Yotel has announced plans to open 3,000 rooms – or 12 hotels – by 2018, with sites including Singapore, Paris, Miami, San Francisco and a second property in New York City.
The growth will kick-start expansion for the group, which has opened four hotels in the 12 years since it was founded in 2002.
The company saw a change in leadership in May this year, with co-founder Gerard Greene stepping down to be replaced as CEO by Hubert Viriot, CIO at Yotel’s major shareholder IFA Hotels & Resorts. Viriot joined IFA in 2013 after five years as the CEO of Thai real estate developer Raimon Land. During his tenure at Raimon Land, Hubert increased the company’s development portfolio from USD200m to USD1.1bn.
Greene remains a non-executive director at the company. He describes himself as “currently taking a break to travel and will be looking for the next adventure in due course”.
Viriot said: “Yotel has created a niche product for affordable luxury. Since the opening of our first hotel in 2006, Yotel has accommodated over one million visitors and collected invaluable insight on both our guests’ expectations and our investors’ requirements. Today, Yotel has the solid foundation and proven track record to expand globally.
“At Yotel, we are focused on both hospitality and real estate principles. Our business model delivers up to two times as many rooms than traditional brands, and our cabin standards are on par or superior to most upscale hotels. Our guest experiences are both comforting and inspiring, remindful of first class travel. As a result, guest retention rates at our properties are extremely high with occupancy rates above 90% across our portfolio, and returns to our investors are attractive.”
The company said that, in its first full year, the New York property saw occupancy of 85% at an ADR of USD200. GOP conversion was 48% of total revenue. According to loan documents filed this year in connection with the New York property’s refinancing, seen by Bloomberg, the site had an average occupancy of 87% in 2013, with ADR of USD213. New York’s average occupancy this year to October was 85%, with rates at USD258.87, according to STR.
The company opened two hotels in the UK during 2007 at Heathrow and Gatwick, while a third property opened in Amsterdam Airport Schiphol during September 2008. In 2010 it launched its first non-airport site, with the 669-room Yotel Times Square in New York.
In December 2005, IFA Hotels & Resorts acquired the majority stake in Yotel. IFA HI now manages the company’s investment in the brand and oversees the operation of its hotels.
The company prefers management contracts, although said that it was “willing to take a little more risk to secure an outstanding opportunity”. It is looking for freehold or leasehold properties, particularly redundant or limited use.
Yotel’s next three locations to open in the US are in Miami, Brooklyn’s Williamsburg and San Francisco’s Mid-Market neighbourhoods. New York-based real estate developer Synapse Capital is developing the Williamsburg property. Together with IFA Hotels & Resorts and its partners, Synapse is also working on the San Francisco site. Yotel Miami is a 250-cabin hotel being developed by Aria Development Group in partnership with AQARAT (Kuwait Real Estate Company) in the heart of Miami.
In Europe, Yotel is developing its fourth airport hotel at Paris Charles de Gaulle airport, which is due to open in mid-2016. The following year it will open its first property in Asia with the launch of Yotel Singapore, developed by Singapore-listed Hong Fok Corporation Limited.
Yotel said it was in “advanced negotiations” for more new properties in Boston, Atlanta, Austin, Chicago, Los Angeles, Seattle and Toronto, and was “actively pursuing” opportunities in Dubai, London, Milan, Barcelona, Sydney and Hong Kong.
“One third of the company’s future growth is anticipated to take place within airport locations, with the other two-thirds planned for city centres,” said Yotel’s chief development officer, Jason Brown.
He added: “The Yotel business model is exceptionally attractive to a wide spectrum of investors, ranging from institutional to family offices. Our partners are typically well-versed at real estate, often new to hospitality, and are drawn to Yotel’s efficient layouts, lean operations and high-margin room revenue.”
The company has hatched plans for growth before. In 2012 it teamed up with US developer The John Buck Company (one of the backers along with IFA Hotels & Resorts and Kuwait Real Estate Co of the New York site) to create a fund with a target of raising USD250m in discretionary private equity. This, it was hoped, would develop and acquire up to USD650m worth of hotel properties across the US over the next three to five years.
John Buck principal Jack Buck said at the time: “We look forward to utilising our investment expertise and development experience as we help expand the brand in north America. Given Yotel’s truly unique concept, strong operating margins, management team and ability to mass approximately 30% more keys on a development site vs. other hotels, it should make for a great partnership.”
John Buck confirmed to Hotel Analyst that it was no longer involved with Yotel.
HA Perspective [by Chris Bown]: Compact hotels and those shiny, bright finishes were something different when Yotel launched. While few others have adopted the “cabin” moniker – or the shiny white surfaces – plenty are now downsizing rooms to get more in. Premier Inn’s new Hub, recently launched in London, is the latest and joins Z Hotels, Tune and others in making a virtue of smaller rooms.
Additional comment [by Katherine Doggerell]: Since the company launched its take on the Japanese pod hotel, talk of world domination has not been matched by reality. Its concept of efficient rooms with a hint of boutique luxury has, however, enlivened the imagination of other operators, with Marriott International’s Moxy the most recent entrant into the (limited) space. Yotel must now attempt to squeeze its tiny self back into what is becoming a crowded marketplace.