REPORT FROM THE U.S.—The Pod Hotels spent 10 years building its portfolio five hotels. Now it has five* hotels open, two of which opened in New York within the past year. It also has another two properties in the works.
Three years ago, the company had conversations with three of the major chains about them potentially taking over Pod Hotels and growing it quickly, CEO Richard Born said. Instead, the company decided to take a more organic approach to growth, he said. The company just built two hotels at the same time, The Pod Times Square and Pod BK,* bringing its portfolio up to five with another two in the works. And Born noted the company could license the brand name at some point to roll out three to four a year to pick up the pace.
“It took us 10 years to get to five hotels,” he said. “My guess is over the next 10 years, we will double the number of hotels in five years and double again five years after that.”
New York openings
The Pod Times Square opened in phases beginning five months ago, Born said. The flagship property opened its first three floors in January and then added a floor every two weeks, he said, hitting the fully open mark by 1 May. During this period of time, the hotel sold a little more than 90% of the rooms it had available to sell, he said.
“I would say we had a pretty good opening,” he said. “We had rates that were pretty good. As we added this inventory of almost 700 units in the market place along with the 250 in Brooklyn, we’ve not seen any negative effect on the other two Pod hotels.”
The hotel took about four years to develop, he said, and it includes 665 Pod guestrooms and 45 micro apartments called Pod Pads. The site was purchased four years ago, and it took a little more than a year to fully design and then file, amend and receive approval for the project. Ground up construction took about two and a half years to complete.
The property recently opened its restaurant, The Polynesian, which Born said is in line with the company’s nontraditional approach to providing guests the experience they want. Tourists come to New York and have so many places to see and restaurants at which to eat, he said, and the Times Square location means the guests are a block away from anything they want. The Polynesian is a place where they can get a drink, a coffee or snack, he said, and it provides them a place to briefly relax.
The new Pod BK in Brooklyn is hard to describe, Born said. It was a modular build, with units sent by ship to be assembled on site. Zoning laws in the location prohibit tall buildings, so he said the property was limited to only four stories. It’s a series of four structures connected by glass corridors, and each is a four-story building that lines up parallel to each other. In between the buildings are gardens where people can eat, read and mediate.
“This was our first modular construction,” he said. “I confess, it had its speed bumps. It was a learning process, as so many things are. I would absolutely do it again. We will be much smarter the next time around. Building a modular hotel offers real benefits to the potential franchisees and franchisor.”
Modular building can take away many of the risks for developing in other locations, he said, because the company now knows what it costs to build and it’s reproducible. As a franchisor, it allows the company to maintain quality control, he said. Instead of worrying about the quality of the build even after handing over the specs, the company can focus on delivering the product to its franchisees.
“We’re controlling the product from start to finish,” he said.
Pod philosophy
The general theory behind The Pod Hotels is that about two-thirds of travelers in the U.S. and probably worldwide typically stay in branded hotels ranging from midscale to upscale, Born said.
“Those really represent the bulk of the hotel inventory worldwide,” he said.
The world now has become a little more experiential, he said. People are looking to define themselves by their environments, he said, and travel is a bit of a fantasy as well. On the upper end of the scale, travelers choose many boutique hotels in New York and elsewhere, he said. After spending the last 20 years building that kind of product, he said, he observed the midscale offerings didn’t present that experiential option.
With the tens of millions of people traveling to New York, they have a choice in that middle market that is “just plain vanilla,” he said. His company came out with a concept that provides a high-quality, cool boutique experience for someone on a budget. To make the hotel affordable, it sacrifices space to make it a higher-quality room, he said.
Some of the larger brands have started rolling out smaller guestrooms, Born said, but Pod Hotels was doing it first. Competitors’ rooms are smaller than normal, but they’re not as small as the Pod guestrooms and they’re overdesigned, he said.
“Consequently, they’ve build a product that is more expensive to build and therefore more expensive to stay in,” he said. “I think most hotels from a price point of view are priced higher than we are, higher than the budget of that core customer I was describing before.”
New locations
The Pod Hotel under construction in Philadelphia comes from Modus Hotels—the same development group that built Pod DC in Washington, D.C., Born said. The developer had opened eight hotels before, but he never had any that opened as successfully and stabilized so quickly, he said, so the developer wanted to try another.
“For us, that was gratifying to see,” he said.
Within six months of opening the hotel in Washington, D.C., the developer applied to open one in Philadelphia and had started construction six months after that, Born said, noting he believes Philadelphia is a large enough market to support the 250-room project.
“We do believe Pod will work in every midsize city in the U.S.,” he said. “The question is, how small? Minneapolis? St. Louis? We went from the biggest city to a smaller but still big city. We have to mark down the food chain that way.”
The Los Angeles location will be similar in development to the first two Pod hotels by repurposing an existing building in Downtown L.A. called the Seso Hotel. The property has 300 rooms and a fair amount of common areas, he said. It will have more food and beverage than any of the existing Pod hotels, he said, and a large roof bar.
The Philly property should open in in September 2019,* he said, and the L.A. property should open six months to a year after Philadelphia.
*Correction, 5 July 2018: This story has been updated to correct the name of a hotel, the number of hotels open and the timing of a hotel's opening.