Savills has forecast that the ongoing expansion of European serviced apartment operators will provide the solution to lack of consumer and investor awareness which has prevented the sector from reaching its full potential so far. The firm’s research found that just 59% of consumers were familiar with serviced apartments and 43% with apart hotels (although slightly higher at 72% and 52% respectively among business travellers). More than three quarters of those surveyed could not name a single serviced apartment or apart hotel operator.
Awareness through expansion
However, Savills reports that Europe’s largest operators are already tackling this lack of awareness through expansion with 3,500 units across 26 sites in the development pipeline compared to 12 sites this time last year. Staycity is developing 800 new units in cities including Lyon and Edinburgh, Frasers Hospitality has 500 planned across Germany and Switzerland and Starwood’s Element is developing 200 in Amsterdam and London.
Marie Hickey, commercial research director at Savills, comments: “Brand development and concept awareness in the serviced apartment sector has picked up pace in recent years but we believe that there is still some way to go. Strengthening both will make consumers more familiar with the product and its advantages over a hotel for certain types of trip, widening demand as a result.”
Upswing in serviced apartment demand
The firm also reports that the number of international visitors staying in paid accommodation across nine key European cities (Zurich, Frankfurt, London, Pairs, Amsterdam, Brussels, Dublin, Edinburgh and Aberdeen) have risen consistently over the last three years, which should prove beneficial in terms of demand.
Furthermore, business travel is yet to return to pre-recession levels suggesting the full upswing in serviced apartment demand is yet to be fully realised. In London, business visitor numbers are rising but still 10.5% off their 2006 peak of 3.7 million.
Investment constrained by lack of stock
In terms of investment in serviced apartments and apart hotels, Savills attributes heavily constrained transaction volumes to lack of purpose built stock. Activity in the UK, one of the largest markets in Europe, has totalled just £300 million across relatively few transactions since January 2014. However, the entrance of corporate private equity and institutional investors suggests that confidence and interest in the sector are expanding. The largest transaction to date in the UK was Starwood Capital’s £206 million acquisition of the Think portfolio earlier this year.
James Bradley, associate director of hotels at Savills, comments: “Aviva and LaSalle have now entered the sector with acquisitions in London while Singapore’s Far East Hospitality has purchased a 50% stake in four Adina branded properties. Some investors now see serviced apartments as a subsector of the ever expanding hospitality landscape and not fundamentally different to hotels. This, combined with the expansion in purpose built stock, means that we expect investor interest to rise accordingly.”
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