The concept of micro hotels is simple: provide guests with a pared-down offering at a slightly lower price. The model’s benefits for investors is also easy to understand: penetrate a popular market with a smaller footprint, while reducing expenses.
The problem lies in the fact that many have caught onto the merits of micro hotels, at least within the country’s biggest metros.
“It’s a very competitive landscape,” says Rohan Thakkar, Chief Development Officer at YOTEL, which operates seven micro hotels across three brands throughout the U.S. “So, securing the right locations for the product and audience can be challenging.”
The global micro hotel market held an estimated value of $94.6 billion in 2024. This number is anticipated to reach $164.8 billion by 2034, with a compounded annual growth rate (CAGR) of 5.7 percent over that period, according to Future Market Insights.
The model is generally enjoyed by both solo business travelers and younger travelers who frequent dense city centers, would like to save a few dollars and don’t plan to be in their rooms all that much. Micro hotels are particularly appealing to Millennial and Gen Z travelers who value experiences and social interaction.
“We continue to appeal to the ‘Generation Go’ mindset, which represents a new wave of travelers who prioritize flexibility, efficiency, and the seamless integration of work and leisure,” Thakkar adds.
The challenge for investors, then, becomes how to create a minimal, yet experiential offering that appeals to this cohort’s sensibilities and wallets.
Design
Anyone can reduce a hotel room down to a Murphy bed and toilet, but those types of accommodations usually accompany a steel door, bars on the windows and a felony charge. Today’s micro hotel guests may appreciate minimalism, but that doesn’t mean they want to sacrifice comfort.
“Successful micro hotel properties like Moxy Times Square and YOTEL Boston remind us that size doesn’t dictate impact – design does,” says Alex Kuby, associate principal at DyeLot Interiors. “These spaces strip away excess while emphasizing what truly matters. It’s less about size and more about feeling cared for, seen and supported in a space that tells a story.”
That starts with the accommodations. The average hotel room is around 300 square feet, while a micro hotel offering can be less than half of that. This means everything counts.
“Micro-hotels overcome their spatial limitations by prioritizing thoughtful design decisions that evoke comfort and connection,” Kuby continues. “When every inch serves a purpose, the guest experience becomes richer, turning challenges into memorable moments.”
YOTEL maximizes comfort in smaller spaces through innovative design features like adjustable SmartBeds. This space-saving furniture reclines from an upright sofa to a full-sized Queen bed, allowing guests to customize their sleep experience.
“The hotel’s design focuses on optimizing space while maintaining a stylish yet functional aesthetic,” Thakkar says. “This allows us to maximize available floor space for guests when they’re not sleeping so they can move around freely, whether they’re getting changed or working out.”
YOTEL also utilizes vertical storage, built-in shelves and compact work desks to reduce clutter. Storage that makes use of overhead space or the area under a bed is also helpful in these smaller rooms. What micro hotels cut in terms of size and space they can make up for in experience.
The items that can’t be eliminated should be maximized to enhance guest comfort and satisfaction. This can include plush bedding and high-thread-count linens, rain showers, beautiful artwork, high-end toiletries and smart home features. Floor-to-ceiling windows and mirrors can create the illusion of more space, while blinds are less bulky than curtains when not in use.
Technology
Technology plays a pivotal role in the micro hotel stay – and in operational efficiencies.
“We use functional technology to help improve every aspect of the guest experience – from increasing the efficiency of check-in to maximizing room space,” Thakkar notes. “YOTEL differentiates itself within the market through its innovative, tech-driven design and emphasis on efficiency and flexibility.”
Wireless technologies like Bluetooth or AirPlay allow guests to control a room’s temperature, television, lights and speakers from their own devices. Self-service stations further permit guests to check in, create a room key, request a late check out or order add-ons 24/7.
Luigi Major, managing director of advisory at HVS, believes these technological assets reflect the values of today’s digital native travelers.
“Although customer service may be more minimal, this aligns with guest expectations,” he says. “The adoption of technology, such as messaging platforms and mobile apps, can enhance the experience while maintaining efficiency.”
Many micro hotel chains streamline their technology through an app, while some take tech to the next level with robot butlers that deliver room service or store luggage.
Location, amenities
The use of technology to fulfill roles generally associated with front-desk, concierge or bell desk staff is one way micro hotels can limit their operating expenses. Their smaller footprints and flexible furniture don’t hurt, either, though Major believes the savings can continue if the minimal approach extends throughout the asset.
“While micro hotels may appear to offer cost savings through smaller rooms and fewer amenities, operating costs often mirror those of limited-service hotels due to similar staffing requirements for management and housekeeping,” he says. “The real savings come from eliminating labor-intensive outlets like restaurants or bars, reducing the operational footprint.”
Nixing these services makes a prime location essential for micro hotels, as guests will need convenient access to entertainment and dining options. Some brands, such as Arlo, maximize their space by putting their restaurants and bars on the rooftop.
When these offerings are present, they must work hard to maximize a guest’s enjoyment. After all, a micro hotel’s smaller square foot won’t allow for seven different food and beverage options for guests, so the existing offering should aim to please.
Major points to Marriott’s Moxy brand as a stand-out example of this.
“Moxy offers compact rooms at lower prices while maintaining high design standards and the service quality expected from a major brand like Marriott,” he says. “Its focus on communal spaces, such as lively bars and lounges, creates a social atmosphere that appeals to travelers seeking this type of product.”
Knowing what type of traveler prefers what type of product is also key to success in the micro hotel world, Thakkar says. That’s why YOTEL maintains three similar but distinct brands: city center, extended stay and airport.
“Each offers a slightly different guest experience while still embodying the core YOTEL principle of smart spaces in prime locations,” he explains. “YOTEL’s success in urban centers and airport hubs is rooted in its focus on high-traffic areas where there’s significant demand for short-term, flexible accommodations.”
When scouting new locations, the company prefers areas with strong transportation access that are frequented by business and leisure travelers who have a need for flexible, efficient accommodations.
YOTEL is also expanding its horizons. It’s got two more U.S. micro hotels in development in Atlanta and Long Island City, N.Y., with more in the planning stages.
“Beyond major cities, we’re keeping an eye on secondary and emerging markets, especially in places with younger, more globally minded populations or areas that are becoming innovation and tech hubs,” Thakkar continues. “These markets – often outside the traditional big city areas – are appealing to developers because there’s a growing demand for the type of convenient, tech-driven accommodations that YOTEL offers.”
Additionally, it’s taking a “stronger interest” in franchisors who have an established presence in target markets and can deliver an experience that is true to the YOTEL brand identity.
Regardless of any one brand’s expansion strategy, Kuby believes investors can find success with the micro hotel traveler by focusing on what they can offer, instead of what they cannot.
“Minimalism doesn’t mean compromise – it means elevating the essentials,” he says. “Micro hotels succeed when they balance comfort, connection and craftsmanship to create meaningful experiences.”