How the ‘Big Mac’ of hotels plans to disrupt the industry

Hotel101 first project outside of the Philippines is in Niseko, Japan.

Hotel101, a subsidiary of Manila-based DoubleDragon, has micro-owners, one type of room and massive plans to be in 25 countries in the next three years.

SINGAPORE — Sometimes, you walk into a hotel room and look for an amazing view and top-tier service.

And sometimes you just want to know where the light switch is.

A Singapore-based hotel company is building an aggressive expansion plan for guests seeking the latter — a “templated” consistency at a 3-star price.

Hotel101 is a subsidiary of Manila-based DoubleDragon, a publicly listed company with approximately $3 billion in assets, founded by Tony Tan Caktiong and Edgar “Injap” Sia II. Both founders have had incredible success in fast food in the Philippines and internationally. The company has sizeable real estate holdings in office and industrial and is the largest community mall developer in the Philippines.

There are currently 11 Hotel101s in the Philippines (two are operational, with the rest under construction or in various stages of the pipelines). The company’s first location outside is in Niseko, Japan, which broke ground in August, and another is under construction in Madrid.

On November 14, the company announced its first U.S. property, with a 622-key Hotel101 being built in the Westlake North District of Los Angeles.

CEO Hannah Yulo-Luccini said the company makes money in two ways: first, from selling each individual hotel unit (the average hotel has around 500 keys) and then from their management of the hotel. Each owner gets a strata title when the hotel opens, and Hotel101 manages the hotel. The company has a 30-70 revenue split, with the unit owner getting 30% of the gross room revenue, distributed equally to all unit owners. Hotel101 gets 70% of the gross room revenue to cover maintenance and operating expenses.

Yulo-Luccini said the roots of DoubleDragon are important because Hotel101 wants to “fast food-ize” the hotel space.

“We aim to be like the Big Mac of hotel rooms,” she told Hotel Investment Today.

Hotel101 wants to open 500,000 rooms by 2040 and become one of the world’s top five global hotel groups, operating in over 101 countries. That’s a lot of Big Macs.

The company is aiming for “one SKU globally” (think economy airlines, Coca-Cola or an iPhone) and 9 out of 10 consistency for its hotel rooms, which are all the same size and layout (around 21 square meters of space with two beds and a kitchenette.)

“We believe that standardization in any market, like the budget airline market, for example, exists because it delivers unbeatable value,” Yulo-Luccini said. “We believe it’s the same for hotel rooms. Some people don’t care what view they have outside their window. They just want a clean bed.

“It smells nice and is consistent — they know where the light switches are. No matter where they go, the light switches will be exactly where they are… Even for a business traveler, we think it will be very attractive for them to feel like they’re coming home to the same room no matter where they are.”

Hotel101, a subsidiary of Manila-based DoubleDragon, has micro-owners, one type of room and massive plans to be in 25 countries in the next three years.

SINGAPORE — Sometimes, you walk into a hotel room and look for an amazing view and top-tier service.

And sometimes you just want to know where the light switch is.

A Singapore-based hotel company is building an aggressive expansion plan for guests seeking the latter — a “templated” consistency at a 3-star price.

On November 14, the company announced its first U.S. property, with a 622-key Hotel101 being built in the Westlake North District of Los Angeles.

Yulo-Luccini said the roots of DoubleDragon are important because Hotel101 wants to “fast food-ize” the hotel space.

“We aim to be like the Big Mac of hotel rooms,” she told Hotel Investment Today.

Hotel101 wants to open 500,000 rooms by 2040 and become one of the world’s top five global hotel groups, operating in over 101 countries. That’s a lot of Big Macs.

“I’d say 90% of our unit buyers are single-unit owners,” Yulo-Luccini said.

The owners can sell the units, but Hotel101 has the right of first refusal. Yulo-Luccini said there hasn’t been much activity on that end, but she anticipates owners trading units, especially once the company opens in more geographic locations.

The fragmentizing of ownership creates revenue to fund Hotel101’s rapid expansion plans.

“Every time we sell a hotel, we take that margin and put it in another two hotels.”

Hotel101 can develop in three ways: through direct development, joint venture partnerships (most properties are done that way in the Philippines) or franchising.

Yulo-Luccini said on the operations side, Hotel101 is aiming for a 25% margin, but it’s often a delicate balance to keep everyone happy.

“We always have to keep that balance so that the developer makes some money but just enough so that the unit owners also are happy that their yields are good, compared to rental yields in that market,” she said. “So, we ensure that the developer is happy, the owner is happy, and the consumer is happy. And that the hotel operator has just has the right amount of margin.”

Proof of concept

Yulo-Luccini said the company opened its first property, the 518-key Hotel101 – Manila, over five years ago. The hotel had 89.2% occupancy and 8.1% yield to unit owners in 2019. So far, for 2023, those numbers are 84.6% occupancy with a 7.4% yield.

She said the 500-unit scale of the hotel is a differentiator (compared to the 100-unit scale of its competitors).

“This gives us the scale and efficiency to price lower than the market and also allows us to offer amenities that you would typically only find in a 4-star hotel.”

Those amenities include food and beverage options like all-day dining that a third party runs. There is also retail space at each property that the company leases to a 24-hour convenience store.

Yulo-Luccini said the company has dynamic pricing but aims to price ADR at value.

She said Hotel101 has made some changes over the last five years, with most aimed at efficiency.

“We’ve tweaked it a bit, in terms of having modular furniture to ensure that we can repair and maintain rooms much faster,” she said. “We were traditional with our build of bathrooms, and now we’re going moving to bathroom pods, so there’s more consistency with that.”

Global expansion

Yulo-Luccini said most of the hotels in the pipeline are already sold out, which not only finances the build but also helps them recycle the capital by building more hotels.

That kind of model has Hotel101 thinking aggressively about expansion. It has around 8,000 hotel rooms in its pipeline (with just over 2,000 in operation). The company wants to be in 25 countries by 2026, 140,000 rooms in 2030, and over 339,000 rooms by 2035.

For those skeptical of whether this micro-owner concept will work for a global audience, specifically the U.S., Yulo-Luccini said for the first few locations outside of the Philippines, the buyers of those units are still primarily from Asia.

“People from all over the world want U.S. dollar exposure,” she said. “They buy in Madrid because they want Europe exposure… We don’t depend on the domestic market, particularly for the U.S. property (in Los Angeles).”

The property in Madrid is also unique because it can qualify for Spain’s Golden Visa investment, which can potentially provide a passport and citizenship.

Yulo-Luccini said other than the 25 countries it has already named (she says there is a lot of interest in Australia and New Zealand, for example), the company doesn’t have a predetermined number of locations it needs in each place, with the U.S. being it’s only exception.

“We don’t have a preset thing, although we do want to have 10 in the U.S. in the next few years,” she said. “There are so many 3-star hotels that are so old… Not in the first-tier cities, but in the third-tier cities, when you travel, you’re paying $250 for a not-so-great hotel. We feel that the U.S. has a lot of opportunities and is primed for disruption.”

Funding the expansion

All of this expansion is new construction, which can be challenging in today’s capital market. Yulo-Luccini said Hotel101 can do it with the equity it has built and the pre-selling of units.

Funding the expansion

All of this expansion is new construction, which can be challenging in today’s capital market. Yulo-Luccini said Hotel101 can do it with the equity it has built and the pre-selling of units.

She said the company is exploring a NASDAQ IPO, but the timing is uncertain.

Yulo-Luccini said putting Hotel101 in one specific segment is hard because she thinks they have more amenities than a normal 3-star hotel.

“It’s interesting because it’s not really select-service. We have all-day dining; we have a pool… It’s not necessarily for those on a budget, but it could be for people that are looking for good value.”

How the ‘Big Mac’ of hotels plans to disrupt the industry

Proof of concept

Global expansion

Funding the expansion

Funding the expansion

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