Micro Hotels: Luxury in Small Spaces Market: Global Industry Analysis and Opportunity Assessment 2017-2027


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Future Market Insights

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Micro Hotels: Overview

Large hotel chains frequently try to lure their customers in with superlatives like ‘bigger, roomier, more amenities offered and more luxurious’. What they deliberately don’t mention is the sky-high rates charged for all these creature comforts. Some hotels boast about being ‘seven-star’ resorts which even allows them to charge their guests upwards of $50,000 a night! Unfortunately, very few entrepreneurs, celebrities or businesspersons can actually afford these rates. There might be several customers who want cheap and cheerful accommodation simply to spend the night. They might not wish to stay in a conventional hotel since they don't need or use all the facilities offered. The concept of the micro hotel sector largely owes its origin to serving the needs of this customer demographic. Rising costs of hotel space along with a desire for more affordable options led to the need for an innovative concept like micro hotels. They typically feature guestrooms which are only 150-160 sq. feet as opposed to larger hotel rooms which are above 200 sq. feet. The main objective of the micro hotel sector is to make optimum use of every inch of living quarters i.e. private space while maximising on public space like terraces, dining rooms. 

Micro Hotels: Drivers

High real estate costs are one of the biggest drivers of the micro hotel sector. Property prices in global cities like New York, Tokyo, London, San Francisco, Geneva and Hong Kong are only expected to go up. For the same investment, hotel chains can develop micro hotels offering more rooms with less space to meet the ever-increasing demand for budget hotels. The second driver is the increased importance of targeting the millennial generation and business travellers. These customers usually visit a place with the intention of exploring to soak up the experience. They do not like spending much time in their hotel rooms and would rather be outside visiting the sights and interacting with the locals or other tourists. The micro hotel sector provides them with the same quality and standards that they expect from branded hotel chains, but with the idea that the room is only meant for sleeping. These rooms provide queen-sized beds, good quality linen and a bathroom-cum-shower, in a much-reduced room size, leading to substantial cost-savings.

Micro Hotels: Restraints

A major challenge to the growth of the micro hotel sector is the rise of the online sector and homestay options like Airbnb. They allow people to list or rent accommodation in residential properties, with the price decided by the property owner. Prices are typically lower than even micro hotels and are eagerly adopted by tech-savvy, cash-strapped millennials. A second constraint is discerning clientele. Micro hotel rooms might not appeal to customers who prefer a touch of individuality in their lives. They might prefer looking at budget hotels which offer them far more privacy with only a marginally higher cost.

Micro Hotels: Key Regions

The micro hotel sector first gained traction in Europe and was mainly in airports and urban centres. Now it has also expanded to North America, particularly the U.S, Japan, Singapore, Hong Kong and many more places. It will have most relevance in those regions where space is truly at a premium. Even the capsule hotels which are so popular in Japan can be considered as one part of the micro hotel sector.

Micro Hotels: Key Players 

Some notable micro hotels are Nine Hours in Japan, Dean Hotel Dublin, Tommie Hotels NYC, The Pod Hotel NY, Citizen M hotels in NY, Paris, London, Yotel Chains, the Moxy brand by Marriott International and Tru by Hilton Hotels & Resorts.