Style in small spaces Japans next generation of capsule hotels

These days, transiting business travelers, foreign tourists on a budget and even Millennial couples and families tend to make up the bulk of guests.

May 07, 2018

Capsule hotels in Japan were once the domain of salarymen looking for a cheap, fuss-free spot to crash after a late night.

But a new crop of guests has helped spur their resurgence, with growing numbers of novel and upmarket versions opening in the last year.

The capsule hotel – also known as a pod hotel – provides simple little rooms with single size mattresses measuring around 1.2 meters wide, two meters long and one-meter high. They first became popular during the 1980s and 90s with local businessmen.

The new versions have broken the mold – think communal lounges with complimentary drinks and massage chairs, stylish rooms with personal grooming products and public bathing areas. The Millennials, a new capsule-hotel brand, was even feted for its artistic pods in its latest Shibuya outfit, which feature the works of 20 Tokyo artists and designers.

“The recent iterations of the capsule market show how the segment and guest profile have evolved,” says Atsushi Murai, Senior Vice President of Investment Sales Asia, JLL Hotel and Hospitality Group.

Capsule hotels are catering less to the salarymen market; these days, transiting business travelers, foreign tourists on a budget and even Millennial couples and families tend to make up the bulk of the guests.

They also have ambitious plans to woo even more travelers, taking advantage of an accommodation crunch in Japan amid growing tourism numbers.

It’s spurring innovation in the market, from women-only hotels to smart technology, enabling guests to control lighting, air conditioning and even the door lock through their smartphone.

“There will probably be more interesting capsule hotels entering the market,” says Murai. “The pie is growing and more travellers are willing to give it a go instead of staying in a typical hotel since it’s usually just for a night or at very most two.”

Going global

Revenue from capsule hotels in Japan will hit US$167.4 million by 2022 from US$123.84 million in 2016, according to Statistica. The global market for capsule hotels is increasing at a compound annual growth rate of six percent, driven primary by Asia, as similar concepts take off in the region from Australia to India. A Japanese capsule hotel manufacturer, Capsule, has even tied up with a local partner to open a hotel in Jakarta’s Soekarno-Hatta airport.

However, Murai does not foresee Japanese operators venturing too far afield into other Asian countries, preferring instead to concentrate on the domestic market.

“There’s enough domestic demand in Japan, in particular the key gateway cities such as Tokyo and Osaka,” he says, noting competition risks abroad. “It does not take much to set up a capsule hotel concept, it can be easily replicated by anyone overseas and you don’t need a high level of expertise for it.”

Hitting the right notes for the future

The demand for capsule hotels is likely to grow steadily in Japan, even in the face of new accommodation options as a new law legalizing Airbnb-style rentals come into effect this June.

“Minpaku, or private residences rented out by their owners as short-term lodging, are not in the same market segment as capsule hotels. They appeal more to travellers who want space and compete against traditional hotels. Capsule hotels are unlikely to be affected at all,” says Murai.

Instead the popularity of manga kissaa (comic cafes) could well be the unlikely competition. Open 24 hours and offering facilities such as an Internet connection, showers and drinks as well as cosy individual booths where you can nap, these cafes have become increasingly popular among  students and the working crowd who missed their last trains home. Some are charge a rate of 1,500 yen (US$6) for six hours, which is cheaper than the average rate of a capsule hotel which is about US$30 a night.

Still, Murai believes that capsule hotels will be here to stay, at least for the near future, before hotels start lowering prices if there’s an oversupply.

“Capsule hotels are in a fringe market and the beauty of them is that they are very easy to set up and demolish,” he adds. “Building owners can have the space quickly repurposed to be turned into offices or warehouses if need be or when demand falls.”

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