge comfortably by the hour—sitting in a sweet spot between cheaper than hotels, but more luxurious than hostels.
“What we’re also seeing now is that some travelers are becoming much more frugal in their spending patterns, and even to an extent, corporates. A lot of travelers just want the basics and all the necessities — what we call ‘affordable luxury.’ They want a room that offers their essential needs, fast Wi-Fi, somewhere to charge their iPads and work from a small desk if necessary. They don’t need a stacked minibar and other ancillary offerings such as day spas or numerous food and beverage options. That’s all usually by the hotel,” says Frank Sorgiovanni, Head of Research in Hotels and Hospitality in Asia Pacific at JLL.
Speaking to the APAC region he oversees, Sorgiovanni adds: “We’ve definitely seen a spike in this form of [capsule] accommodation. The brand Yotel which is well known in New York and Europe in particular is about to open in Singapore, which is an expensive city to stay in based on room rates compared to other Asian cities, and later in Changi Airport [Singapore’s international airport] in the near future. This is a new concept that is coming into the market at a new price point, which will challenge some of the older style 3 and 4- star hotels.”
"The combination of increasing density, long commute, and awareness for wellness is leading to a rising demand for quality sleep,” says Alex Kot, cofounder of SLEEEP, a capsule hotel in Hong Kong.
“The concept came up from a competition Alex and I entered back in 2014, Harvard’s Dean Challenge. It asked for proposals to address various urban issues, and we decided to address the lack of space in urban environments,” says cofounder Jun Rivers.
The rise in these hotels also signals a new wave of young urban travelers. SLEEEP appeals to a younger demographic, targeting who they call “young urban creatives” who are more eco-conscious than older generations.
Capsule hotels also offer immense flexibility. Whereas hotels charge by night, capsule hotels charge by the hour and are often stationed in airports or close to city centers, making them an optimal choice for backpackers caught in layovers. What’s more, according to a 2015 McKinsey report, business travel in Asia alone already accounts for a third of US $1 trillion in annual spending globally— and is projected to grow four times as fast in North America. This exponential growth means that more accommodation will need to service this demand. The same McKinsey report indicates that business travelers place a premium on convenience, making it likely this industry will grow as company travel budgets tighten.
The future of hospitality: experiential design
And then there’s the obvious novelty appeal. In the past, capsule hotels, which originated in Japan in the 1970’s in the face of a bubble economy, were largely no-frills, with little interaction among guests. Now, they’re full-blown communal hubs, leveraging new technology and the promise of unique, interconnected experiences. This has even earned them the alternative name of “poshtels,” the term hotel and hospitality group JLL uses to describe “design-led ambiance, with small, often shared sleeping areas with a focus on innovative communal spaces.”
For millennials, among which these hotels are gaining traction, personalization and user experience are a major selling point. Why stay in a traditional hotel when you can Instagram your customized high-tech pod? The Millennials in Kyoto is a case in point: in addition to offering sleeping pods powered by IoT technology, the aptly-named capsule hotel also has a co-working space to encourage community building among its guests.
Some other ingenious hotels with niche offerings include Tokyo’s Book and Bed, where book lovers can get cozy behind a bookshelf for the night. At the Xiangshui Space, a Beijing-based startup, customers can snag a quick nap in a futuristic pod for a mere $2 USD for a 30-minute stay.
These pods have also evolved from being minimalistic to upscale and boutique--the First Cabin Tsukiji in Tokyo, for instance, claims to exude the luxury of a "first-class airplane.” Ashin Oyada in Tokyo, which sells itself as being “within 120 seconds by walk from the nearest station,” also doubles as a craft beer brewery and artificial hot spring.
The race to create bespoke experiences is on: if capsule owners want to stay relevant and top-of-mind, the differentiating factor will be whether they can anticipate the diverse needs of their clientele and craft unique, personalized experiences.
