HOTEL BUSINESS MAGAZINE | YOTEL PLOTS GROWTH TRAJECTORY

Night time exterior of YOTEL Washington DC

CEO Hubert Viriot has some lofty goals for YOTEL: “Hopefully, in less than five years, we will have achieved our objective of 50 hotels around the world. And, in 10 years, I think we should be 10 times bigger.”

At the rate YOTEL’s three brands—YOTEL, YOTELPAD (extended-stay) and YOTELAIR (airport hotels)—are growing, with 18 properties open and 11 in the pipeline, it would be hard to argue with that prediction.

Yotel Miami will be a mixed-use property with a hotel and condominiums.

The company’s growth plan includes entering the franchising space. Its first U.S. franchised property, YOTELPAD Park City in Utah—owned by Replay Resorts and operated by Benchmark Pyramid—opened in December 2020. There will be more to come when the timing is right.

“To offer a franchise program comes with a lot of responsibilities,” said Viriot. ”My team and my shareholders agree that before we even contemplate doing that, we need to demonstrate that the Yotel model works. That’s why we haven’t even contemplated doing anything like this until very recently. We can now demonstrate—even though we’re still a very young company—that YOTEL works.”

The original plan was to offer a franchising model once YOTEL reached 50 properties, but it should roll out sooner than expected.

“We’re pragmatic, but if the market is comfortable enough with us to be able to deliver a franchising program, we’re ready as well,” said Viriot. “As any CEO of any company would, I want my business to grow and flourish, but at the same time I want it to grow at a rapid pace. So the objective right now is to continue our management activities, growing our franchising business and, ideally at this stage, working with a number of vetted operators that we’re familiar with, and starting this way before going straight to a franchisee owner-operator model.”

The company’s two core markets are the U.S. and Western Europe, with properties also in Istanbul and Singapore. Two new countries will have YOTEL properties in the near future.

“We’re actively growing our business in Australia and Japan, two markets which are quite far away, but actually present lots of similarities in what we’re doing and experiencing in Western Europe and North America in terms of customer behaviors, barriers to entry to the market, supply gap, travel behaviors and the maturity of the market,” said the CEO. “So, we will be announcing a number of new projects in those two countries, perhaps [this month]. We have a very strong pipeline coming from there.”

Viriot pointed out that, as far as expanding to other markets, there is only so much the company can do right now—“In my office here in London, we’re 60 people. It’s 59 more people than five years ago, but it’s still only 60 people”— but, “I am absolutely sure that our brand works in, for example, Mexico. I’m sure YOTEL would do very well there, and we’re looking at projects there. We’re very proactive in the U.S. and looking for opportunities there.”

This past year also saw the first hotel acquired by a third-party to convert to a YOTEL. The Liaison Washington Capitol Hill in Washington, DC, which was acquired by Metrovest Equities and BLDG Management, became the YOTEL Washington DC.

“We were working with them throughout the process because it was acquired to transform into a YOTEL,” said Viriot. “Since then, we’ve got a second one in Manchester, U.K. We’ve now demonstrated on both sides of the Atlantic that it’s absolutely feasible and it adds value. It’s certainly a model that we want to continue replicating.”

The CEO explained that he expected more conversion opportunities with investors taking a lot of assets that are distressed or in a dire state to find a value-added play, but “what we’re seeing a little bit more often is adaptive-reuse opportunities, and that may come a lot with COVID. Offices that become redundant may work in our favor.”

The two conversions were completely different, he pointed out, with the DC property undergoing a “heavy surgery.”

“We took the asset and increased the room count because our rooms are smaller,” said Viriot. “So, we converted three rooms into four. But, we didn’t increase the room count by 25%; we increased by 12%. That required a lot of work; it was just making the hotel look a little bit less older. We implemented our tech requirements and facilities and gave it a completely new look and feel. We were supposed to do this conversion over time, floor by floor, and keep the hotel working while we were doing it, but because of COVID the hotel was shut down and we did it over in five months and then reopened.”

Fortunately for YOTEL, the Manchester property had a room size that met the brand’s standards. “The conversion was easier; it was primarily aesthetic—FF&E, OS&E, etc.,” said Viriot. “We just took over [in November], and the conversion will be completed by February. So, it was two different scenarios. One was a massive repositioning of the asset and the other is more like the takeover, incorporating it into our portfolio and elevating the property.”

He noted that there have been four other conversions to Yotel properties, in San Francisco; Edinburgh and Glasgow, Scotland; and Porto, Portugal.

“San Francisco was by far the most difficult because it was a historic building, and it wasn’t just about converting an office; it was about converting a 100-year-old historic building,” the CEO said. “There were a lot of code requirements from the city, which made the refurb a little more complicated than anyone expected, but the end result is spectacular.”

The next major project to come aboard is the mixed-use Yotel Miami and YOTELPAD Miami, located in Downtown Miami close to the cruise port. The YOTELPAD portion of the property will be made up of condominiums.

“Very few of the buyers have purchased the condos to move in,” said Viriot. “They’re more investment properties, and we’ve offered a rental program that we will be managing on their behalf. So far, about 100 of the owners have signed onto the program, and we’re expecting as the property opens even more to come in. Then, we will be offering these units on an extended-stay basis vs. the hotel, which we offer on a short-term stay basis. We could do exactly the same thing without selling the condos.”

Because of supply chain issues, the condos have yet to open. The hotel is expected to make its debut sometime in the first quarter of this year.
YOTEL'S first-ever property was the YOTELAIR within Gatwick Airport in the U.K. Since then, there have been four more YOTELAIRs in cities such as Paris, Amsterdam, Istanbul and Singapore. Viriot explained why there has yet to be a YOTELAIR in the U.S. “We’ve pitched them so many times—JFK, San Francisco, Atlanta, Miami—and I’m sure at some point we’re going to get there,” he said. “The main issue we have in the U.S. airport environment—but it’s not so different from elsewhere—is that they’re quite old and they’ve outgrown themselves. They’re already stretching and using every square inch they have to add more flights and other things. So, there’s a general lack of space in the huge infrastructure.”

He noted that Hartsfield-Jackson Atlanta International Airport offered a space that was too small.

“I can do small, but it was really small,” said Viriot. “For us to make the economics work, we don’t need much— 500-600 sq. m. (5,382-6,458 sq. ft.)—in the airport, but they don’t have it,” he said, adding, “We will get there because I think what’s very interesting—and we’re seeing it all around the world—is that hubs are competing with each other and they need to attract the airlines and the individual traveler.”

According to YOTEL, of the more than three million guests who stay at one of its properties, 11% are business travelers, while 65% stay for both business and leisure. Despite the fact that business travel has been slow to recover, Viriot noted that the type of business traveler that YOTEL caters to is coming back.

“The recovery of the markets has been stronger than anticipated, primarily driven by leisure, but corporate is also coming back quite quickly,” he said. “Corporate groups are not a big deal for us because we are not a MICE [meetings, incentives, conferences and exhibitions] hotel. Global corporate is not exactly our market. We have a little bit, but who is the corporate traveler at YOTEL? It’s a guy from New York, San Francisco, Denver, etc. That traveler segment is already recovering. We benefit from the fact that the traveler that is back on the road needs to reduce his costs, so staying at YOTEL makes sense.”

He hopes to convert business travelers who would normally stay at legacy brand hotels to loyal YOTEL customers. “Maybe someone might say, ‘YOTEL is different, I’ve never been there and the price is right,’” the CEO said. “I’m reasonably confident that at least for our type of business traveler, the recovery is relatively quick. In New York, our hotel is close to the Javits Center, so we’re missing those business MICE travelers. But your independent kind of business traveler is back on the road."