The serviced apartment sector is set to expand faster than any other segment of the UK hospitality market over the next two years according to new research from Savills and the Association of Serviced Apartment Providers (ASAP). The report forecasts a growth in supply of 8.4% per annum by the end of 2017 based on known planning consents, outpacing the 6% anticipated for budget hotels and 2.6% average across all hotel types.
Future growth hotspots
While London previously dominated purpose built expansion, Savills and ASAP highlight Scotland and the Midlands as future growth hotspots with an average increase in serviced apartment supply of 21.1% and 13.4% per annum respectively. Although London continues to lead in terms of quantum of new units, with 1,200 in the development pipeline for the next two years, it is closely followed by Scotland where 1,061 units will be delivered.
3.1% and growing
Marie Hickey, commercial research director at Savills, comments: “The serviced apartment or apart-hotel segment – also known as extended stay – is currently a relatively small part of the UK accommodation sector with a 3.1% market share (approximately 19,000 units). This is set to change and with national operator targets pointing to a potential doubling of stock, the level of growth is likely to be far in excess of that indicated by the known development pipeline.”
As part of the research, ASAP surveyed 48 serviced apartment operators regarding their expansion targets both in the UK and globally to the end of 2018. The survey revealed an anticipated global increase in supply of 145,000 units. UK-only operators led in percentage terms, with identified expansion targets pointing to a 122.3% increase in stock through to the end of 2018, effectively doubling current supply. As 91% of these unit targets reflect committed pipeline, they look likely to be realised.
James Foice, managing director at ASAP, adds: “The drive for expansion in the serviced apartment sector is definitely not just a UK phenomenon. In fact, the larger global brands surveyed revealed plans to increase stock levels by 47.2% before the end of 2018. In real terms this equates to approximately 112,500 additional units which is more than six times the size of the current UK market. With new innovative brands entering the space, such as Zoku from the co-founders behind CitizenM, there is a growing realisation around the customer appeal and the growth potential of the sector ”
Pure serviced apartment operators will be at the helm of the sector’s global growth, according to the survey, with a projected 71.1% increase in stock over the next three years. Examples include the Ascott Group which plans to double its existing portfolio to 80,000 units by 2020. Hotel-owned serviced apartment and apart-hotel brands are also expected to be acquisitive globally and, in some cases, will be the fastest growing across their stable of brands.
Helped by Airbnb
Marie Hickey adds: “The positive impact of Airbnb on the serviced apartment sector has been rather unexpected. It was previously touted as a big threat, but in fact it has helped to raise the profile of alternative accommodation such as serviced apartments and apart-hotels to prospective consumers. This is reflected in the number of operators listing properties on the site and as a result travellers are becoming increasingly more open to concepts that are better aligned with their specific requirements. This, coupled with supply constraints in some less developed markets in Europe and the ambitious expansion plans of operators, means that the serviced apartment sector looks set to become an established and well-recognised part of both the UK and global hospitality markets.”
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