- OakNorth has completed a transaction to fund the development of a 242-bed capsule hotel and rooftop bar in central Edinburgh;
- The project introduces the Tarka brand, blending upscale pod accommodation with a Japanese-inspired food and beverage (F&B) offering;
- The project is being led by hospitality entrepreneur James Scott supported by a team of highly experienced sector experts, having successfully rolled out the Generator Hostels concept globally;
- Edinburgh is Tarka’s first site and is actively seeking opportunities in other UK cities to roll out the brand.
- The global capsule hotel market had a revenue share of $205m in 2021, growing at a CAGR of 8.15%, and is envisioned to reach $327m by 2031.
London, 12th May 2025 – OakNorth – the leading digital bank for entrepreneurs, by entrepreneurs – has provided a £10.3m facility to Tarka Edinburgh to fund the acquisition and development of a new 242-pod hostel and rooftop bar in the heart of Edinburgh’s city centre.
Tarka is a new hospitality brand focused on upscale pod-style hostels, designed to deliver comfort, connectivity, and convenience to modern travellers. The operational team, including former leadership from Generator Hostels bring a wealth of experience to the project, which is backed by entrepreneur James Scott. The Tarka Team, including its 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 10 years as its COO, Karen helped Generator grow to become the second largest Hostel group in the world. It was sold in 2017 for €450m.
Located on South St Andrew Street next to St Andrews Square and just minutes from Waverley Station and the St James Quarter, the development will transform a six-storey vacant property comprising of over 18,000 sq. ft., into a tech-enabled capsule hostel with a Japanese-themed rooftop bar and restaurant. Upon completion, the property will trade under two new brands: Tarka (Capsule Hotel) and Nana Kai (rooftop bar and restaurant). The hotel will be tech-enabled enabling 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.
James Scott, CEO of Tarka, commented: “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. If you’re a high-growth, scaling business, with ambitious growth plans, they’re the banking partner you need.”
Fraser McPhail, Director of Debt Finance at OakNorth Bank, added: “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 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. 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.”
James was advised by Moxa Hospitality on the financing.
ENDS
Notes to editors
About OakNorth
Launched in September 2015 and founded by entrepreneurs, OakNorth is a digital bank focused on serving and empowering the lower mid-market (businesses with £1m-£100m in turnover), that are seeking to scale but are routinely underserved or overlooked by traditional banks.
To date, it has provided c.£12.5bn to these businesses across a wide range of sectors, achieving performance metrics that place it amongst the top 1% of commercial banks globally. Its loans have directly contributed to the creation of 56,000 jobs, and over 34,000 new homes across the UK and the US – the majority of which are affordable and social housing.
It is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
Visit www.oaknorth.co.uk for more information.
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