REPORT FROM EUROPE—Serviced apartments and aparthotels have long been considered as a breed apart from traditional hotels, but that is slowly changing, according to sources.
Traditional hotel chains are beginning to add serviced apartment and aparthotel brands to complement their portfolios and tap in to travelers’ evolving travel needs.
European hotel companies are already clamoring to the segment. In April, AccorHotels announced a €148-million ($164 million) purchase of Onefinestay, and hotel management firm Bespoke Hotels acquired a minority stake in aparthotel brand Staying Cool, which recently opened its debut property in Birmingham, England. Irish hotel management company Prem Group also has launched two serviced-apartment brands—Premier Suites and Premier Suites Plus—and three properties have opened in Dublin.
A shift toward serviced apartments
Max Thorne, managing director of hospitality at Jones Lang LaSalle’s Hotels & Hospitality Group and chief investment advisor for the British Hospitality Association, said mainstream hoteliers will move more into serviced apartment ownership as they see consumer demand increase.
“My personal belief is that there is a growing recognition across hospitality that the consumer now wants the choice of tailoring his or her travel and accommodation for the purposes of the trip,” Thorne said. “This has led to the evolution of new and subsectors within hospitality, with serviced apartment being one of those.”
Serviced apartments are generally defined as extended-stay accommodations that typically include a suite with a full kitchen, but often without the full slate of amenities like free breakfasts, 24-hour front desks and the like.
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Nick Turner, Bespoke Hotels |
Thorne said the niche will benefit from guests who choose well-established but “unaudited, un-regulated, inconsistent ‘Airbnb’-style apartments, with a poor arrival and departure experience.”
“Given that this market isn’t speculative anymore, if you offer the consumer that’s buying in an inconsistent, fragmented accommodation pool a branded, consistent, reliable, regulated option, then there is a potentially wide market to tap into,” Thorne added.
Thorne said hoteliers also are seeing how the sector is developing with stronger brands.
“With the expansion of (serviced apartment) brands like Staycity, Adina, Saco and Ascott, we are seeing delivered to the market professional towers with hundreds of rooms per building,” Thorne said. “This has come a long way from … 20 years ago when most other serviced apartment offerings sat in adapted residential blocks.”
Opportunities for U.K. growth
Nick Turner, managing director at Bespoke Hotels, said the U.K. is a promising sector for the niche after it’s already grown for years in France.
“This has exploded for a combination of reasons, including attractive yield, low-risk alternate use and hybrid split with hotel and aparthotel combos, amongst others,” Turner said.
Shaun Hinds, managing director of serviced apartment firm BridgeStreet Global Hospitality, said U.K. serviced apartments might receive a boost from the Brexit decision. He added that changes to the investment landscape will contribute to hotel companies’ new confidence in the segment.
“The sector is moving from it being property-led to being client-led. … (although) planning permission not being as clear for serviced apartments as it is for other property classes is keeping institutional funds at bay,” Hinds said while on a panel titled “The rising star of the hotel investment sector: Service apartments” at the 27 June Hospitality & Tourism Summit in London.
But Hinds said that surely will change.
With hotels increasingly coming into the sector, “the boys will be sorted from the men,” he added.
What makes the segment work, and what doesn’t
Andrew Hunter, director of Europe for Australian hospitality firm Toga Hospitality—which includes serviced apartment brand Adina Apartment Hotels—said in Australia the segment is far more dominant; about 26% of overall rooms are located in the sector, which is much more than in other countries.
Hunter added much of the sector’s rise was because it was more attractive to investors and hoteliers than the residential asset class, especially where residential prices are falling. He said the breakthrough came when guests started to think of serviced apartments immediately when they needed a place to stay.
Another panelist, George Westwell, director of luxury serviced apartments firm Cheval Residences, said in London availability is always a pinch point.
“I think we’ll see more happening outside of London,” Westwell said, who added he believed the sector was benefitting by being both investment- and client-led.
There are still other pinch points that, if resolved, could bring even more hoteliers into the serviced-apartment segment, such as:
- The niche needs to determine its identity;
- the sector is in danger of continually being thought of as a hybrid;
- serviced apartments are currently not top of mind to most guests;
- consolidation and government recognition could propel the niche forward, although some think the number of serviced apartment brands and rooms has not yet reached critical mass to make consolidation an improvement; and
- average roomnight stays range from 2.8 nights to 28 days, which fosters confusion and hesitancy among some stakeholders, as does the fact that some serviced apartments have restaurants and other traditional hotel amenities.