Hotels Target Young Customers with Strategies Ranging from Micro Rooms and Hostels, to Hip Hotels that Encourage Mingling

A few hotel companies are innovating new, cost-effective room alternatives, especially in Europe and Japan, aimed at cost-conscious travelers. Busy travelers can now book tiny rooms, or “pods,” that typically measure about 100 square feet (some as small as 65 square feet) in size either for the night or just a few hours to rest and freshen up. In contrast, a more traditional motel is about 300 square feet, and luxury hotel rooms are 300 to 600 square feet. Pods generally have a small bed, flat screen TV and tiny bathrooms (some offer shared bathrooms), and windows, if there are any, may open onto a corridor instead of outside.

Examples of hotels providing pods are Yotel (which offers a 113-square foot “Queen Room”), Pod Hotels in New York (91.5 square feet) and EasyHotel (about $71 per night for 104 square feet). Hilton Hotels & Resorts introduced Tru, with 225-square foot rooms in 2016, and Marriott International is also working on a small room concept for the U.S. Microtel by Wyndham is another leading brand.

Extended-Stay Hotels Seen as A Hot Growth Area in Major Metro Areas

Extended-stay hotels, those that provide what are essentially small apartments with well equipped kitchens and living rooms in addition to bedrooms and baths, are seeing booming business and attracting significant levels of new development. Hotel giants Marriott and Hilton in particular see this is a high profit margin, high demand market. In 2023, for example, Hyatt was planning 100 new Hyatt Studio properties over the near-term. These properties are attractive for families on a budget, and for people seeking longer term stays because of work, such as construction workers, engineers or consultants involved in massive projects that require their on-site presence. The fact that these properties offer amenities such as kitchens for dining-in, on-site laundry facilities, outdoor relaxation areas such as barbecue pits and living/dining areas in which to spread out, is a great draw. Room rates tend to be moderate.

The true pod business model is similar to discount airlines in that only the basics are available and low prices are of supreme importance. Pod hotels do not generally offer perks such as fitness facilities, meeting rooms or lavish room service (some do not offer food of any kind). Yet, the services they do offer can be top-of-the-line such as plasma TV screens and high-thread-count sheets. In addition to business travelers, the rooms attract vacationers looking for good deals in locations near major tourist attractions.

New hotel brands have been launched that cater largely to younger demographics. They include 1 Hotels in the U.S., EU and Asia Pacific; Hyatt Centric in 57 hotels in 53 cities worldwide; Moxy (part of Marriott); AC hotels from Marriott in Europe, Chicago and Miami, among others; and Graduate hotels in college towns such as Athens, Georgia, Charlottesville, Virginia and Cambridge in the UK. These hotels are more affordable than high-end hotels (ranging from $70 to $399 per night) and typically feature services that appeal to Millennials such as Wi-Fi, environmentally sustainable practices, local flavor in food and décor and locations in hip neighborhoods.

A different take on the low-cost model is the youth hostel, a concept that has been around for decades, especially in Europe. Hostels are typically very low-cost housing with several people to a room and communal bathrooms. Hostelling International reported that, as of early 2023, there were approximately 3,000 hostels worldwide in more than 80 countries. A new partnership of private equity firm Yucaipa Cos. and New York hotel developer Sydell Group is spending $250 million to open as many as 10 low-cost properties in the U.S. over several years on a hostel business model. Its “Freehand” hostel is now open in Miami, Chicago, New York and Los Angeles. Affordable room rates with reasonable levels of comfort and good food are key goals.

Some hostels are attempting to go upscale with free Wi-Fi, avant garde furnishings and better security. Some offer private rooms, en-suite baths, free breakfasts and concierge service. These “poshtels” include the above mentioned Freehand, Sydell Group’s NoMad Hotel and Generator in London and Miami.

MMBY Global, a travel and hospitality firm, reported that almost 50% of millennials find having an onsite fitness center or access to off-site centers important when choosing hotels. 85% of U.S. hotels had fitness centers as of 2016, compared to only 63% in 2004, according to The American Hotel and Lodging Association. Hotels are investing in fitness center improvements and perks such as loaning guests athletic apparel and shoes or providing two-hour laundry service for athletic wear.

Some hotels are even installing fitness equipment in individual guest rooms. Hilton offers “Five Feet to Fitness” rooms in select properties that include an indoor Wattbike bicycle and Gym Rax, a body-weight training station with TRX straps, in addition to a touch screen display with more than 200 fitness videos and tutorials. The rooms cost between $45 and $90 more than standard rooms. Ritz-Carlton, Westin and Kimpton hotels are also offering rooms with exercise equipment in some markets.

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