GLOBAL REPORT—Today’s marketplace is continuously threatened by a number of variables, including the evolving consumer, financial crises and political issues. And some hotel operators are finding that the “pop-up” hotel segment is the way to go in an unstable environment.
Pop-up hotels can be defined myriad ways—from setting up temporary accommodations for events and festivals to converting existing buildings into seasonal hotels.
“I think the current banking crisis around the world is the fundamental reason for why you see so many pop-ups,” said Claus Sendlinger, founder and CEO of Berlin-based Design Hotels, which operates both temporary and permanent establishments.
In major cities such as New York and London, where real estate changes hands from one owner to another, if the new owner does not have the financing available to fulfill the vision they’d like to create, they bring in luxury, alternative brands on a temporary basis to gauge demand for that particular product and give consumers an idea of what can be done with that space, Sendlinger said.
The demand for pop-up hotels has been really high, said Mark Sorrill, founder and managing director of U.K.-based The Pop-Up Hotel, which blends a luxury element with camping.
“There’s an increasing sector of the market that’s looking for a (unique) experience and something that’s really different from the norm,” Sorrill said.
Big, branded hotels often can be generic, he said, making it difficult for a guest seeking an authentic Caribbean experience and staying in a branded hotel to distinguish any features from a property of the same brand in Miami.
For example, The Pop-Up Hotel was contracted to set up guestrooms trackside at a recent motor-racing event, he said.
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| The Papaya Playa Resort in Tulum, Mexico, operates full time from December to May. |
“We were (so close to the track) you could hear them,” Sorrill said. “Our staff were in (racing attire), our guests were in costume and they really got that experience.”
“If you’re at a festival and you leave that festival to go back to that hotel, you lose that connection. At a pop-up hotel, you’re with like-minded guests. At a conventional hotel … you’re dislocated from that,” he added.
Financing is just one issue; stability is another factor. For example, hoteliers in Mexico are hesitant to invest in the market because of the country’s drug crisis, so they turn to pop-up hotels.
Sendlinger proposed to his partner that instead of building an actual property in Tulum, Mexico, that they create their first pop-up resort. “So we took a beach that would normally fit 100 villas, and we said, ‘Let’s take the cabanas, let’s fix them, make them nice, bring the right people to operate, bring the right crowd.’”
Design Hotels operates the Papaya Playa project from December to May, and when Tulum faces its low season during the remaining months, the resort is open several times a week for the local community rather than foreign guests.
Challenges of pop-up operations
Snoozebox, a pop-up hotel company that launched in July 2011, is just closing out its first full year of operating in the United Kingdom. And while it’s been rewarding, Richard Worrall, sales and marketing director of the company, said the benefits have not come without their challenges.
“Over here in the U.K. it’s been a dreadful summer, which is an extraordinary thing for us because it’s been a test,” Worrall said.
There were initial concerns from the Snoozebox team about installing their guestrooms—known as containers—on the soft, muddy conditions experienced this year. “But we managed to get the containers on dry land,” he said.
The company operated at the London Olympics, boasting 85% occupancy for the month of August. Although the inclement weather caused some problems throughout the six weeks Snoozebox hosted guests, Worrall said things went well, overall.
The main challenge going forward will be working out where the company can be more efficient from a building and operational standpoint, he said. The company is “working out where we can save money and the design changes we need to make to allow installation to be quicker,” he said.
Transporting and assembling the containers can be costly and labor intensive, Worrall added.
In terms of initial investments, Sendlinger said creating a pop-up hotel can be less expensive because of the ability to cut some corners. Putting in kitchens and bathrooms for pop-up resorts can be costly, he said.
In addition to providing these amenities, mobile pop-up operators also come equipped with their own staffs and “front-desk” units to help accommodate guests.
“Financially, this is not viable for an operator,” Sendlinger said, comparing the costs associated with building a permanent site as opposed to creating a pop-up project. “If you a build a hotel, you have a completely different payback time,” he said. “There are different business models that need to be applied.”
Expansion opportunities
The pop-up hotel phenomenon is not going away any time soon. Each of the hoteliers interviewed for this report said they are looking to grow.
Sorrill of The Pop-Up Hotel said the company wants to expand internationally. “We’re always interested in talking to landowners,” he said.
“We’re looking at the Caribbean in the moment … We are talking to folks in San Francisco, the Seychelles, the Middle East and the Far East,” he said. And each landowner is considering a different hotel concept, he added.
Meanwhile, Sendlinger said his company is in the last phase of closing its next two deals and is confident Design Hotels will be able to announce four more within the next two years.
In the short term, Worrall said they are “certainly looking at the key European markets and the key global markets.”
Down the road, executives are thinking about a global operation outside of festivals and concerts. Mining and disaster relief are some of the options, but Worrall said the company is focused on perfecting its strategy before rapidly expanding.