A Room with No View

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In contrast to Beecham's somewhat orthodox business model, the Yotel is downright radical, attempting to pack guests into much smaller spaces than Western consumers usually encounter. Woodroffe says he was influenced by Japan's capsule hotels, which feature rooms little bigger than the sleeping compartments on trains. Yotel's "pod rooms" will offer a bit more space than Japanese-style cocoons. Still, they're not for the claustrophobic. The largest are just 10.5 sq m, though they're tall enough for even the most statuesque of guests to stand up in. Also jammed into that space: tiny workstations and en suite bathrooms about the size of those on jetliners that include luxury "rain showers." There are no exterior windows, allowing the pods to be stacked and clustered in sites never before considered for hotels. "It's a very flexible product," says Russell Kett, managing director of hotel consultants HVS in London. The Gatwick Yotel is being crammed into a previously unused basement of the airport's South Terminal. The squeeze on space helps to shrink prices: rates are $107 for a standard room and $156 for a slightly larger cabin. While those charges are less than the London average, it's arguable they're still somewhere north of Cheapside. But Woodroffe claims he's giving folks a lot of luxury at those prices, just in a compact package. "Basically, you get everything you'd get in a four-star hotel." And he is planning to eventually offer smaller, more capsule-like economy rooms without a private bath that could be priced at around $50 a night. "They'll be based on the beds they have on rock 'n' roll tour buses, so they'll be very comfortable, with their PlayStations and TVs and all that. What more do you need? It's fun and cozy."

Woodroffe is not the first to try to adapt capsule hotels to the European market. Stelios Hadji-Ioannou, founder of budget airline easyJet, launched the first easyHotel in London in August 2005, offering tiny spartan rooms averaging 7.5 sq m (most without windows) in the high-rent South Kensington district. Want restaurant service or minibars? Forget it. And you'll pay about $10 a night extra if you want to watch the flat-screen TV. As a result, rates average about $78. Yet travelers appear to have embraced no-frills accommodation. easyHotel's occupancy rate averages 89%, says Roger Powell, franchise service director, compared with the average annual occupancy rate of 74% for all London hotels.

All three operators offer special pricing plans for exceptionally thrifty guests. Like many airlines, both easyHotel and the Hoxton Hotel give discounts for early booking. (Reserving a month in advance at the South Kensington easyHotel will save you about $10.) Meanwhile, Woodroffe says he intends to rent Yotel rooms for as little as $49 for a four-hour stay. That will be possible because he plans to roll out Yotels at airports (a Heathrow Yotel is slated to open this summer) and other travel hubs such as train and subway stations, where guests in transit may require rooms only for a shower and a nap. Like restaurants that turn over tables many times an evening, "We think we can let the rooms 21/2 times a day," Woodroffe says — that's a target occupancy rate of 250%.

There are no guarantees Woodroffe and the other budget hoteliers will hit their numbers. "Certainly niches are out there," says Alex Kyriakidis, global head of tourism, hospitality and leisure at industry consultants Deloitte. "But will they be a slam dunk success? The answer is no." They'll need to achieve year-round occupancy rates of more than 85% to be profitable, he says, which could prove a tough target in a segment of the market that is already competitive, and becoming more so. Established chains, such as the Hard Rock Hotels and Intercontinental's Indigo chain, are opening small-room, limited-service hotels in cities such as Chicago and Houston, and have international expansion plans, Kyriakidis says.

Still, the London crowd seems to have a head start. Beecham says he's ready to open a second hotel and is already scouring the globe for suitable locations. There's already an easyHotel franchise in Basel; two more London branches are set to open this summer, followed by others in Luton, England, and Budapest. EasyHotel has also inked a deal with Dubai's Istithmar Hotels to open another 38 in the Middle East, North Africa and Asia. Meanwhile, a third Yotel may open as soon as year-end at Amsterdam's Schiphol Airport. Kuwait's IFA Hotels and Resorts, which is providing financial backing for the Yotels, "wants to expand very, very fast around the world," Woodroffe says. Clearly, the pace of change is picking up speed in the once-sleepy hospitality industry. These days, if you snooze, you lose customers.