Size doesn’t matter. At least that’s what a handful of hotels in New York hope lodgers will think when they stay in their small, yet functional and affordable rooms.

At The Jane, a tiny red-brick hotel overlooking the Hudson River in West Village, Manhattan’s ultra-bohemian neighbourhood, space is at a premium.

“In my room, I can turn around, and that’s about it,” said Kai Neuhaus, 33, of Germany.

With their wood panelling, velvet benches and Oriental carpets, most of the 150 rooms occupy just 4.6 square metres and recalls boat cabins. A large mirror hangs on the wall to counter any claustrophobic feelings.

The century-old building, which long welcomed sailors then disadvantaged people, now attracts tourists the world over who, for $100 a night – $125 for bunk beds – don’t fret about sleeping in close quarters.

“But for two days in New York, it’s good enough: very well located, not too expensive, and I really use it just to sleep,” said Mr Neuhaus, who chose to save on his lodging so he could better enjoy the city, with his hiking bag on his back.

Considered one of the most expensive cities in the world, New York averages $260 per night for hotel rooms. The least expensive rooms with Hyatt and Novotel hotels are $300 to $350, while W Hotels’ starting rate stands at $600.

Bolstered by the economic crisis, several popular sites like Jane offer cut price lodgings, with a narrow bed and a shared shower room on the landing.

Bjorn Hanson, dean of New York University’s Tisch Centre for Hospitality said: “To the extend that pod rooms feature both low real estate costs and low payroll costs – which are the two biggest costs for hotels in NYC – they operate on a niche market which has extremely favourable economics,” he said.

The precursor to the trend was the Pod Hotel, which opened in 2007 amid the skyscrapers of Midtown Manhattan. This trendy spot offers 345 rooms, with sizes varying from eight to 12 metres squared for $89 to $169 a night.

Their minimalist design recalls the interior of a plane, from stainless steel sinks embedded into the wall to lighted signals indicating whether the shared bathroom on the landing is free.

With an average occupancy of 93 per cent, the Pod’s success is such that it plans to open a second location near Grand Central Station in 2012.

As early as next spring, British chain Yotel plans to open at a new location on Times Square, complete with 669 “capsules” of less than 15 metres squared for $150 a night.

Already present at London and Amsterdam aeroports, the British chain already proposes cabins inspired by Japan’s capsule hotels, complete with purple neon lighting and featuring a bed, retractable desk and shower.