Event review: Hotel Alternatives conference 2016

George Sell By George Sell
Uploaded 05 February 2016

Serviced Apartment News was a media partner for the second Hotel Alternatives conference, which took place this week in London.

Billed as a conference for "investors, operators and advisers with an interest in the new accommodation types that rival hotels", the event featured representatives from sectors including hostels, short-term rentals, and hybrid hotels.

It was notable that the serviced apartment sector took up a greater proportion of the programme this year, as did the short-term rental sector, with the subject of Airbnb cropping up in nearly every session.

A session called The Leaders perspective was chaired by event organiser Andrew Sangster, the editor of Hotel Analyst magazine, who quizzed industry figures about their businesses' performance and attractiveness to investors. It featured BridgeStreet CEO Sean Worker, who said that the last eight months has seen the company's best run rate for the last 20 years.

"Serviced apartments have truly arrived as a credible alternative to traditional uses of real estate," said Worker, who added: "Resi developers, as well as companies such as ours, are moving away from larger footprints. Mixed-use developers are building smaller units and consumers are adjusting to that. These units also have alternative uses - residential or short-stay - in a downturn, which also attracts investment."

Tom Walsh, CEO of Staycity described trading conditions as "very benign" with 87 to 88 per cent occupancy over the company's portfolio last year. "Staycity sees Airbnb as a distribution platform and as soon as they can sort out some technical issues to make it compatible with our booking systems, we will be on there," added Walsh. He noted that 70 per cent of Staycity guests say their kitchenette was a vital or significant factor in their booking, and echoed Worker's earlier thoughts, saying: "Volatility is lower from aparthotels than traditional hotels - the sector is becoming more attractive as an asset sub-class."

Frasers Hospitality's CEO for the EMEA region Guus Bakker said the company has felt the effects of the Paris attacks, both in Paris and London, and that the provincial UK and European markets are performing better than London. "The average length of stay in the serviced apartment market has shortened considerably since 2008, since the financial crisis, but ADRs go up as a result. In the MEA market customers expect a 24-hour F&B supply, reducing margins, but in Europe margins have increased," said Bakker.

A finance panel featured Elie Younes, executive vice president and chief development officer for Carlson Rezidor. He said the group "has been pulled in to the extended stay sector by investor and consumer demand", and now has 30 extended stay properties. "There is a lack of brand awareness in the sector which we can capitalise on with our hotel brands," he said, adding "The extended stay model is also much more compatible with Shariah compliant investment".

Goncalo de Vasoncelos of crowdfunding specialist Syndicate Room said: "Crowdfunding used to be a last resort, where you went when every other option had been refused. But our model works by having a recognised, credible lead investor and then the crowd can join in. We work in the property and hospitality sectors but we are sector agnostic."

Nick Chadwick of Starwood Capital, which bought four Think Apartments-operated buildings out of administration described the deal as "a real estate play, the sector was secondary. The serviced apartment sector is a potential very defensive play in a downturn."

In an eye-opening session, Ian Rennardson of Jefferies International, described the huge impact of Airbnb and other similar platforms on the hotel sector. He began by saying: "Investor sentiment towards hotel stocks is as low as I can ever remember, largely because US REVPAR growth is slowing. The US hotel stock market was down almost 30 per cent in 2015." Rennardson's presentation - The Sharing Economy: what it means for hotel companies - can be seen here.

Discussing how operators can compete with the likes of Airbnb, Frank Reeves of Avvio ominously claimed that "We're not far away from page one of a Google search being totally made up of paid for listings."

The final three sessions were all highly encouraging to those in the serviced apartment sector. Jo Layton of The Apartment Service, set the scene for the serviced apartment landscape, and was very positive about sector growth, but called for a global code of conduct, stressing the importance of consistency of product from one geographical market to the next.

Thomas Emmanuel of STR Global then revealed that serviced apartment supply growth in the UK has been faster than that of hotels every year since 2006. After the global financial crisis, demand for serviced apartment fell for just eight consecutive months, compared with 15 months for hotels, he said.

Finally, a highly entertaining debate, chaired by Russell Kett of HVS, saw the house, represented by Eric Jafari of SACO and Marcel Lindt of Frasers, propose the motion that "Serviced apartment offer better returns than hotels". They were opposed by Shane Harris of Jupiter Hotels and Paul Johnson of Kew Green Hotels who put up a game defence but were defeated by the serviced apartment fans in the audience in a vote won by a ratio of 2:1. The debate was a light hearted affair but did contain compelling evidence of the increasing appeal of serviced apartments as an asset class.

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