Skift Take

We have our reservations (pun intended), but if the popularity of pod-like hotels is any indication, perhaps this might just work for YotelPad and its experiment in reviving the condo hotel concept.

Yotel, the hotel company known for its compact rooms and its penchant for a high-tech guest experience, is bringing its expertise to a new sector: branded residences that will be marketed for extended stay travel.

Yotel CEO Hubert Viriot has long sought to create an entity such as YotelPad, which might be considered a hybrid of an Airbnb and an old-school hotel. He sees YotelPad as a solution for travelers who need a stay that’s longer than two or three nights.

“It’s a natural extension for our brand,” Viriot told Skift. “We’ve been very focused on very short stays for the past four years, with YotelAir at airports and with Yotel in cities. They specialize in two- to three-night stays maximum, and they’re designed for busy travelers looking for efficiency and being on the move, jumping form one city to the other.”

But Yotel realized that its current hotels might have lost customers who were looking for longer stays.

As the CEO of Raimon Land PLC, a Thailand-based real estate developer, from 2009 to 2013, Viriot helped develop ultra-luxury condominiums.

“I always thought we should do the same at a very affordable price,” Viriot said. “My super luxury customers hardly even used the facilities. What if I brought this to a younger generation that’s dynamic and wants to be in the right location, but can’t afford the big price of central London or New York City? I’m sure it would fly. The idea had been with me for years. When I was invited to take over Yotel, I thought, ‘I have to do this one day.'”

It was Yotel’s multiple developer partners who convinced Viriot and his team that this idea could indeed become a reality, taking the brand’s guiding design principles and applying it to condominiums.

The first property, a branded residence in Park City, Utah, is scheduled to open in December 2019, with four other residences in the works in Dubai, Miami, and Geneva Lake, Switzerland, where there will be two.

Condo Hotel, Extended Stay Hotel, or Branded Residences?

To be frank, the messaging around this newest Yotel brand is very confusing and muddled, making it difficult to define exactly what YotelPad is. All we can surmise is that it is, essentially, a condo hotel that accommodates extended stay guests.

When Skift spoke to Viriot by telephone, he said, “With the Park City YotelPad, it will be condos and some will come back into the rental pool. In other cases, it’s more traditional extended stay. We have both formulas available. The objective is the ability to achieve both.”

That statement suggests there will be some projects, such as the Park City YotelPad, that will be purely condominiums or branded residences, and other projects that would operate just as any other extended stay hotel brand would.

Additionally, the marketing materials Skift received with details about the new brand use the term “extended stay” and “longer stay” several times.

But in a later conversation with Yotel’s vice president of brand, Jo Harrington, she said the majority of the brand’s initial developments will primarily be condo hotels, or branded residences. That means that the individual units will be sold to owners, either individuals, corporations, or institutional investors, and then those owners have the option to put those units into the rental market on any platform they choose.

When they do book their units, these owners will also pay a commission to Yotel for servicing/managing their units. And in marketing those units, it appears that Yotel will be marketing these condominiums to an audience of extended stay guests.

Harrington said, “It’s not extended stay hotels. It’s for the extended stay market. It’s for anyone who wants a longer stay. The vast majority of the projects we’ll do are ones where you own an individual unit. There may be some pockets in the world where we don’t do that, however. The projects we’re working on now, like Park City and Miami, [are ones where] owners will be able to buy those units. The Miami project will be on top of the hotel [a Yotel hotel property, as part of a mixed-use development.] Where we have a hotel [and we have these types of units], we may brand them as YotelPads and they may not be individually owned.”

This concept, also known as the condo hotel, is not new to the accommodations industry.

“Extended stay and branded residences are not new,” said Mark Skinner, a partner in the Highland Group, a lodging consulting firm based in Atlanta. “It’s a condo hotel. It’s been done before. Because they are residential condos they have kitchens and they are capable of catering to an extended stay guest. It’s like an apartment, but it’s owned and put back into a rental pool. There’s nothing new about that. This trend peaked in 2006. There are examples of that all around the country and they are branded.”

For that reason, Skinner thinks the company could be taking a risk with this new brand.

“It’s a big jump in the positioning of the brand to go from what Yotel is known for and getting into extended stay and condo hotels,” he said. “The condo hotels have very much gone out of favor. To be successful they would have had to have worked both as a condo and as a hotel so a lot of them were developed on the basis that the sale of the condos would provide revenue for the hotel side and it didn’t always work. What happens if the condo sales don’t go as projected?”

Skinner said that if Yotel wants to give YotelPad a fair chance to succeed, it would be better to ensure that its individual YotelPad properties are either solely an extended stay hotel or a branded residence project.

“It’s easier to manage if they keep branded residences and extended stay separate and also, from a zoning standpoint, you could probably develop that on residential land if you only do branded residences,” Skinner said. “If you rent out rooms for less than 30 nights you may run into some zoning challenges in some areas.”

A rendering of the kitchenette area of a YotelPad in Park City. Source: Yotel

Thinking Small

There are, however, some features that make YotelPad a compelling brand to watch, whether you’re talking about extended stay or branded residences.

The first is the fact that YotelPad’s rooms are much smaller than typical branded residences and extended stay hotels. A standard “Pad” is approximately 215 square feet and goes up to about 570 square feet for some larger units to accommodate up to six people.

The tech-driven rooms, Viriot said, maximize the space with smart design and flexible, even mechanical furniture. This includes Yotel’s adjustable and foldable SmartBeds, en-suite bathrooms, fully equipped kitchenettes, a Technowall, and storage space. Communal areas include a 24/7 gym, bike and gear storage, Amazon lockers, laundry, a home cinema, library, and a Club Lounge for co-working, meetings, and entertaining guests.

“You can retract the beds and move furniture depending on what usage you need them for. The room can turn into a lounge area during the day. The dining space can become more of an office. The combination of an app, smart devices, and mechanical furniture allows us to move things around easily makes the Pads exceptionally multifunctional and very user friendly,” Viriot said.

Viriot and his Park City developer partner, Replay Resorts, don’t see the smaller rooms as being a hindrance.

Todd Patrick, director of marketing and sales for Replay Resorts, said he thinks there’s a desire for small but efficient homes like the ones Replay is building with Yotel because of “what’s happening in the prefab movement, or the tiny home movement.”

“Big homes are becoming things of the past,” Viriot said. “I’m exponentially confident about that. We see the same trend all around the world for exponential growth of micro homes, or the tiny home movement.”

Why is he so confident? Viriot said, “For various reasons, one being purely real estate and congestion of cities but also because of new generations who have very different lifestyles and prefer living in small places in good locations close to city centers. There’s now much more acceptance of smaller places. We’ve already seen it with the Yotel brand in hospitality and the same applies to longer stay accommodations now, too.”

Yotel isn’t the only brand to be experimenting with smaller rooms. Other brands doing the same include Pod Hotels, Marriott’s Moxy Hotels, and Ian Schrager’s Public Hotels.

Smaller living areas, Viriot said, benefit from good design and quality. “It needs to have that quality and experience element and that’s why I think we have such an opportunity with this brand, to apply what we’ve learned in the hotel business and bring it to extended stay.”

However, Skinner remains skeptical about how these smaller rooms will manage to appeal to extended stay guests. “You can’t get a kitchenette in a 250-square-foot room. You have to add on a little bit to that. Even the economy extended stay product out there is larger than that.”

Bringing Affordable Luxury to the Condo Hotel Market

The smaller unit sizes also impact another defining feature of YotelPad: its relative affordability. Launching YotelPad lets the company branch out into urban markets and even into resort destinations, as the first YotelPad in Park City demonstrates. And it’s in these more established leisure destinations where a brand like YotelPad can offer a more “affordable luxury” type of experience that’s in stark contrast to the multimillion-dollar branded residences that you might usually find.

“In some hotels, you can buy a condo and feed it back into a rental pool and that’s been around for a while, but it’s been privy to luxury condominiums,” Viriot said. “Why should it only be for the super-luxury hotels of the world — only for Four Seasons or St. Regis? Why can’t we bring this experience and bring the price down significantly lower to a much larger and younger crowd?”

The price range for a YotelPad unit in Park City, Patrick said, will likely range from $250,000 to $350,000, which can be half the price of other condominiums for sale in the area.

“I don’t know of anyone doing this type of extended stay hotel model at that economy price point that Yotel does,” Skinner said. “In extended stay, the majority of travelers are business travelers. Economy extended stay does very, very well in the U.S. for sure and elsewhere where it’s present. But there are not a lot of economy extended stay properties in urban areas because the development costs are too high to appeal to that traveler.”

When it comes to pricing, Viriot said it’s too early to state specific rack rates for the rentals, but that “The idea is to be very competitive with what you may find on Airbnb and being much more in line with that market segment than your typical serviced apartment. The projects are just being launched, so it’s premature for me to put a price on it.”

Viriot said he thinks the brand has cross-generational appeal, but will be attractive first to “younger generations who don’t see the need of having a very large apartment, or someone who values community more than the real estate.”

Tech-Driven Pads

Viriot said Yotel has spent quite a bit of time examining the guest experience for a YotelPad, ensuring that it stays true to the company’s overall brand DNA but also works for longer stays.

Controlling much of the guest/resident experience is the YotelPad app, which acts as a digital concierge, as well as a digital key. Yotel said guests can use the app to order amenities and food to go. But beyond the app, Yotel is also working on enhancing the technology behind the guest experience.

Viriot said the company is “also working closely with a number of tech companies to get our Pads ‘smart’ in so far as the utilization of lighting, temperature control, and sound.” He said, “We’re also looking at how we can connect and how we utilize voice control to control those Pads.”

One item to note is that YotelPad has no connection to Yotel founder Simon Woodrroffe’s Yo! Home, which boasts a similar emphasis on building space-saving homes that utilize mechanical furniture.

“We are not involved in Yo! Home and I think it’s very interesting,” Viriot said. “The only commonality is that the founder of Yo! Home is the former founder of Yotel. It’s a much more residential project, and it’s much more U.K.-focused rather than being a global brand [like YotelPad].”

The Next Big Disruption in Longer Stays?

Aside from expanding Yotel’s reach, this move helps the brand remain competitive. Viriot sees YotelPad serving as a disruptive — and needed — force in the traditional extended stay and branded residence markets. He added that Airbnb’s impact on the entire lodging industry is not lost on Yotel and the development of this new brand.

“Airbnb disruption is also one of the reasons why we decided to go into this segment. It’s a source of inspiration to some extent,” Viriot said. “With the growth of Airbnb and how it’s disrupting the entire rental market, I always thought, ‘what’s missing?,’ You’re never sure of what you are going to get with Airbnb; you rely on pictures on the site and there’s generally no service and no experience because you’re on your own. With YotelPad, we could build something to take that into account. You know what you are going to get. … It’s something I have been thinking of for a long time, and YotelPad might have just put that all together and hopefully, I am right.”

Viriot said that most traditional extended stay product consists of “very large and very luxurious” accommodations, but that they “lack experience.” Because of that, traditional extended stay is finding it challenging to compete against offerings like Airbnb.

“The only thing an extended stay can do better than Airbnb is about serving and providing services and an area to develop a sense of community,” Viriot said. “That’s why there’s still huge potential in the extended stay segment. It needs to be more affordable and more flexible and the element of the community is critical. At the end of the day, what customers are looking for is an experience. With YotelPad, we inverted the rules. The studios or pads are very compact and very well designed and we invest a lot into the communal areas.”

The extended stay market is indeed changing, and pivoting more toward approaches that emphasize communal living or even co-living as an answer to the popularity of platforms like Airbnb and HomeAway.

Extended-stay hotels are also a particularly bright spot in the hospitality industry, with demand at record highs in the U.S. Extended-stay hotel demand growth outpaced the change in supply in the most recent third quarter in 2017, according to The Highland Group.

Skinner said, “Occupancy in extended stay hotels has been in record territory for four to five years now in the U.S., despite thousands and thousands of rooms being added. The fundamentals for extended stay are very good because the economy is expanding, jobs are being created, and there’s a lot of construction going around all across the country.”

He said that the industry’s focus on experiential lodging is “definitely growing” and that it adapts well to the extended stay experience. “Extended stay lends itself to that because you are there in the neighborhood for a long time, because you’re there on an extended assignment,” he said.

One thing that YotelPad will not be, however, is an experiment in co-living, Viriot emphasized. He said he still believes that people still prefer to have their own living quarters and the option to decide what they want to share in the community.

“You have your own Pad, and there’s not someone else with you in there. It has everything you need — a kitchenette, bathroom, etc. but you can open the door and access the communal areas and decide when and where you want to share and co-live,” he explained. “We purposefully made this decision.”

A Closer Look at YotelPad Park City

YotelPad Park City’s developer, Replay Resorts, is a resort developer whose executive team was formed from Intrawest, a leading destination resort developer that was influential in developing the ski resort of Whistler, among others. It was Replay’s decision to work with Yotel to bring YotelPad to Park City as a branded residence concept.

“We had this idea of bringing what’s happening in the urban market, the micro concept, and bringing that to the resort market,” said Patrick. “Hot resort destinations in North America are expensive for ownership and they are becoming unaffordable. With YotelPad, we’re bringing affordability and reinventing, in some way, resort living.”

Patrick said Park City is easily one of the largest and most accessible ski resorts in all of North America and because the resort hasn’t seen much condo development in recent years, now seems like the optimal time to launch a product like YotelPad and to “revitalize” parts of the resort.

In developing the Park City property, Replay’s Patrick said “every inch has been planned” and it was important to them that the property be close to the main gondola, as well as close to amenities such as bars, restaurants, and shops in the ski village. Just as important were the indoor and outdoor amenities that the residences will have, including outdoor fire pits, a hot tub, a Club Lounge, fireplace hearth room, games area, gym, and terrace. All units are fully furnished.

People who choose to buy a unit at the YotelPad Park City can choose to live in it 365 days a year or they can rent it out whenever they choose to. It’s a very similar concept, in fact, to the one being used at Niido Powered by Airbnb whereby residents are encouraged to rent out their apartments on Airbnb when they are not using them and, when they do, the landlord, Niido, benefits with a commission.

Skinner said that Airbnb’s partnership with Niido is something the entire lodging industry should be paying close attention to, and that Yotel would do well to take note of what Airbnb is doing with those apartment-hotels, which are scheduled to open later this year.

“Airbnb is a wonderful booking engine,” Skinner said. “Their name alone will draw people to their website … I think that them branding a building, from a marketing standpoint, is a very good idea. There’s no reason that Yotel couldn’t leverage their own brand on extended stay accommodation, too”.

Patrick said that he thinks the YotelPad concept will appeal to many markets, and that Replay has plans to bring the concept to other resort locations in the future.

Can YotelPad Succeed?

We won’t know until the first YotelPad opens in 2019 if the brand will prove to be successful but, not surprisingly, Viriot and Patrick are optimistic about its prospects.

Given Yotel’s recent $250 million in investment from Starwood Capital, Viriot thinks the company’s overall future is bright, and especially so for YotelPad, which was already in development prior to Starwood’s investment.

“Starwood Capital also has its own extended stay brand, but it’s positioned very differently,” he said, referring to Uptown Suites. “But it shows they are also big believers in the extended stay space, as we are. They gave us confidence to go deeper into it.”

A Yotel expands its brand portfolio to three, he said a loyalty program is “also in the works” but that it won’t resemble the hotel loyalty programs we’ve become accustomed to. Instead, it’ll be more like a customer resource management system.

“We will come up with our own program,” he said. “Having loyal customers is key and for me it means having program that allows us to recognize them and personalize their stay and give them immediate rewards rather than never-ending point accumulation.”

And to market the new brand, Viriot said the team is focused on digital marketing. And for distribution, well, he’s open to a number of channels, including Airbnb.

“We might use online travel agencies. Will we put them on Airbnb? I don’t have the answer yet, but I’m thinking about it with a smile,” he said.

Advertising YotelPad on Airbnb certainly aligns with a larger strategy that Airbnb is currently pursuing, as it attempts to bring more traditional accommodations — hotels included — onto its platform.

As for the future of YotelPad, Viriot said, “I’m passionate about how our business is being disrupted and how residences via apps like Airbnb everything are changing. I think this brand, YotelPad, has enormous potential because it ticks boxes from so many perspectives. It’s so flexible. It might be the ultimate hybrid between a hotel and a residence.

“Having said that, and as passionate as I am, I haven’t set a specific target for it. When I speak to my owners and developers they all like it a lot. We already have the first five or many, and many more will be announced soon. You never know — it might be our largest brand, but I don’t want to jinx ourselves. Let’s start with five and see what happens.”

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Tags: extended stay, yotel

Photo Credit: A rendering of the YotelPad in Park City. Yotel is launching the new YotelPad as a brand that caters to extended stay travelers and people looking for vacation condominiums or branded residences. Yotel