The Sweet Spot

George Sell By George Sell
Uploaded 16 August 2016

If there were any doubts that the serviced apartment sector is now one of the main sweet spots in the hospitality industry, a look at the types of companies who are new entries to the sector gives a good idea of the convergence currently occurring.

Sydney's Crown Group is one of the city's most prominent developers of luxury apartments for sale, but has just launched a hospitality arm which will operate some of the units it will retain and run as a luxury aparthotel. It has plans to roll out the model to other Australian cities, and farther afield in to Asia.

If this model is viable for a residential developer in a city with land and property values as high as those in Sydney, will we see other upmarket developers - whose previous business model has been to build and sell as quickly as possible - retain and operate units in London, for example? Could the likes of Berkeley Homes, or Candy & Candy (developer of the luxurious One Hyde Park residential and retail complex) be the next wave of growth as competition intensifies for operators in the UK capital?

Over in the States, an interesting JV between Rockefeller Group - another big name developer - and Korman Communities (owners of AKA Hotel Residences and AVE brands) raises further possibilities, and offers a glimpse of potential future financial structures for developments where developers want to retain an interest in their product - in this instance by forming a JV with the operating company, which also has a financial stake in the construction phase.

Developers becoming operators, and collaborations between developers and operators are just two of the new models we are likely to see more of as the serviced apartment sector becomes the subject of ever more intense scrutiny from potential new entrants.

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