The Serviced Apartment Sector Explained
In the following Q&A, we attempt to shed some light and clarify some key concepts.
What are serviced apartments?
We refer to ‘serviced apartments’ as a catch-all term for purpose built apart-hotels (with C1 use class) and residential buildings re-purposed for short-term lets (with C3 use class).
Why is everyone talking about them?
This alternative type of accommodation is becoming increasingly popular among corporate and leisure travellers worldwide, as it bridges the gap between the AirBnB, hotel and residential markets. Due to the sector’s increasing popularity, the industry has already reached maturity in the Americas, Middle East and Asia, leaving Europe and the UK particularly underpenetrated.
How did serviced apartments originate?
In the UK, the serviced apartment sector first came into focus around 15 years ago as a response to a surge in demand from corporate travellers, who frequently found long-term hotel stays uncomfortable and impersonal. Next came the rise of AirBnB which introduced a viable alternative to hotels and acted as a catalyst for the serviced apartment sector to flourish.
What are the benefits for developers and landlords?
Hotel developers are used to working with management contracts, but landlords and investors can now benefit from the guarantee of long-term leases provided by serviced apartment operators.
These are the typical serviced apartment and apart-hotel operating characteristics:
What’s the market forecast?
Having seen a rapid growth over the last decade, the sector continues to expand at a healthy rate with a pipeline of 20,000 units expected to open in Europe over the next five years, almost double that of last year’s projected pipeline.
Large international brands are realising the sector’s potential and are creating and evolving new brands to penetrate the market. In the first quarter of this year, Hilton opened 23 extended stay hotels and The Ascott Limited, the world’s largest provider of extended stay, announced their target to double their global portfolio from 80,000 to 160,000 units by 2023. IHG also has another 169 extended stay hotels in their Staybridge Suites pipeline.
New brands continue to emerge, and over 70% of operators are planning new properties, creating substantial demand for C1 and C3 buildings across the UK and Europe. Our job is to help our clients satisfy this demand and hand-hold them to completion.
Sign up to our newsletter to receive the latest serviced apartment news, views and updates on our current opportunities.