Wall Street Journal

"Small Is Getting Bigger in Discount Hotels - Tiny Lodgings Toss Unessential Services, Add Upscale Touches" (19.03.08) By BETH CARNEY

A new niche of European budget hotel is catering to travelers who prefer Wi-Fi over scenic views and don't mind cramped quarters if that means saving money.

In the past few years, more than a half-dozen small hotel groups have been cropping up in Britain and across Europe, offering cost-conscious accommodation. Though their rates and services vary, all are shrinking costs by cutting unessential amenities, which, depending on the property, can mean space, check-in staff, or natural light.

Describing themselves as "budget luxury," "micro-boutique," or "low-service design," most also are offering upmarket touches in the form of stylish furniture, sophisticated electronics or perks such as free movies and Wi-Fi. The result is a pared-down service and lower rates.

London-based Yotel Ltd. last year opened two small pilot hotels within the terminals of Gatwick and Heathrow airports. It plans to open another in Amsterdam's Schipol airport in July. Inspired by Japanese capsule hotels, Yotel's rooms are seven or 10 square meters, or less than half the 22-square-meter rooms offered by Britain's budget-hotel market leader, Premier Inn. Yotel's rooms hold little more than a bed and bathroom (shower stall only), and their windows face an indoor corridor.

But each Yotel room comes with a flat-screen television, free wireless Internet access and a handmade "organic" mattress.

"The idea was we'd cut down on real-estate costs and provide luxury in a really small space," said Gerard Greene, chief executive of Yotel, which was founded by Simon Woodroffe, who started the Yo! Sushi restaurant chain in Britain.

Rates at Yotel start at £25 ($50) for four hours (for travelers to freshen up during long layovers, for example) and go up to £80 for the best cabin for a full day, lower than London's average rate of £120 per day, according to Smith Travel Research.

In Birmingham, NiteNite Ltd. offers windowless seven-square-meter rooms with mood lighting, 42-inch plasma-screen TVs and Egyptian cotton linens for an average rate of £45 a night. The two-year-old company plans to open its second hotel, in Berlin, at the end of this year.

The group's aim is to attract business travelers on a budget, Chief Executive Colin Hatt said. "Why spend £200 for a room you only sleep in for six hours."

The windowless design allows NiteNite and Yotel the possibility of building in unconventional sites, such as warehouses, managers said.

That is the strategy of Qbic Hotels BV, of Maastricht, the Netherlands. It opened its first hotel in July in the World Trade Center office building in Amsterdam, because office space is in surplus supply there, said Maxine Hofman, Qbic's sales and marketing director. The company has properties in Maastricht and Antwerp that plan to open later this year.

The Qbic hotel is built around a contemporary-looking nine-square-meter, box-shaped pod called the Cubi, which contains a bed, a bathroom and desk space. The module can be assembled in any room to create a hotel room, cutting the cost of development almost in half, Ms. Hofman said.

Charging between €69 ($109) and €139 per room a night, the company keeps costs down by offering virtually no service, she said. Guests check themselves in through automated terminals and can buy sundry items from sandwiches to toothpaste from vending machines. "The advantage is we have almost no staff," Ms. Hofman said.

The mix of luxury and budget elements in the new hotels appeals to today's business travelers, who don't fit into easily defined boxes, said Michael Levie, founding partner of Amsterdam-based group CitizenM, which is opening two "affordable luxury" hotels in its home city this year. "They wear jeans. They have an expensive watch. They drink champagne and take public transportation. They fly budget airlines and want to stay in a nice hotel," he said.

Indeed, the popularity of low-cost airlines throughout Europe has helped drive demand for cheap accommodation, said Richard Cope, a travel analyst at London-based research firm Mintel International Group Ltd.