Serviced apartments are a relatively recent phenomenon. They are fully furnished apartments that have amenities similar to hotel rooms and can be used for short or long stays, offering a more home-like experience. Some of the main benefits of staying in a serviced apartment compared to a hotel room are that they offer on average 30% more space, more privacy and are more cost effective in terms of no additional hidden costs and fully equipped kitchens . reduce food expenses. According to The Apartment Service, serviced apartments are 15-30% cheaper than hotel rooms, adding to their appeal to both business and discerning tourists.
In recent years, the serviced apartment, a subsector of the hotel industry, has grown more than any other type of temporary accommodation in Europe. This can be attributed in part to globalization and the need for workers to travel more frequently to offices located outside of the city, with companies looking for less expensive ways to accommodate them. In addition, families may prefer to stay together and require a different setup than hotels offer, in terms of wanting to keep an elderly relative close, having office space to catch up on work tasks, or allowing older children have more privacy. .
The evidence of its popularity lies in the occupancy rates. Serviced apartments in the UK averaged an occupancy rate of 81% in 2016 and outperformed hotel rooms at 77.2%. Among businesses, its use is also increasing. According to a recent survey conducted by the Business Travel Show in November 2016, four in ten corporate buyers reported that they would have used more serviced apartments by the end of 2016 than in 2015.
As we’ve mentioned before, serviced apartments are outperforming hotel rooms in terms of occupancy rates. Due to their cost-effective nature, they are becoming popular with companies that send employees on business trips and those who travel for pleasure and who require more flexibility in their accommodation than a hotel can offer.
Serviced apartment companies are enjoying their success and subsequently expanding at a fast pace. SACO is currently one of the largest operators of serviced apartments and has made several acquisitions in recent years. Since the beginning of the year, SACO has secured additional developments in London, Cambridge and Dublin, with a fourth being planned in Manchester. This shows confidence in the market and indeed a 2016/17 report from Savills predicted that 2017 would be “record growth” in terms of new developments in the UK.
The distinction between serviced apartments and Airbnb.
Governments have been cracking down on Airbnb rentals, which in part enables success in the serviced apartment market. Berlin has banned tourists from renting entire floors from Airbnb to protect affordable housing, and Airbnb is banned from listing short-term rentals in New York. Serviced apartments differ in that they are not flats owned by people looking to earn extra income, but rather are owned by a company for the sole purpose of short- or long-term rentals to people in need of a place to stay. Unlike Airbnb, apartments are not someone else’s permanent residence.
A crackdown on Airbnb rentals in some places is allowing serviced apartments a chance to accommodate those who would have used Airbnb, further increasing demand for the units.
Apartments with services as an investment
Investors looking to invest in the serviced apartment sector will be excited about its fundamentals. In terms of specific investment, people will look for buildings with high-quality facilities in good central locations. Bearing in mind that the people who will use the apartments will be business or leisure travelers (or a combination of both), they will need easy access to transport links and the attractions and services in the area. Because stays are generally longer (research has shown that 91% of stays are longer than 14 nights), residents will be assured of a more stable income as their apartment will be occupied for a more defined period. . The longer-than-average length of stay, coupled with lower running costs, means that serviced apartments generally achieve higher net operating income compared to regular hotels. This helps allay concerns for people who are considering investing in hotel rooms but are concerned about the possibility of gaps in occupancy.
Sir Thomas House is an excellent example of an attractive investment in Liverpool. It occupies a city center location close to Liverpool’s bars and restaurants, attractions and transport links. Liverpool itself boasts not only a booming tourism industry, but also a growing economy, home to the highest proportion of fast-growing startups in the country. A 2017 PwC hotel industry report also identified Liverpool as set to see growth in terms of revenue earned per room, indicating increased demand and willingness to spend more in the city. These factors ensure that there will be sustained demand for apartments from tourists and business travelers alike.
