Capsule Hotel Market

Market Overview

The global capsule hotel market size was valued at USD 205 million in 2021, growing at a CAGR of 8.15%, and is envisioned to reach USD 327 million during the forecast period. 

The capsule hotel also referred to as a pod hotel or sleeping cabin, is an innovative and affordable form of lodging. It is a new and affordable accommodation equipped with basic amenities, such as a single or double bed, pillow, locker facility, alarm clock, charging socket, and a shared bathroom. The demand for capsule hotels among travelers is driven by the expansion of the global travel and tourism industry and a preference for cost-effective lodging. However, the market for capsule hotels has been hindered by terrorism and domestic problems in various nations. However, the advent of capsule hotels in untapped markets is likely to provide an opportunity for expanding the capsule hotel industry in terms of sales value over the forecast period.

The availability of capsule hotels at a lower price than other lavish and typical hotels, lodges, and other types of accommodation, according to the leading manufacturers, is another major factor driving the capsule hotel market growth. In addition, these hotels offer hourly accommodations and are conveniently located near airports and train stations, allowing travelers to relax before or after their journey. This contributes to the capsule hotel market growth.

Market Dynamics

Market Driving Factors

The Rise of Travel and Tourism Industry Along with the Advantage of Cost-Effectiveness to Propel Growth

The tourism sector has witnessed a substantial expansion over the past few decades. This is due to increased business travelers opting for unique and exotic vacation destinations to escape the daily grind and gain valuable experiences. In addition, there is a rise in the number of travelers seeking simple accommodations for a single night or hourly stay. Capsule hotels at airports or train stations offer this amenity to travelers at a reasonable price. These hotels have USB ports, electrical outlets, storage areas, beds, and other necessities. Consequently, the preference for inexpensive and convenient lodging options promotes the expansion of the travel and tourism industry, which fosters the development of the capsule hotel industry in terms of revenue.

Also, capsule hotel rooms are typically less expensive than other accommodations, including lodges, guesthouses, luxury hotels, and others. Cost-effectiveness is the most critical factor when reserving a temporary place to stay while traveling. As a result, most travelers favor this option when reserving a room. And because these hotels are available hourly at the airport and train station and are furnished with the necessities for travelers, this increases the demand among travelers.

Market Restraining Factors

Growing Terrorism and Domestic Issues in Countries to Hinder Market Growth

Political chaos and terrorism have impacted the total number of international trips and the selection of destinations. Terrorism risk tends to frighten tourists, influencing their perspectives of destinations and travel patterns. A catastrophe causes a protracted crisis in the local tourism industry. The turmoil caused by political unrest and terrorism in the global tourism industry has posed a challenge to expanding the capsule hotel market demand.

Key Market Opportunities

Introduction of Capsule Hotels in Untouched Markets to Spur Market Opportunities

Capsule hotels are in their early stage in developed regions of North America and Europe, including Mexico, the United Kingdom, Italy, Germany, Canada, and others. These regions have many tourists, presenting a lucrative opportunity to capitalize on the growing demand for capsule hotels and representing the potential for the future market for the major players. In addition, there is a growing awareness of capsule hotels among travelers, which is anticipated to create lucrative growth opportunities for the capsule hotel market share in the coming year.

Regional Analysis

The region-wise segmentation of the global capsule hotel market includes North America, Europe, Asia-Pacific, and LAMEA.

In which region are capsule hotel industry popular?

Asia-Pacific will most likely hold the largest market share during the forecast period and grow at a CAGR of 7.6%. The rise of the capsule hotel market share in the Asia-Pacific region is fueled by the improvement of infrastructure and many customers opting to stay in capsule hotels, primarily in Japan. Asia-Pacific has long been renowned for its vibrant culture and allure. Countries in the Asia-Pacific region have the highest proportion of high-income households that travel abroad. This can be credited to the Asia-Pacific region's rapidly expanding economy and new employment opportunities, which have boosted household income. Consequently, this is anticipated to provide enormous opportunities for expanding capsule hotels in India, China, Malaysia, Singapore, and Taiwan.

North America will have the second-largest capsule hotel industry share of USD 16 million, growing at a CAGR of 13.5%. The growth of the North American market for capsule hotels can be attributed to the rapid adoption of digital media, which has been a critical factor in attracting tourists to travel websites such as TripAdvisor, as well as an increase in the number of travelers seeking out different experience and destinations. In addition, an increase in disposable income and enhanced air connectivity with various travel destinations fuel the expansion of the market for capsule hotels in the United States. Increased air connectivity and disposable income have led to an increase in people opting for capsule hotels in the Canada and Mexico markets.

In recent years, the United Kingdom, France, Italy, Spain, and New Zealand have been Americans' most famous outbound travel destinations. The percentage of male travelers departing the United States has been more significant than the number of female travelers. The number of outbound travelers from the U.S. market has grown significantly over the years, reaching 72.6 million in 2016.

LAMEA will show a significant growth rate with the highest CAGR during the forecast period. The LAMEA market for capsule hotels is driven by a growing affluent population and a growing propensity for travel and leisure. In addition, a growth of social media exposure and the establishment of capsule hotels at numerous airports, including those in Africa, Turkey, and others, are driving the expansion of the capsule hotel market share in this region. In addition, well-known travel destinations such as Abu Dhabi and Dubai attract vacationers from all over the world, creating a good opportunity for expanding the capsule hotel market demand in terms of revenue during the forecast period.

Segmental Analysis

The global capsule hotel market is based on traveler type, booking mode, age group, and region.

By Traveler Type Analysis

Depending on traveler type, the segments include solo and group.

Solo Travelers to be the Dominant Traveler Type Due to the Ability to Tailor the Entire Travel Experience

The segment of solo travelers is most likely to hold the largest market share during the forecast period and grow at the highest CAGR of 8.9%. Solo travel destinations are gaining popularity due to the ability to tailor the entire travel experience to the traveler's preferences, which allows them to gain new adventures, meet new people, and gain a sense of empowerment. There has been a substantial increase in the number of people who want to travel alone. This has prompted travel companies and agents to provide group and solo traveler’s services. Recent trends indicate that solo tourism is on the rise, and the number of people who choose to travel alone has increased. In addition, capsule hotels' unique design and novelty attract large crowds, especially solo travelers. In addition, capsule hotels allow for efficient space utilization while providing sufficient resting space for solo travelers. This opens the door for expanding capsule hotels in the solo travel segment.

People who travel in groups for recreation, relaxation, entertainment, or vacations are group travelers. Some of them travel in search of new experiences or adventures. People are increasingly inclined to de-stress and unwind. As a result, travelers seek ways to enrich their travel experience, including leisure, spiritual, and cultural activities. Capsule hotels with double beds, Wi-Fi, television, and lockers attract group travelers. The majority of group travelers prefer these accommodations because they are affordable. This is anticipated to stimulate the capsule hotel market growth over the next few years.

By Booking Mode Analysis

Depending on the booking mode, the segments are offline and online booking modes.

The segment of offline booking mode is expected to hold the largest capsule hotel market share during the forecast period and grow at a CAGR of 8.3%. Offline Booking refers to all the physical locations where reservations for capsule hotels are taken. Offline booking is the most popular method for booking capsule hotels by travelers. Conventional shopping centers typically feature travel agents who help travelers book capsule hotels on their own. In addition, airports in countries such as Turkey, Japan, Canada, Mexico, the United States, Singapore, Malaysia, and others offer travelers the option to reserve capsule hotels or sleeping cabins on an hourly basis via offline booking at the airport or railway station to rest before their next flight or train. These elements have contributed to expanding the capsule hotel market share for offline bookings.

The online booking mode is expected to grow at a higher CAGR than the offline mode. Online booking channels for capsule hotel reservations are gaining popularity among travelers. It is anticipated to attract more customers due to the proliferation of the internet and the growing popularity of smartphones. Online booking allows consumers to reduce reservation effort and time, compare prices/packages offered during booking, and take advantage of discounts provided by capsule hotel websites or other online booking sites, allowing them to save money.

By Age Group Analysis

Depending on age group, the segments include generation X, generation Y, and generation Z.

The age group of generation Y is anticipated to have the largest market share during the forecast period growing at a CAGR of 8.8%. Travelers between the ages of 21 and 34 are millennials or members of generation Y. They account for more than 200 million travelers who are estimated to generate USD 180 million globally, a 30% increase since 2007. Generation Y is comprised of a large number of world travelers who are avid explorers. On average, they spend USD 527 per day, which is 62% less than their older peers. They typically seek out cultural and recreational vacations. Generation Y is motivated by wanderlust and breaking the monotony of daily life; these young people prefer short trips to culturally rich countries with inexpensive lodging. And hence, capsule hotels are excellent for shorter trips because they are inexpensive and provide a variety of essential amenities. This attracts the majority of generation Y, thereby boosting the capsule hotel market growth.

The segment of generation Z will hold the second-largest share. Generation Z, also known as gen Z, is a demographic cohort comprised of individuals born after 1995. This generation has purchasing power comparable to that of generation Y and comprises 32% of the world's population. Generation Z is highly cost-conscious and seeks immersive travel experiences. Several tourism companies are making new products aimed at Generation Z, which has become an increasingly important demographic group. Most prominent players have invested more in digital marketing to attract gen Z customers and have enhanced their online booking channels for convenience. Customers belonging to Generation Z favor inexpensive accommodations that provide basic amenities such as an alarm clock, luggage storage, bed, Wi-Fi, and other amenities. This stimulates the expansion of the market.

Recent Developments

• In 2022, the Central Railway of India announced the development of the second pod hotel at the Chhatrapati Shivaji Maharaj Terminus in south Mumbai.