Serviced apartments are preferred option for European hospitality investors

George Sell George Sell Uploaded 12 November 2020

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UK: Serviced apartments have overtaken hotels to become the most attractive hospitality asset class to European investors for 2021, driven by positive demand fundamentals and leaner costs, according to a report from Deloitte.

The 2020 Deloitte European Hotel Industry Survey represents the views of a sample of senior hospitality figures, including owners, operators, lenders, developers and investors. Nearly half (45 per cent) of those polled said serviced apartments are the most attractive asset class, compared with 20 per cent in 2019. Just 25 per cent opted for hotels as first choice, down from 31 per cent last year.

Assets with a focus on sharing experiences such as coworking, coliving, student housing and hostels have seen a decline in investment appeal, a total decline of 25 percentage points from the previous year. Hostels for instance plunged from 17 per cent to just one per cent as an attractive asset from the previous year. Holiday parks on the other hand climbed from one per cent to eight per cent, possibly driven by the growth in domestic travel.

The Deloitte findings are backed up by another recent report from HVS. Its publication, The Serviced Apartment Sector in Europe – Changing Gears?, found that more than 70 per cent of investors surveyed said they were actively looking for serviced apartment deals for new developments in key markets, although lenders reported a more cautious approach. However, more than 80 per cent of respondents expect operating models for the sector to change going forward, shifting towards variable lease agreements, management agreements and owner-operated units.

"The positive resilience the sector has shown during the pandemic has been a real stress test for investors and lenders," said HVS director Arlett Hoff, the report's co-author. "This sector will continue to grow even during the pandemic and, once recovery sets in, we are likely to see expansion accelerate."

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