First Cabin pod hotels declare bankruptcy, many locations closed

Capsule hotels are ingrained in the Japanese culture. They are as much for locals working late and needing a simple bed near the office rather than commuting home as they are for tourists. But the “First Cabin” brand focused heavily on tourist, with an aviation theme to its 25 properties across the country. With the travel world in turmoil, however, First Cabin may not last much longer. The company declared bankruptcy late last week and laid off 400 staff members.

First Cabin made a name for itself with aviation-themed rooms. Three different capsule sizes were branded economy, business and first class. As with the airplane analogies, better amenities arrived with the higher classes of service. A first class room even includes a bit of floor space and a table, while the economy class options are stacked double high and have a narrower bed. Though other than claiming it is an aviation-themed environment it was not particularly clear what about the experience really was tied to airplanes or airlines.

The First Cabin story is far from unique, even if the properties are. Small hotels across Japan are under massive pressures. Capacity ramped up in advance of the 2020 Summer Olympics, to be hosted in Tokyo. That was supposed to be a boon to the hoteliers, with higher room night rates eventually offsetting the glut of inventory available at the beginning of the year.

But the Olympics are postponed. Japan is fighting to control the spread of COVID-19. And hotel occupancies are dropping into the teens or lower, with some properties forced to close by the government’s state of emergency declaration.

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Coming off two years of losses and with little desire to burn more cash, the decision to seek financial protections is not too hard to argue.

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Five directly-managed properties are to close as part of the proceedings, with other franchised properties potentially reopening when the state of emergency lifts.

The company also indicates a desire to relaunch its direct operations with new funding when the pandemic relents, though where the money will come from and how much is needed are unclear.