UK serviced apartment sector optimistic for year ahead

Facebook
Twitter
LinkedIn

UK: The ASAP/Savills Sentiment Tracker Survey has found that serviced apartment operators are optimistic for 2017 after a challenging operating environment in 2016.

The November survey has tracked the changes in operator sentiment compared to the August 2016 Survey. The key findings for the UK serviced apartment sector were:
• Overall operators are more optimistic about their business prospects for the next 12 months than they were in August.
• Encouragingly almost 30 per cent of respondents reported they are accelerating their expansion plans (compared to 13.3 per cent in August); the majority (60 per cent) confirmed they were making no change to their existing plans but an increased proportion of 12.8 per cent stated they were scaling back their plans which points to continued uncertainty in the market.
• The operational outlook is mixed with the general trend suggesting that operators expect both year end occupancy and ADR to be down on 2015, which is reflected in the latest STR data for the sector (UK occupancy down 2.6 per cent at end October 2016, year to date); however, this is an improvement on what was reported in the August survey with 30 per cent of operators in November stating that they expect their year end occupancy to be up on 2015, in the August survey it was 20 per cent.
• It is a mixed picture when it comes to sources of demand with operator responses pointing to more robust leisure demand than corporate.
The majority of operators (60 per cent) stated that they expect year end leisure demand to be up on 2015 levels with 40 per cent stating that year to date demand was already up.
• The survey results suggest corporate demand post the Brexit vote remains, on the whole, weak but has improved on that reported in August.  The improvement in sentiment is more marked when it comes to the year end outlook with 35 per cent of respondents expecting that year end demand from the corporate market to be up on 2015, an increase on the 26.7 per cent reported in August. This helped move the outlook net balance (balance between proportion of respondents expecting an increase in demand minus those expecting a decline) for corporate demand into positive territory.
• The biggest potential source market remains the UK for 50 per cent of operators, although Europe’s share increased from 14.3 per cent to 22.5 per cent of operators, which correlates with the increase seen in leisure demand.
• Wider economic conditions, Business Rates and property acquisition costs were the top three ranking business challenges facing UK operators over the next three years.  This reflects a shift on the August survey where wider economic conditions ranked second with 60% of operators stating it presented a slight to significant challenge; in the November survey this was 63 per cent. The most significant shift in ranking has been for Business Rates.  In August 41 per cent of respondents flagged it as a challenge, ranking it seventh, in November it was 58 per cent placing it second.

James Foice, chief executive of the ASAP, said: “It’s encouraging to see that, in spite of the operating challenges we’ve experienced in 2016 in terms of occupancy and ADR, operators are now at the end of the year feeling more positive in terms of the outlook for business performance for 2017 than they were back in August.  And it’s especially good to see over 28 per cent of operators reporting that they are accelerating their expansion plans. The pipeline of new serviced apartment/aparthotel developments for the UK in 2017 looks very strong, with over 2,000 units due to open next year.”

Marie Hickey, director of commercial research at Savills, said: “There are a number of potential headwinds facing the sector as we go into 2017 around operational performance with operators rightly identifying wider economic conditions and Business Rates as posing significant challenges to their business over the next three years. No doubt the release of the draft revaluations in September has moved this up the agenda for operators.  However, the sector as a whole remains well placed to weather these challenges.”

www.savills.co.uk
www.theasap.org.uk
</p

Be in the know.

Subscribe to our newsletter »