In the Age of Airbnb, Micro Hotels Spark Interest of Global Hospitality Chains and Boutique Developers
May 25, 2016
Micro hotels are moving from fringe to mainstream as global hospitality brands and boutique developers alike build projects that cater to millennials and others who are looking for budget-friendly, no-frills rooms; amenity-rich common areas; and connections to local culture. This shift has occurred with the rise of Airbnb and other providers of short-term rentals that emphasize bespoke and authentic travel experiences over luxury and standardization, according to a panel of hospitality and real estate experts convened by ULI Washington earlier this month.
What a new generation of travelers wants is a simpler, more efficient use of space in individual hotel rooms with more lavish shared spaces that allow them to socialize or—similar to a coworking space—be alone together and not isolated in their rooms, panelists said.
The micro-hotel concept is making its way to the nation’s capital, visited by 20 million tourists in 2014. Modus Hotels will open Pod DC later this year in Chinatown, a busy retail- and restaurant-packed district, accessible by transit and within walking distance to the Smithsonian Institution museums, the National Mall, and a major sports and entertainment venue.
Small-scale, boutique developers are jumping on the micro-hotel trend as well. Panelist Jim Abdo, president and CEO of Abdo, a developer of luxury condominiums in historic D.C. buildings, will debut his Hotel Hive early next year.
The 83-room hotel is a major renovation of the Allen Lee Hotel, a historic but dilapidated property that sits adjacent to the George Washington University and U.S. State Department. The Hotel Hive’s rooms will measure roughly 250 square feet—larger than a typical micro-hotel room in New York City, but small nonetheless—and will cost $125 per night on average. Each will be outfitted with the latest technology—smartphone check-in, high-speed wi-fi, energy-efficient HVAC systems, and ample charging stations throughout the property—that millennial travelers now expect; room finishes and fixtures will express what Abdo calls “refined minimalism,” an aesthetic that defines the Hotel Hive’s shared amenities; and common spaces as well.
“The Hotel Hive is all about socialization,” he said. “Why do we love the term ‘the hive’? It conveys a lot of energy, buzz, and an extremely efficient use of space.”
One of the common spaces and social focal points will be the Hive Bar with a food and beverage program designed by Michael Lastoria, cofounder and chief executive of &pizza, a growing fast-casual wood-fired pizza chain that launched in Washington, D.C., four years ago. The chain also celebrates efficiency—it takes only a few minutes from the point of “designing” your own pizza to walking away with it, steaming hot—but sources its ingredients from local purveyors.
Lastoria, a panelist, explained to attendees that he and Abdo are challenging the idea that an upscale hotel experience should be exclusive or out of reach. Room rates as well as the fast-casual menu “prices guests in rather than pricing them out,” he said. “The concept of the VIP is thrown out the door.” He envisions the Hive Bar as an intimate space where guests can sample unique cocktails made from a line of specialty sodas.
Perhaps the most important ingredient of all will be guests feeling like they are experiencing something real and one of a kind. The Hive Bar “will feel like you stumbled into someone’s cool D.C. apartment,” Lastoria told the Washingtonian magazine—precisely what Airbnb’s business model aims to do: connect travelers searching for experiences off the beaten path with hosts willing to open their homes to strangers and share their city’s secrets.
While Abdo’s ultimate goal is to launch the Hotel Hive on a national scale, for now he is eager to test his combination of minimalist rooms, locally sourced craft pizzas and cocktails, and a hip bar and rooftop scene in the D.C. market.
Just as small-scale developers like Abdo are exploring micro hotels with as a viable business line, so too are major hospitality brands like Hilton, Hyatt, and Marriott, according to panelist Vanessa Sinders, senior vice president and department head for government affairs at the American Hotel and Lodging Association.
In the past few years, Hilton has launched two micro-hotel concepts—Tru, a midmarket hotel that targets those with a “millennial mind-set” and offers functional rooms, decked-out lobbies, and more food-to-go options; and Canopy, with minimally furnished rooms, local food and wine tastings, and bike sharing for neighborhood exploration. Marriott launched Moxy Hotels in Europe, but opened locations in New Orleans and Tempe, Arizona, thereafter, and Hyatt opened its Hyatt Centric brand in Miami and Chicago earlier this year. “The major brands are adapting to appeal to millennials,” Sinders said. “Our industry is growing, evolving, trying to meet the needs of consumers.”
It is no coincidence that the global brands are launching micro-hotel concepts as Airbnb grabs a larger share of the market away from major companies—the technology company’s $25 billion valuation far exceeds the market caps of the major brands, including Hilton and Marriott, Sinders said.