the major player in the hospital …
Enter the serviced apartment, which quickly becomes the force of hospitality to be reckoned with thanks to its sense of space, flexibility and profitability. By combining the amenities of a hotel – room service and luxury furnishings – with the benefits of an apartment (privacy, flexibility and space), it’s easy to see why serviced apartments have become the first choice for business and leisure travelers.
The advantages of an apartment with hotel services compared to a hotel
With increasingly local tourism and stays, the focus is on this sector and its high-end gyms, concierge services and fully-equipped kitchens, all without the hefty price of a hotel room. ‘hotel.
Guests opting for fully serviced accommodation for their stay do not have to compromise on quality, location or facilities, as many are located close to public transportation, business centers, and many other areas. Tourist attractions.
It is simple to explain why the serviced apartment industry has become the fastest growing sector in the hospitality industry. Although the asset class is in a similar price range to a hotel room, it almost always offers much more space – often up to 30% more – than a hotel offering and with space comes flexibility, which means more people can be accommodated.
Families and business travelers alike are drawn to the separation between the kitchen, living room and bedrooms, ensuring child-friendly space, catering, conference calls and committee meetings. Indeed, the serviced apartment is so convenient for frequent business travelers that many companies have purchased permanent apartments for use by visiting staff throughout the year.
Facilities of serviced apartments
Serviced accommodations offer a range of amenities to help keep costs low and contentment high, from designer kitchens to washing machines, dishwashers and coffee makers, allowing flexibility in terms of accommodation. meals and catering for children or guests, as well as to help minimize the overall costs involved in a trip.
Many believe that this style of accommodation provides a more personal feel than a hotel room, with sofas for lounging around watching TV and the ability to put the children to sleep in a separate room while enjoying the sun. living space without disturbing them – an impossibility with many other forms of accommodation.
When it comes to choosing the ideal serviced apartment, think carefully about what your trip involves on a daily basis. If it’s sightseeing and family time, look for services like babysitting and housekeeping, and make sure parking is easily accessible. Business travelers may want to make sure there is an ergonomic desk, fast WiFi speeds, and room to entertain colleagues.
Are serviced apartments a good investment?
The growth of the serviced apartment industry has already surpassed that of the more traditional hotel room in recent years and the asset class has really proven itself during the pandemic.
According to the 2020 “ Spotlight on the European Serviced Apartment Market ” report by Savills Research, while serviced apartments have not been immune to demand shocks from Covid-19, it is a class of asset that is better positioned to withstand this storm and all future storms. and has been above hotels in terms of occupancy throughout the period.
Historically, the sector has also performed strongly during periods of weak demand, such as in the aftermath of the global financial crisis of 2007-2009, which led to skyrocketing operational performance due to the increased focus on financial measures. reduction of costs for companies and a number of contract agents used.
Serviced accommodation was seen as a much more cost effective alternative for touring contract staff than the traditional hotel room that would have been booked in the past.
The report found that the increase in RevPAR (revenue per available room) in the London-based serviced accommodation industry has averaged 5.2% per year over the past three years, well over above the 2% average annual growth – with a three-year average of 3.3% – noted in the hotel room industry.
Savills suggests that there will be a 41% increase in RevPAR for serviced apartments across Europe during this year, with the recovery in this area leading the overall rebound in the hotel industry. The average occupancy rate for serviced apartments was also higher in the capital during the first quarter of last year, at 61.8%, compared to 59.4% for hotels.
“Additionally, the generally lower running costs, coupled with a longer average length of stay, continue to support the profitability of serviced apartments… compared to full-service hotels,” the report states.
There is still room for significant expansion, with the sector remaining relatively under-represented compared to other accommodation, accounting for 9.6% of the average share of the hotel stock located in the top ten European hospitality markets, according to Savills.
The resilience and strong recovery expected for the serviced apartment sector will likely serve to further underline its appeal, attracting a growing number of clients and attracting the interest of investors who may be new to this form of accommodation.
Indeed, many of the larger operators are expected to more than double their portfolios in the coming years. The Savills Report said: “Investor appetite for longer term development projects indicates continued confidence in the long term fundamentals of the hospitality industry. In the case of serviced apartments, this long-term confidence continues to be justified. “
While currently the capitals and gateway cities of the UK and Germany account for the majority of future developments, others appear to have to spring up in secondary and tertiary towns to meet demand. In 2019, investment volumes in serviced apartments in Europe reached 551 million euros, far exceeding the five-year average volume of 16.6%, the Savills report continued.
One of the main drawbacks for investors is the lean operational structure of the industry and above average length of stay, ensuring that minimal staff is needed to help with day-to-day management. These factors contribute to a strong gross operating margin – often in the range of 45-65% – and the confidence that the more lean operating expense structures will always be best placed. to withstand the shocks of demand.
Being able to adapt to the changing needs of travelers, with new additions such as contactless check-in and increased cleaning regimes, has kept the momentum on an upward trajectory in this relatively young industry.
Serviced apartments can also cater for a broad spectrum of society and the ability to remain flexible is one of the main selling points. With the home office being the new must-have, the serviced apartment has even found a new subclass – the home office away from home – to meet its needs.
Many operators of serviced apartments have also reported an increasing demand from businesses to use the apartments as semi-permanent offices.
Serviced accommodation can also offer a more affordable investment than other types of property and comes with a high degree of flexibility for investors as it is available on both a long and short term rental basis.
This means that the owner can use the apartment to generate rental income and operate it in the same way as a hotel room. This allows the owner to use the property intermittently and rent it out for the rest of the time.
Where to buy an apartment with hotel services?
The returns that can be achieved by short term rentals may be higher than long term rentals on the standard rental agreement. It depends on the location; Coastal towns and popular tourist towns, such as York, are ideal for investment in serviced apartments.
For example, recently completed Icona apartments can achieve 7% + net returns as serviced apartments and 5% when rented on a long-term rental, even after accounting for higher management costs. (including advertising and cleaning).
In 2018, York welcomed 8.4 million visitors with a hotel occupancy rate of 80%. Obviously, people think York is a good place to visit. Travel after Covid-19 is expected to favor domestic travel and factors such as obtaining a visa to travel to Europe could have a positive impact on weekends.
There are a number of key benefits that come with investing in a hotel room like this, including a solid rental income guaranteed as many serviced apartments are rented by the operator at the hotel. name of their owners for a fixed price, then rented to travelers.
This means that the landlord receives the agreed fixed rate of rental income whether the apartment is occupied or not, thus removing the fear around vacancy periods. Maintenance and repair issues are also an attractive proposition for many sophisticated investors.
The serviced accommodation industry has proven to be resilient and flexible enough to withstand global storms past and present, and it’s no surprise that the momentum looks set to continue over the next several years, the class assets even being called upon to lead the global recovery of the hotel industry.
Today’s travelers expect a lot from their accommodation and this multi-faceted offering suits all styles, from families looking for space, sightseeing and self-catering to corporate clients looking for cost savings, concierge and culture.