Developer Goes Micro with Plans for Pod Hotel in SoMa

Developer Goes Micro with Plans for Pod Hotel in SoMa

San Francisco Business Times

Developer Goes Micro with Plans for Pod Hotel in SoMa
By Katie Burke


Few hotel guests have probably had the urge to snuggle in bed and flush the toilet at the same time, but the recent spurt of new micro hotel developments in San Francisco could make that possible.

A new pod hotel proposal slated for Central SoMa is just the latest one to join the party.

Local developer Leon Lee submitted plans for a pod hotel at 744 Harrison St., a site at the heart of the city’s influx of new hotels. The proposed plans call for demolishing the two-story building on the site and replacing it with an eight-story building with 52 micro-rooms and nine units of market-rate group housing.

According to the project’s filing, the developer is expecting to have the property open by early 2019. Last year, California set a record — opening more than 10,790 hotel rooms, according to a recent Atlas Hospitality Group report, breaking a record previously set in 2008. In the Bay Area, that included the delivery of 290 rooms between the debuts of both the Hotel Via and Proper Hotel. This year, another 670 rooms among four hotels are expected to open, with the largest to come from the 230-room Hyatt Place under construction at 701 Third St.

But those figures don’t include everything else in the works. Atlas reported that San Francisco County has 38 hotels with 5,930 rooms in planning, a 46 percent increase over 2016. Of those proposed projects, about 2,945 rooms are slated for the SoMa area.

The recent spurt of new hotel development throughout San Francisco has triggered a number of changes for the local hospitality industry, with micro hotels emerging as one of the biggest trends in 2018. Andrew Freeman, a partner at restaurant and hotel consultant AF&Co., said at a recent San Francisco Travel event that pod hotels have become increasingly popular among younger travelers for their lower-than-average price points and community-focused amenities.

“Pod hotels like Yotel provide great, hyper-efficient rooms where — if they want more space — people just go downstairs. They’re social centers, which is why they’re doing so well. People love taking the money they save on the room and using it for restaurants, experiences or in other areas,” Freeman said.

The hotel hasn’t yet chosen a brand, but is expected to sign a franchise agreement. The brand will be similar to Marriott’s (NASDAQ: MAR) Moxy Hotels, citizenM or Yotel, all of which have San Francisco properties in the works.

Calls to the developer’s land-use attorney for the proposal — Reuben, Junius & Rose, LLP’s Thomas Tunny — were not immediately returned. Lee could not be reached for comment.

San Francsico-based consultant HVS, which conducted the market survey for the SoMa site, said in the proposal that pod hotels have been cropping up in urban locations throughout the country to serve travelers planning to spend limited time in their rooms. A majority of the micro-developments have featured compact designs, efficient floor plans and limited facilities, all of which will be featured at the Harrison Street development, where rooms are expected to average less than 219 square feet.

Smaller room footprints will be accompanied by a handful of community-oriented amenities, such as a ground-floor restaurant, rooftop deck, lounge, lobby workstation, a sundries counter and multiple vending areas.

Once completed, average rates at the SoMa hotel are forecasted to be slightly less than the market average — which will help it compete with nearby properties like the W Hotel San Francisco or the Virgin Hotel under construction just a few blocks away.

Average nightly rates in the city have temporarily dipped due largely to the Moscone Center’s partial closure — its $550 million overhaul is expected to wrap up work later this year — but HVS expects rates bounce back sometime next year. The pod hotel is anticipating an average 90 percent occupancy rate when it opens. Its rates will average $254 per night in 2019 and go up to $278 per night in 2021.

Average nightly rates across San Francisco hotels are expected to hit nearly $303 per night by 2021, according to HVS data.

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