£10.3 million boost for Japanese-inspired capsule hotel and rooftop bar in heart of Edinburgh
“Capsule hotels are becoming increasingly popular in major European cities like London, Paris and Amsterdam”
Plans for a Japanese-inspired capsule hotel and rooftop bar in the heart of Edinburgh are on track after a £10 million-plus loan was secured for the project.
Digital bank OakNorth said it was providing a £10.3m facility to Tarka Edinburgh to fund the acquisition and development of the 242-pod hostel and rooftop bar on the capital’s South St Andrew Street, next to St Andrew Square. The project will introduce the Tarka brand, which is said to blend “upscale pod accommodation with a Japanese-inspired food and beverage offering”.
Developers said the scheme would transform a six-storey vacant property comprising more than 18,000 square feet into a “tech-enabled” capsule hostel with a rooftop bar and restaurant.
Upon completion, the property will trade under two new brands: Tarka, the capsule hotel element, and Nana Kai rooftop bar and restaurant.
The hotel will use the latest tech to enable guests to check-in, and obtain guest information via a multi-lingual mobile app. The app will also allow guests to book event tickets, make restaurant reservations and arrange dry cleaning.
The operational team behind the ambitious proposals, including former leadership from Generator Hostels, is said to bring a “wealth of experience” to the project, which is backed by entrepreneur James Scott.
The Tarka team, including its chief operating officer (COO) Karen Richardson, worked for Generator during the period when it was owned by Patron Capital. Patron purchased the brand in 2007 when it had just two properties, and over the next ten years, as its COO, Richardson helped Generator grow to become the second largest hostel group in the world. It was sold in 2017 for some €450m (£380m).
Fraser McPhail, director of debt finance at OakNorth Bank, said: “Capsule hotels are becoming increasingly popular in major European cities like London, Paris and Amsterdam. The traditional hostel market has been established for some time but it’s the micro-hotel segment which has driven substantial growth, with property count expanding on average by 16.4 per cent per annum since 2012.
“Together with leaner cost structures driven by a rooms-driven product, this is allowing capsule hotels to generate higher relative profits on a per-square-foot basis than their traditional peers.”
He added: “We are delighted to be supporting James and his team on this maiden project from Tarka - the combination of an excellent site, a differentiated offering, and a strong management team made this a compelling opportunity for OakNorth.”
Scott, chief executive of Tarka, who was advised by Moxa Hospitality on the financing, said: “We’re creating a fresh take on the hostel experience - one that blends style, technology and affordability in a way we believe will resonate strongly with our target audience. OakNorth’s belief in our vision, as well as their collaborative approach made this a genuinely delightful experience.
“Our team has worked with a range of banks over the years, and I can say that OakNorth is a cut above the rest.” he added.
Launched in September 2015, OakNorth has provided in the region of $17 billion (£13bn) to businesses across a wide range of sectors.
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