Industry Update
Opinion Article19 July 2018

The Serviced Apartment Sector in Europe: Alive and Kicking

By Arlett S Hoff, Director at HVS London and Magalí Castell, Associate at HVS London

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The last year marked a true consolidation of the serviced apartment industry, which has now found its place within the accommodation sector and in the investor community. This year's article includes the latest announcements in the sector, analyses the different operating models used within the industry through the review of the 2018 survey results, and looks at the future pipeline as well as the latest investment transactions in the market. HVS has conducted a survey to observe and understand the shift in trends in terms of the different operating structures and models used within the sector. The results show a real strengthening of the use of management agreements and the rise of franchises, providing operators with more flexible structures that enable the current expansion needs of brands and reduce the operator's risks. The results also give us no doubt that serviced apartment operating models and structures are increasingly moving towards the hotel sector.

Hotel operators are keeping an eye on the rising competition and the serviced apartment sector is getting more and more crowded. Brands are benefiting from complete makeovers, being repositioned and new trendy concepts are emerging, such as Cuckooz Nest with its fusion of coworking spaces with childcare, and Cotels 7Zero1 fitness-focused serviced apartments.

In terms of branded extended-stay product, yet another hotel group is jumping on the serviced apartments bandwagon, demonstrating the growing interest of hotel groups in this product type. Yotel has announced the arrival of Yotelpad, compact homes with clever design and smart technology, with already five deals signed. Others are adding new brands to their serviced apartment portfolio: Staycity has announced a premium brand, Wilde Aparthotels.

The European serviced apartment pipeline has boomed compared to last year, approaching 20,000 units over the next five years. This is nearly double compared to last year's article, and thus it is safe to say that investors and developers see true potential in the sector. Brands are looking into consolidating their presence in those markets where they are already present, as well as expanding into new locations. The focus is not only on Western Europe; interest is starting to be shown in Central and Eastern Europe, in countries such as Austria and Poland, where further potential in the market can be found.
There have been a limited number of serviced apartment transactions and there is relatively little transparency in terms of sales prices. However, recent transactions such as the acquisition of SACO by Brookfield are thought to result in an increase in awareness, security and transparency for the sector, as serviced apartments are starting to be perceived as an investor-friendly asset class.
We would like to thank all of the survey participants for their generous input into the study. Your opinions and experiences are crucial in facilitating understanding of this thriving sector. We urge more operators in the sector to recognise the value of sharing data to enable serviced apartments to gain more attention from potential investors.Much has been announced in terms of product and brand expansion in the past year; we take a look at what has actually materialised.

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Industry Highlights and Announcements

Adagio has taken a breath of fresh air for the occasion of its tenth anniversary in November 2017. The brand has undergone an image makeover and redefined its offer, with the objective of creating a more modern and dynamic identity. This new concept, called The Circle, will be implemented this year in 20 aparthotels across 64 establishments to be renovated over three years. With millennial guests in mind, the common areas have been rethought offering new concepts such as welcome areas that will be turned into a table d'hôte, shared kitchens, co-working spaces, a delicatessen, a library of objects where customers can borrow several objects to personalise their rooms and a world map display board where guests can take a selfie and leave it on the map to share their experiences. In addition, Adagio's new concept, Co-Living by Adagio, is aimed at guests travelling in larger groups. This concept includes shared common spaces to enhance the guest experience, with a living room and shared kitchen. Each common area is to be shared by four to six guest rooms, designed for a maximum of 12 people.

Supercity, the aparthotel operator, has also announced a new company branding and a fresh look for its website. This brand update is thought to greater reflect the company's personality and prepares the brand for its future. Also this year, Go Native has rebranded as Native, as it focuses on product innovation and continues its expansion across the UK and Europe.

New Brands and Concepts

Staycity has announced its new premium brand, Wilde Aparthotels by Staycity, with the name inspired by the Irish poet and playwright Oscar Wilde. Properties will be located in gateway city centres across Europe, the first being London The Strand, which opened in April 2018. Wilde Aparthotels have a clear personality; the design incorporates local touches with an Irish stamp. London will quickly be followed by a Wilde in Edinburgh in 2019, two properties in Berlin in 2019/20 and another in Manchester in 2020.

The hotel chain Yotel has announced the launch of its serviced apartment brand, Yotelpad. This new concept reinforces the brand's ability to optimise space through clever design and smart technology, creating compact homes known as PADs. The company has already signed deals for five Yotelpad projects in the USA, Europe and the Middle East.

To fight the negative health effects that frequent travelling can incur, Cotels launched 7Zero1 in November 2017, a fitness-focused serviced apartment concept located in Milton Keynes. Cuckooz has recently launched Cuckooz Nest, a co-working space with crèche facilities, the first of its kind in London.

Lamington Group has launched room2, defined as a new brand of 'hometel' properties. The company defines 'hometel' as a space between home and a hotel, 'a flexible living environment that does not force you to conform to a set of rules'.

Vienna House R.evo, the new concept by Vienna House hotel group, is a 'tribrid' concept that brings together guest rooms, studios, and friends and family rooms. With zeitgeisty design, laid-back common areas and the sorts of amenities guests appreciate, guests will be able to check in for one night, several months or even for just half a working day. The properties will be located in convenient central locations, the first in Munich, to be followed by other major cities internationally.

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Arlett S Hoff

Arlett Hoff is a Director with HVS’s London office, specialising in hotel valuation and consultancy. Arlett joined HVS in 2006 after experience in the hotel investment industry as well as operational hotel experience. Arlett holds a Masters in Real Estate Investment and Finance from Reading University, UK and is a member of the RICS.

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Magalí Castell

Magalí Castells is an associate at the HVS London office. Before joining HVS, Magalí gained operational and real estate development experience in Barcelona, Spain. She speaks English, Spanish and French and holds an MSc in Hospitality Business from Ecole hôtelière de Lausanne. Prior to gaining her master's, she graduated with a bachelor's degree in Business Administration from ESADE Business School, Barcelona, with a focus on finance and real estate.

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