Poised for TAKE-OFF

/ EdgeProp
October 21, 2018 8:00 AM SGT
Marketed as a no-frills alternative to pricier hotels in Singapore’s city centre, capsule hotels are proving to be an attractive option for millennials travelling on a shoestring budget.
The 56-bed Cube BoutiqueCapsule Hotel in Kampong Glam (Picture: Samuel Issac Chua/The Edge Singapore)
In February this year, husband-and- wife business partners Benedict Choa and Sonia Anya opened a 56-bed boutique capsule hotel in the historical Kampong Glam neighbourhood. The hotel is the result of extensive renovations of three linked conservation shophouses that previously housed a budget hostel that squeezed up to 40 guests in one room.
The couple owns and manages Cube Boutique Capsule Hotel, a niche hotel brand that offers capsule beds. This is their second capsule hotel, and it is located on Bussorah Street, near the historical Masjid Sultan — a mosque built in 1824 and rebuilt in 1932 — as well as F&B and entertainment outlets on Haji Lane and Arab Street.
Choa and Anya opened their first capsule hotel in 2016: It was a 58-bedder in a pair of conservation on Smith Street in Chinatown. Referring to the hotel in Kampong Glam, Choa says: “This trio of shophouses is on a closed street, and its proximity to the mosque is a key selling point. Tourists enjoy exploring this historical area for its sights and food options.”
Husband-and-wife business partners Choa and Anya opened their second boutique capsule hotel in February (Picture: Samuel Issac Chua/The Edge Singapore)
Capsule hotels such as Cube’s occupy a niche in Singapore, as budget-conscious travellers to the city state may find mainstream hotels too pricey; on the other hand, lowend hostels may not appeal to them. It is no surprise, then, that new capsule hotels have opened their doors to keep pace with Singapore’s tourist growth. Last year, total tourist arrivals grew 6.2% to surpass 17.4 million, according to the Singapore Tourism Board.
Capsule hotels originated from Japan, where they acted as economical rest-stops to serve white-collar workers who missed the last train home on late nights spent working or entertaining. Since the concept was brought to Singapore, it has evolved to cater to budget-conscious travellers looking for affordable accommodation.
Most capsule hotels in Singapore offer simple amenities for guests to refresh and rest for the night. But capsule hotels such as Cube are offering much more, with amenities such as high-speed WiFi, a breakfast buffet and daily housekeeping services bundled in. Each capsule has a bed fitted with plush mattresses and beddings; roll-down blinds; a fold-down table; TV and Bluetooth headset; as well as towels and in-room slippers. Each guest has a personal key card that opens to their allocated room where their capsules are located and which has personal shoe lockers, a luggage storage area and an individual safe. The capsule beds range from 18 sq ft in size for a single bed to 30 sq ft for a queen-sized bed.
Cube’s Kampong Glam hotel (left) is near the historical Masjid Sultan mosque (Picture: Cube Boutique Capsule Hotel)
The Cube hotel in Kampong Glam has a dedicated 12-capsule, female-only room. Other rooms are mixed rooms, and the largest one can fit 18 capsules.
Cube holds the master lease of the shophouses, and sub-lets two ground floor spaces to Gloria Jeans coffee house and Japanese restaurant Grill Yasu. The hotel also houses a Singapore Visitors Centre on the ground floor.
Since Cube opened its doors two years ago, its occupancy rates have increased. When it opened its first hotel in Chinatown, its average monthly occupancy rate was 80%. It has now hit 88%, and “we have managed our rates accordingly”, says Anya. Today, a single-bed capsule in Cube Kampong Glam is priced at $49 a night, whereas a similar bed in Cube Chinatown is $64 a night.
The cube hotel in Kampong Glam also houses a Singapore Visitors Centre on the ground floor (Picture: Samuel Issac Chua/The Edge Singapore)
Anya says there is a “good mix” of guests at Cube. Apart from solo travellers, large groups have also booked the entire Kampong Glam hotel, and large families have booked several private rooms. Cube has also hosted local staycationers, such as parents who check in with their children for a weekend stay.
Changing perception of capsule hotels
Another capsule hotel operator, MET A Space, has two hotels in Singapore. One is a 2,500 sq ft shophouse in Boat Quay, which opened in December 2015; the other is a 3,724 sq ft conservation shophouse in Chinatown, which opened last November.
MET A Space has 11 single capsules, called pods, and 10 double pods in Chinatown, as well as 36 single pods in Boat Quay. MET A Space is owned by Mavis and Ern Tang, the couple whose initials form the first part of the company’s name. MET A Space has a space theme and its pods have a spaceship-inspired design with ice-blue neon lights, and a futuristic-looking control panel for the lights and ventilation.
Space-themed capsule hotel operator MET A Space prices single pods at $38 to $45 a night (Picture: MET A Space)
Most of the guests of MET A Space are backpackers and typically travel solo or as a pair. “More inexperienced backpackers stay at our hotel because it is a good starting accommodation for them,” says Carine Ng, guest relations manager of MET A Space. Seasoned backpackers stay there for the experience of staying in a space-themed hotel. A single pod at MET A Space costs $38 to $45 a night; and a queen-sized pod costs $70 to $90 a night.
Since joining MET A Space in 2015, Ng has seen first-hand how Singaporeans’ perception of capsule hotels has changed. “Before 2015, capsule hotels were generally considered to be like student hostels, which tend to offer minimal comfort. Even those more widely travelled associate you with a hostel if you don’t have an en suite bathroom,” she says.
MET A Space in Boat Quay opened in 2015 and offers 36 single pods. (Picture: MET A Space)
Most of MET A Space’s initial exposure was by word of mouth, says Ng. The average occupancy rate is 80% during busy periods in May and June, as well as from August to October, and drops to 50% outside of these periods.
Getting financial backing
Adler Hostel, which offers accommodation that is a cross between a hotel room and a hostel room, also vies for the niche that neither hotels nor hostels can fill. Adler occupies two separate shophouses on South Bridge Road. The first, opened in 2012, is a three-storey building at 259 South Bridge Road with a gross floor area of 4,500 sq ft and comprises 40 beds. Opened in 2014, the second is a four-storey property at 265 South Bridge Road that has a GFA of 6,000 sq ft and 51 beds.
Adler Hostel has 40 beds in a three-storey building at 259 South Bridge Road (Picture: Adler Hostel)
Opening a hotel was 30-year-old founder Adler Poh’s idea, but it took him more than a year to persuade his father to support him. “I had gone out looking for funding, but Singapore venture funds are very tech-centric, to the point that not many believe in a bricks-and-mortar business,” he says. “I was 24, and not many believed I could run a hostel.” Poh’s father invested $500,000 in his first property and, later, with the help of a long-term customer, Poh invested $1 million in the second property.
Adler’s hotel guests are mostly aged 25 to 35 and are a mix of solo travellers, couples and families. “There are many millennials travelling alone, and budget travel is now more affordable,” says Poh. About 30% of his guests are traditional backpackers — the rest are millennials with one cabin-sized suitcase and armed with their tech gadgets. Only 10% are family-sized groups. The average occupancy rate over the past year has been 80%, he adds.
(Picture: Adler Hostel)
Operators in the capsule hotel segment aim to differentiate themselves in various ways. Ng says MET A Space wants “to edge towards technology to automate many functions such as check-in”.
For luxury operators such as Cube, maintaining good service remains at the core of their offering. Cube provides breakfast and food for its guests. Hot food such as mee goreng, mee siam and roti prata is sourced from neighbouring eateries and coffee shops in Cube Kampong Glam’s vicinity because “we want our guests to experience local cuisine”, says Anya.
Expansion plans
Embarking on the expansion path, Poh wants to take Adler Hostel to regional cities such as Hong Kong, Tokyo, Sydney and Melbourne, and then sell a majority stake in the company with its regional portfolio. He does not want to grow his business in Singapore, he says, citing high manpower and rental costs. He discloses that Singapore-listed, international hospitality brand Banyan Tree had offered to buy the company, but the plan fell through because Poh felt the Adler brand would not fit well with the Banyan Tree brand. Another investor offered $1.5 million for a 50% stake in his business, but the deal was rejected because of the investor’s track record, he says.
Poh wants to take Adler Hostel to regional cities such as Hong Kong, Tokyo and Sydney (Picture Adler Hostel)
There are now more accommodation options available in the city fringe and city centre areas than when Adler opened his first hotel, which means more competition. “We were offering $55 a night [at that time, but] we are now about $40 a night,” he says. Many new players do not fully understand the work needed to run a boutique hotel, and in the past year many owners have sold their establishments because they could not cope with running the business, he adds. “Anyone entering the market needs to have deep pockets.”
Meanwhile, MET A Space will open another hotel in a shophouse on Arab Street by year-end, says Ng. “We prefer to be located in heritage areas and culturally rich neighbourhoods closer to the city, definitely close to attractions such as Marina Bay Sands and Gardens by the Bay.” This is because many of the places that guests like to visit are in the downtown area.
MET A Space plans to fit 46 pods into its new location on Arab Street, more than double the number of pods at its Chinatown location. Earlier this year, it sold a property on Race Course Road, which was opened in 2016, to fund the setting-up of the Arab Street property.
As for Cube, Choa and Anya say they are looking to expand to at least five more locations in Singapore, and are exploring additional sites in Kampong Glam and Chinatown, as well as Clarke Quay, Boat Quay and Telok Ayer. Their third hotel will also be on Smith Street in Chinatown, says Choa. Another conserved shophouse, it is currently under renovation and will open before year-end. “It will be our Cube Capsule family brand, because since opening in Kampong Glam, we have found that families are interested in staying in capsule hotels too,” he says.
Choa and Anya say their third hotel will also be in Chinatown in another conserved shophouse
The future sites for Cube’s hotels are also likely to be larger. “If we can find a good property with about 8,000 sq ft GFA, we might consider it,” Anya says. Now, the duo is also looking for more partners outside the hospitality industry, as Choa reckons that “to be a holistic business, we need F&B partners”. He adds: “So far, we have been growing organically based on demand. We want our evolution to continue to be based on guest needs.”
The couple may even consider partnering with a co-working space operator, Anya adds. At the same time, they are looking for shareholders and strategic investors who can help them create an international Singapore brand. “Our partners must be able to expand internationally with us as we continue to grow,” says Choa.