What Is a Microhotel? The Small-Footprint Model Explained

A microhotel is a hotel where the room is only the bedroom and the building is the living room. The rooms are small, typically about 150 square feet or less, and the rest of the guest experience moves into a lounge, bar, cafe or co-working space. SiteMinder's definition is useful here: the term describes the room format, not the size of the property. A microhotel can have 300 keys.

This guide explains how the model works, the one calculation worth doing before you consider it, and the situations where it does not.

What makes a hotel a microhotel?

Three features, together: a small private room, a strong shared space and tight operations.

The room is the obvious one. A Hospitality Net analysis quotes HVS Design's Scott Rosenberg putting the average microhotel room at about 140 square feet, against roughly 330 for a traditional room. Other sources use a slightly wider band, and SiteMinder gives 120 to 200 square feet. Some budget brands go smaller: the same analysis reports ZIP by Premier Inn at about 90 square feet in its first hotel.

The shared space is what makes the small room acceptable. The analysis describes bars, restaurants, cafes, lounges and co-working carrying much of the guest experience, with programming such as classes and events used to attract leisure guests. The third feature, tight operations, shows up in staffing and turnaround: SiteMinder's illustrative case has one staff member handling arrivals and looking after the lounge.

That is the whole definition. It has little to do with luxury or budget. The same format runs from stripped-back pod stays to design-led urban lifestyle brands.

How is a microhotel different from a pod or capsule hotel?

A pod hotel shares almost everything except the bed. A microhotel keeps a private room, with its own bathroom, only smaller.

Pod hotels began in Japan in the 1970s, according to the same Hospitality Net analysis, and the microhotel builds on them by adding in-room digital controls and better furnishings. In practice the line blurs. Some pod-style brands now offer private rooms, and some microhotels are close to pods. What matters for a business is how much the guest gives up in the room, and what you give back elsewhere.

Does a smaller room really earn more?

It can, and one calculation shows when. Compare the floor area of a guest room, ignoring corridors and shared space.

Take the HVS figures: 140 square feet against 330. A small room is about 42 per cent the size of a large one (140 divided by 330). So if you sell the small room for more than about 42 per cent of the large room's rate, it earns more per square foot of room floor. At the same occupancy and ignoring everything else, a microhotel could charge well under half of a conventional rate and still match it on this one measure.

This ratio is a simple check and no forecast. It ignores that bathrooms, wiring, fire safety and many fit-out costs do not shrink in proportion to the room, and it ignores the cost of the shared space that makes the small room work. But it explains why investors find the model attractive. SiteMinder lists lower build and conversion costs per key, higher revenue per square metre and lean staffing as the main advantages.

Operators make bolder claims. In a 2018 piece, a principal at BD Hotels, a US pod-hotel operator, said development costs ran 30 to 40 per cent below those of traditional properties and returns on investment were 12 to 15 per cent. Those are one operator's figures from one period, so use them as a prompt for your own modelling, not as a benchmark.

A microhotel moves the space from the bedroom to the bar.

Where does a microhotel's income really come from?

Rooms still pay, but the shared space decides whether guests come back and whether the building earns beyond its keys.

The Hospitality Net analysis reports that at the JO&JOE brand, food and drink accounted for 36 per cent of revenue. That is a 2019 figure from one brand, so read it as direction, not a rule. It tells you something useful, though: in this model the lounge or bar is a second business. SiteMinder describes the same pattern as centralised communal spending through one lounge or bar.

Some hotels sell the shared space to people who are not staying. The analysis notes that citizenM's New York hotel offered business day passes, priced at 15 US dollars at the time. A lobby that sells desk hours, a bar that serves locals and a cafe that opens early all turn a small building into a busier one.

Where does the model fail?

Mostly at the edges of who it suits, and in the details of small spaces.

SiteMinder's own list of challenges is the most practical one available:

• Narrower fit. Families, long stays and luxury guests are poorly served by a very small room.
• Limited room for desks, storage and bathroom features. Storage, sound and arrival peaks are the three pressure points.
• A possible rate ceiling. If a competitor offers a larger room at a similar price, the small room may have to discount.
• Bottlenecks at scale. Housekeeping and lifts can limit a large microhotel.
• A perception risk. Guests may read small as cheap and not as efficient.

Location is another one. Rohan Thakkar of YOTEL told Hotel Management that securing the right locations for the product and audience can be challenging, especially in the largest US metros. A microhotel works best where land is expensive and guests spend their days outside, and it works worst somewhere guests expect space.

What should you check before building or converting one?

Run five checks, in this order.

1. Guest fit. Who stays? Count the share of your likely guests who are solo, couples or short-stay. If families or long stays are central, look at other lodging models first.
2. The rate ratio. Estimate the rate a conventional room would get nearby, then the rate you could realistically charge. Compare the ratio to the room-size ratio.
3. The shared space. Design the lobby, bar or co-working area first, and give it a plan to earn from non-guests. The guide to hybrid hospitality venues covers how.
4. The small-room details. Test storage, sound, lighting and the bathroom layout in a full-size mock-up before ordering fixtures.
5. The numbers that matter. Track RevPAR, ADR and occupancy alongside food and drink revenue per occupied room, since the second business now sits inside the first.

The mock-up is the cheapest step and the one most often skipped. A room that looks right in a drawing can feel cramped with a suitcase open on the bed.

Key takeaways

• A microhotel has small private rooms, commonly about 120 to 200 square feet, and moves the guest experience into shared spaces.
• Using HVS's 140 versus 330 square feet, a small room earns more per square foot of room floor if it sells for more than about 42 per cent of a conventional rate. Fit-out costs that do not shrink will change that.
• Published economics, such as 30 to 40 per cent lower development costs, come from individual operators. Model your own.
• The lounge or bar is a second business in this model, so it needs its own plan, hours and customers.
• The format suits solo, couple and short-stay urban guests. It is a weak fit for families, long stays and luxury expectations.
• Test storage, sound and bathroom layout in a full-size mock-up before you commit.