Joyce Cawthorpe ASAP’s Marketing/Media Manager attended this week’s Serviced Apartment Summit Europe in London on 11 July. We’re pleased to share key insights from the panel discussions at the event.
Conversation with industry leaders
The opening seminar highlighted the importance of ‘trust and transparency’ in the industry, especially in view of GDPR.
- BridgeStreet’s MD (EMEA/APAC) Steve Burns stressed the need to ‘get the basics right – before, during and after the guest’s stay’ stressing that the speed of response to booking enquiries is critical as well as delivering the transaction in realtime, and the need to bring down the turnaround time to process a booking from days to hours/seconds.
- Jan Jacobsen, Global Accommodation Manager for AIG stressed the need for operators be ‘completely truthful and honest’ so that the traveller knows exactly what they are getting as ‘no-one likes an element of surprise’. And he warned the sector to tackle the speed of distribution issue quickly ‘or you’ll become a Kodak’.
- Adagio CEO Karim Malak highlighted the strength of their future pipeline – 46 new properties due to be added to their portfolio in the next few years including expansion with partners in the Middle East and Brazil.
STR: Essential data and market insight
STR’s Director of Business Development – Tom Emanuel – presented the latest industry figures:
For the UK – performance up to end May 2018:
- Occupancy year-to-date end May 2018 is 9%, down 0.1% on 2017
- ADR is £119.86, down 0.9% on 2017
- RevPAR is £90.98, down 1.1% on 2017
- While growth has slowed in the UK this year, serviced apartments are commanding a rate premium of just over £32, compared to the accommodation industry overall (£87.53)
- The performance varies across key cities in the UK – London RevPar is down 4% on 2017, M4 corridor is down 14% and Edinburgh down 8%; whereas Birmingham is up 7% and Manchester is up 2%
- Increase in supply is creating some challenges in London currently
- Key cities where supply is predicted to increase dramatically in the next 2 years:
- Glasgow + 184%;
- Manchester + 158%
- Liverpool + 105%
- Total UK serviced apartment sector supply is now 22,637 units, + 9.3% on 2017; London accounts for half of the total UK supply; a further 1,100 new units expected to open in London by end 2019
In the distribution panel Jennifer Kim, Cycas Hospitality, identified technology as the biggest challenge for the sector – for agents, TMCs and operators – and the need for a booking tool which is a lot more intuitive, making extended stay much easier to book.
Irene Roberts, Expedia highlighted that OTAs have the ability to scale globally and present serviced apartments right around the world bookable realtime and their abilty to display customer reviews is very important. The OTA share of business is growing because of their rich content and the wide choice of product they can present.
Ilkka Ylilauri, Director, Forenom Apartments, commented that for them Airbnb is one of the best marketing tools, especially now they are entering the B2B market.
A question from the floor around the importance of being on the GDS which some feel doesn’t represent the industry fully in terms of the breadth of imagery presented and it can be expensive – Jennifer commented that it all depends on your target market – if you’re targetting the big corporates then they expect you to be on the GDS.
Jennifer also encouraged all operators to commit to supplying performance data to STR to ensure as an industry we can benchmark ourselves more accurately.
Commenting from the floor Cho Wong, Compass Edge Europe, stressed that the younger generation is most loyal to their mobile device and for the Chinese they have to be able to book as easily as possible at the touch of a button using eg Alipay.
Developer & operator debate: hotels v aparthotels/extended stay v serviced apartments
In the developer and operator debate Vivek Chadha of The Nine Group commented that Airbnb had shown hotels ‘how far behind we are’ and that the future for apartments centres on the need to ‘create an experience’.
Staycity’s Barry Hickey confirmed they increasingly focus on design with the introduction of their new Wilde Aparthotel brand but see the kitchenette as the sector’s key differential – for 30% of their customers it’s critical and a further 30% it’s very important.
Adagio’s Thomas Lamson commented that 75% of Adagio’s customers are longterm and they’re focussing on a new design of apartment to be launched next year and on delivering a ‘new experience’ in their public areas – where they can bring guests together for particular events etc. But they are reviewing the need for all apartments to have kitchens as their customer is more focussed on the option to have food delivered to their apartment and having close access to shops.
Paul Rands, BridgeStreet, commented that as the sector is maturing there is more innovation and we’re seeing the best of both worlds with the traditional hotel trying to create an extended stay product and serviced apartment operators creating more of a hotel experience from an apartment product. Consumers are becoming ever more sophisticated and he stressed it’s essential to be very clear about what you are offering in the online environment.
In terms of where they’d look to develop new extended stay properties Paul confirmed it’s all about looking at where the demand is, but generally urban locations, being close to the workplace, good central locations with good transport links. For Staycity they’d look at the different markets – tourism/leisure/corporate and see if there is an established hotel market there, normally looking for city centre locations. Vivek confirmed it all centres around the ability to deliver ‘an experience’ in urban locations.
Regarding funding Paul commented that the funding community has become more comfortable with the serviced apartment sector and now that data is improving, the investment climate is improving.
For Adagio their preference is to operate with leases as if it doesn’t work out you can convert the property more easily to residential accommodation.
Vivek confirmed that while there is space for everyone in the sector it’s the brands who really help move things forward and clarify understanding of what the sector is all about.
Investment outlook: serviced apartment investors
Simon Scott of JLL led an interesting discussion around the investment climate with Lauren Okada of Brookfield Property Group and Verdrana B Riley of Ciel Capital.
Brookfield recently acquired SACO and Lauren confirmed that it was the higher occupancy and lower room turnover which made the sector an attractive investment opportunity for them along with the opportunity to scale up the brand.
Ciel Capital invested in their first aparthotel in 2012, and Verdrana explained she has developed the new ‘Stow-away’ brand (managed by BridgeStreet), and the focus has been on developing smaller units eg 18/20 sq metres which reduces the build costs, and the key thing is to secure the right location.
Lauren agreed location is always key and that the unit size will vary depending on the target market of each property. For their Locke brand, where the apartment size is smaller, it’s important to offer the other services – eg gym, coffee shops, co-working space.
In terms of the Brexit impact Lauren believes that longer term it could be positive for the serviced apartment sector as there will be a more transient workforce with more project based work compared to permanent relocations.
In terms of future growth while the availability of funding remains a challenge, Verdrana believes awareness has improved in the lender/investor universe in terms of understanding what an aparthotel is. Lauren expects it to evolve in a similar way to the student housing market but as awareness improves there will be some compression in yield.
Injecting digital into operators’ DNA
Julie Grieve of Criton Apps confirmed that people still have a vital role to play in our sector but that technology should make things more efficient can deliver an opportunity to upsell particular services.
Doug Greenwood, Cheval Residences, commented that they are finding using mobile apps is a big advantage in terms of tracking staff, for example for their housekeeping operation.
Severinne Obertelli, Maxxton stressed how vital technology is in ensuring all data is both protected and fully accessible to deliver efficient reporting.
In terms of exciting future developments Doug explained that AI is opening up new opportunities for guest profiling; Julie highlighted the opportunity for digital key solutions and for Severinne it all centres around better connectivity and distribution and being able to give better information to repeat guests.
Debate: Brexit and London v European gateway cities
Brexit does not appear to be having a major impact on operator expansion plans.
Anja Mueller, Adagio, confirmed that the UK is their key market outside Germany and their strategy won’t change – they still want to grow in the UK.
However there are also new opportunities for them in Spain and Paris is performing very well. She feels London has a strong future but things may be more challenging in the rest of the UK if it becomes much more expensive for inbound visitors.
Filippo Cavandoli, Nomad Aparthotels, confirmed they are looking to expand in the UK.
For Jan Winterhoff, GBI AG explained they are focussing on Germany and Austria and are not looking at the UK at the moment but that’s not related to Brexit, more a question of their focus on building their brand in their core markets.
George Westwell, Cheval Residences confirmed that he believes London has a very strong future and the Brexit effect should be minimal as ‘London will always be London’. Cheval Residences are also looking to expand in Europe.
Adina commented from the floor that they are seeing huge demand for aparthotels and smaller units eg studios and that there is less demand for larger units. For Cheval however George explained they still experience high demand for larger units from certain markets which Steven Smit, CFO of the Shortstay Group agreed with commenting that their largest units eg 2 and 3 bedroom apartments do yield well.
Meet the Leaders: Final Thoughts
Guus Bakker, Frasers Hospitality predicts a lot of change in the sector in the next few years and expects there to be some big mergers on the horizon. Chris Ahearn, CEO, Oakwood Worldwide advises the industry to behave confidently, to be bullish as we have a bright future and believes that while dynamic pricing is challenging, we will find the right solutions for booking technology.
George Westwell, Cheval Residences was very encouraged to see that STR’s benchmarking data now covers 50% of the industry in the UK and welcomed the news that our sector delivers revpar of £32 above hotels.
Steve Burns, BridgeStreet believes the market still needs more quality supply but at a lower price, although Chris Ahearn agreed that while an economy brand is needed it could be difficult to achieve that in the right location in London.
Further information about the Serviced Apartment Summit –