YOTEL: Analysis of Innovation Practices

1.1 YOTEL

YOTEL is audaciously described by its founders as “a revolutionary new hotel concept… creating a stir in the hotel industry”. The company’s concept and execution can be translated into the same entrepreneurial initiative that has been driven many leading organisations in hospitality, tourism and events over the years. Creative entrepreneurs with the vision, courage and knowledge to put their concepts into place dominate the history of tourism. (Middleton et al., 2009).

YOTEL was created by YO! Company founder Simon Woodroffe and Gerard Greene, YOTEL current CEO. It is the accommodation brand of the Yo! Company Group founded in 1997 by Simon Woodroffe with the creation of his first brand of restaurants YO! Sushi. The accommodation brand concept was inspired by the capsule hotels in Japan and BA First Class cabins. In 2002, Simon Woodroffe, already interested in the Japanese capsule hotels, was upgraded to a first class sleeper cabin. He decided then to melt luxury airline travel with Japanese capsule hotels and convert them into small but luxurious cabins for implementation at airport locations. Gerard Greene, a former hotel analyst and executive with Hyatt and Marriott hotels, evolved that idea into reality with YOTEL. The concept has the intention to deliver economies of scale within a minimum volume of space and a outstanding and comfortable consumer experience at a relative very competitive price (Middleton et al., 2009)

In summer 2007, the company opened a 46-cabin YOTEL in London Gatwick Airport, succeeded by a 32-cabin YOTEL at Heathrow Airport in the winter of the same year. (YOTEL Limited., 2008) YOTEL at Amsterdam Schiphol opened in Summer 2008 and a 669-capsule site will open in New York City in 2011.

Since 2005, IFA (International Financial Advisors) Hotels & Resorts is the major investor in the company.

In 2008, YOTEL’s CEO acknowledge an affiliation “Memorandum of Understanding” with ADNH (Abu Dhabi National Hotels) in order to expand YOTEL also in the capital of the United Arab Emirates. Two YOTELs are going to be built in the International Airport and in city centre of Abu Dhabi, and other locations are also under negotiation. (IFA Hotels & Resorts, 2007).

As Simon Woodroffe comprehend “the holy grail of retail today is to constantly and never endingly innovate in order to deliver high luxury without the high cost” (YOTEL Limited, 2008). Competitors will unavoidability come to the market with innovations or ameliorations of existing products which will change the basis of competition: for this reason the ability to create, evolve and adapt is indispensable for any business to stay alive. The company’s concept as well as the founder’s values and culture, suggests that the company is potentially innovative.

1.2 Report Structure

The present report aim to identify and explore past, current and future innovation practices of YOTEL. Since the organisation was not created long ago it will concentrate mostly on the current and future practices. In particular the structure and content of the report is as follows:

Part 2 – YOTEL Current Innovation Practices. This first part will evaluate YOTEL’s existing innovation practices and how YOTEL shows signs of innovation in its sector. Evidence of how it appears to be innovative is supported by innovation theory.

Part 3 – YOTEL Future Innovation Practices. This part will appraise which innovations YOTEL might create and adopt in order to meet its future strategic needs. Propositions for possible ameliorations for the organisations are made here. This section will therefore consider YOTEL objectives, as well as New Product Development theories and WWW innovations in order to make appropriate and logical recommendations for the company.

Part 4 – Impacts of proposed Innovation upon YOTEL’s performance. This forth part is where the potential impacts of the recommendations made are considered. Advises and information about the consequences of the changes proposed are given for the attention of YOTEL’s management team.

Part 5 – Summary and Conclusions. This final part contains a brief summary of the report, as well as a conclusion based on the arguments presented.

2. YOTEL Current Innovation Practices

Innovation is “the act of creating a new product or process. This includes invention as well as the work required to bring an idea or concept into final form. An innovation may have various degrees of newness, from very little to highly discontinuous, but that must include at least some degree of newness to the market, not just to the firm” (Crawford, 1994, pg. 472).

As Crawford’s definition suggests, innovation is a complex process which involves organisations’ effective management of activities such as idea generation, technology development and commercial exploitation. Schumpeter (1934) was among the first economists to recognize the importance of innovation for organisations to obtain long-term economic growth. His evolutionary theory has seen how companies’ success in the past, present and future lies in their capability to obtain and employ knowledge and apply this to the development of new products.

Figure 1.1 – Interactive model of innovation

Source: Trott, 2008 – adapted from B. Rothwell and W. Zegvelt (1985) Reindustrialisation and Technology, Longman, London.

Overall innovation is a complex and continuous process which consists in transferring knowledge from different communication paths. These paths include external and internal linkages. In order for innovation to occur, there must be an interaction between the marketplace/customer’s needs, the latest sciences and technology advances in society and the organisation’s capabilities. Organisations able to manage this process will have successful innovation practices.

In its past three years of life, YOTEL has demonstrate a good capability on managing the innovation process. It has been able to do so, using different types of innovation. As Trott (2008, pg.16) explain, there are seven different typologies of innovation: product, process, organisational, management, production, marketing and service innovation.

2.1 YOTEL Product Innovations

2.2 YOTEL Commercial/Marketing Innovations

2.3 YOTEL Service Innovations

This part of the report will evaluate in which of these types of innovation YOTEL gives evidence of being innovative. YOTEL introduced in the hospitality market a new revolutionary concept inspired by the capsule hotels in Japan and BA First Class cabins: guest rooms, which are compact in size and incorporate multi-functional sofa beds and fold out study desks. The cabins have a design feature that means the windows are internal rather than external and through effective reflective lightening look out into corridors. YOTEL product innovation consists in a hotel which needs relatively small volume of space within airports.

The type of hotel the company has introduces, was completely innovative in its market. Even if capsule hotels already existed in Japan, YOTEL has been the first hotel located inside a UK airport terminal. Moreover YOTEL differentiates itself from Japanese capsule hotels, sicne it is more luxurious and offers a wider range of comforts. Its rooms are larger than those in capsule hotels but are very small relative to traditional hotel rooms. The positive advance about YOTEL concept, is that it needs basic requirement. A YOTEL does not require space for parking, access on roads which other normal hotel do require. Moreover all the basic requirements for heating, lightening, water and lavatory provision are already immediately available at airports. But YOTEL is not innovative just in the product its offering, but also in its services.

stylish yet affordable rooms. The aim of YOTEL is to provide a flexible and convenient business class hotel experience at affordable prices. The company aim therefore to combine luxurious and modern with affordable prices. This is an innovative practice since most of the hotels whicha re perceived as luxurious and modern are usually also very expensive. Moreover YOTEL does not combine luxurious with low prices, but also with small romm environment. The company referes in fact to his rooms with the world cabins. The idea was inspired by 1st class airlines cabins. Which category???

Lovelock, how would you classify Yotel product? What degree of risk with this NPD>?

LUXURY AT LOW COST: magical formula

Shower and Nap Combo: At London Heathrow, London Gatwick, and Amsterdam Schiphol, Yotel cabins can be rented in four-hour blocks. (No, it’s not that kind of hotel.) The podlike rooms (from $40/4 hr.) are tiny but comfy, with private baths and storage units.

A virtuos circle of innovation (Trott, 2008: 96-98)

(Categories of new products, link with innovation practices of YOTEL)

[2] Room sizes are Premium (double), Twin (2 large singles, bunk style) and Standard (large single). Each features en suite bathrooms, flat screen televisions, free Wi-Fi, and 24 hour room service.[3]

In his study of The Economic of Industrial Innovation, Christopher Freeman (1982) wrote that “…not to innovate is to die”. Adaption and change are essential for companies in order to survive. Competitors will unavoidability come to the market with an innovation that changes the basis of competition: for this reason the ability to create, evolve and adapt is indispensable for any business to stay alive.

The big dilemma of doing this within an organisation stays in the fact that innovating demands ‘stability’ in order to be carried out efficiently and flexibility in order to create opportunities for creative thinking. Managing the tension between the need for creativity in a loose and flexible environment and the need for efficiency in a stable and controlled environment is therefore very important for organisations (Trott, 2008). Organisations have also to manage uncertainty and know how to respond to internal and external events, some of which cannot be controlled. Some examples of external challenges facing organisation in the innovation process are customer demands, new purchasing models, falling prices, early supply involvement, collaborative ventures, customer-supplier value chain and post release improvements (Ahmed and Shepherd, 2010, pg. 474).

Anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need is considered as a product. (Find another definition of PRODUCT)

Yotel products, as any hospitality, events and tourism products, are service products delivering intangible experiences. Hospitality products are very diverse and customers are involved in the production process. Since people are part of the product process, these kinds of products are harder to evaluate. (Write about Scope of Hospitality products – Hospitality Business Development)

A new product is “A good, service or idea that is perceived by some potential customers as new” (Kotler et al., 2004, p.215). In simple terms innovation refers to any good, service or idea that is perceived by someone as novel or new (Kotler et al., 2002, p.215). A new product is a product being introduced to the market for the first time as a result of invention, innovation or improvement ( Keegan et al., 1995, p.418) (Change this definition)

YOTEL CASE STUDIES

http://unicenta.net/casestudy_yotel.aspx

http://www.computing.co.uk/ctg/feature/1843555/case-study-yotel

http://www.lorientuk.com/case-studies/yotel-london/

http://images.businessweek.com/ss/09/07/0720_budget_lodging/15.htm