Fasten your room key, 1st class awaits

Pod hotels, which originated in Japan and have spread out through the Asia-Pacific, is an interesting development in the hospitality industry with the unstoppable rise of the solo traveller. Cheap capsules for sleep with basic services have strong revenue potential with their use of small spaces in densely populated Asian cities. But the business model is needlessly restrictive. Pod hotels should widen their service offering to cater to value-conscious as well as price-conscious guests. The 'small form' factor plays out for both. But the unit economics change dramatically if the hospitality on offer is on the lines of first-class air travel instead of budget sleeper trains.

The luxury air traveller typically pays 3-5x the fare in economy, which essentially covers the cost of fuel and taxes. The rest is accounted for by cuisine, service and amenities like flat beds. Intercontinental air travel is usually of a duration to cover a full night's sleep, and airlines have invested a lot of money into finding ways to make flying comfortable. These learnings can be borrowed by the hospitality industry to convert small spaces into luxury experiences without the pain of jet lag. A natural progression would be airport lounges and layover hotels. Then there are enough people travelling business class who might find the idea of an upscale capsule hotel in a downtown area appealing. Fusing the air travel experience with compact luxury may catch on among a generation that prioritises experiences over possessions.

Some pod hotel chains are doing interesting work on sleep. The small receptacles provide researchers a unique window into sleeping patterns of large groups of people. Kitted with more sophisticated sensory apparatus, this can lead to industry-wide breakthroughs. Combined with a growing asset-light model, prospects for a wider spectrum of service offerings improve for small-space hospitality. Real estate investors should be losing sleep over it.