Charting the growth curve - Serviced Apartment Summit review

George Sell George Sell Uploaded 15 July 2016


Growing demand and sophisticated consumer understanding of serviced apartments will fuel growth over the coming year,delegates at Serviced Apartment Summit 2016 were told.

More than 350 industry players as well as a cohort of hospitality graduates from some of Europe's top hospitality schools came together at London's Park Plaza Victoria Hotel for an intense day of presentations and workshops running concurrently alongside a new event, the Short Term Rentalz conference, focused on the growing short term rental sector as it moves towards a projected global market value of $170 billion USD by 2019,

The event was kicked off by SAN's Piers Brown who told the audience, after a tumultuous couple of weeks in British politics, to be prepared and expect the unexpected, not just in business but the wider world too.

Over the course of the day, delegates discussed the post-Brexit scenario, finance, best practice, regulatory issues and how the industry continues to educate consumers and investors as to the points of difference the extended stay market can offer.

Thomas Emanuel from industry data specialists STR kicked off the day with an overview of how the serviced apartment segment is performing. Serviced apartments had higher occupancy rates than hotels across all the markets surveyed - the US, UK, Germany, UAE, China and Australia. In the UK serviced apartments had a significantly higher ADR for the year-to-date, at £132.04 compared with £83.31.

UK serviced apartments as a whole saw a 1.8 per cent drop in REVPAR, but this figure was just 0.7 per cent for the regional UK, excluding London. Manchester and Birmingham but saw a five per cent increase in REVPAR.

Investors are increasingly looking at entering or increasing their exposure to the sector and, according to Lisa Neubeuser, managing director of hotel fund manager Invesco Real Estate, who spoke on the Investors panel, "the differences between serviced apartments and aparthotels are narrowing" and the advantages that a larger footprint and flexibility over traditional hotels can offer are increasingly seen as an attractive alternative. Fellow panelist John White of Osprey Equity Partners suggested that yields can be similar to conventional hospitality portfolios as well as another boom accommodation segment, student housing.

In spite of the current political upheaval in the UK, MP Pat McFadden - formerly a shadow minister for Europe - honoured his commitment to address the Summit and spoke in favour of a restrained approach to the UK's moves towards Brexit following the decision by a narrow majority of British voters to leave the European Union.

He cautioned against a rush to invoke Article 50 which would trigger a two-year negotiating process, by which time the UK and the EU should have dealt with an enormous to do list regarding the disentangling of all agreements between the two parties.

"Our trading relationship with Europe and the rest of the world is very important," reiterated the Labour MP for Wolverhampton South.

Making a point that also has direct relevance for the hospitality sector he said: "The big question for the government is how it deals with the trade off between access to markets and free movement."

Referring to the triumph for the advocates of 'Leave', he told the audience "the vote a couple of weeks ago has changed the in tray for British leadership. Not everything can be negotiated in advance," while adding that he doubted that many EU institutions "will engage until Article 50 is invoked".

A lively discussion from some of the best known names in the sector saw Max Thorne, newly appointed MD of hotels and leisure at JLL - which released a report on serviced apartments in the run up to the conference - predict a double digit increase in the growth of the 'bleisure' (business + leisure) market.

Andrew Shaw, associate VP development for IHG, which is present in the sector via its Staybridge Suites brand, identified another trend for the sector which which traditionally tends to provide a slimmed down FnB offering. "We see many guests form dining clubs," he noted during a discussion on how location, especially for extended stay buildings is crucial - something that the panel agreed on while noting that visibility is less important and so there may be advantages when it comes to land values - though Cycas Hospitality's Asli Kutlucan was clear that location is key to everything.

Whitebridge Hospitality's Philip Camble chaired a straight talking and, for some, surprisingly enthusiastic panel of decision makers from three major UK lenders.

HSBC's Huw Zachariah, regional manager, hotels; Diane Scott, business development manager from Lloyds; and Tim Helliwell, head of hotel finance, Barclays; all said they had finance available to lend if the proposition was right.

Helliwell noted that the serviced apartment sector currently represents "less than 10 per cent of our overall hospitality exposure" and that he is open to the sector which he views "in a similar way to wider hospitality" propositions.

In response to a question from the audience about whether it matters if a property is branded or not, Scott suggested that she is less concerned about the name over the door and more interested in the possibilities of scaling up. "If the management team is good enough to make it a multiple then I'm not fussed," she said adding that of course a track record helps and that it "would be crazy not to look at a Grange or a Firmdale".

The topic of Airbnb and short-term rentals cropped up in most of the sessions throughout the day. One of the best attended was a presentation by Tom Caton of Airdna, who explained the phenomenal growth of Airbnb. His presentation can be downloaded here.

While branding is still a hotly debated subject - and many present seemed to think that the sector will see some element of consolidation over the next 12-18 months - making a business stand out from the competition will always be a challenge.

Leonie Bulman, associate director of BDRC shared some down to earth insights about the serviced apartment market that could help operators  reach out to new and underdeveloped markets, especially consumers - particularly families or small groups looking for an alternative to hotels.

Noting apartments aren't yet on everybody's radar but that the growing trend for multi-family stays is driving consumers to look at platforms such as Airbnb, she urged operators to consider how they present their offering to consumers. "How you show people actually living in your apartment is crucial," she said.

This year's Summit highlighted the importance of investing in human capital and particularly the newest entrants to the hospitality field.
In an industry first, a panel of young graduates from a number of hotel schools across Europe were invited to take part in a panel on the main stage to share their views about what they thought the wider hospitality sector should be doing to encourage the leaders of tomorrow.

Martina Krischkeova from the School of Hospitality Managment at the University of Surrey was joined by George Hiley-Jones from The Edge Hotel School at the University of Essex, Floris Drapers from the Hague Hotel School, and Ecole Hoteliere Lausanne's Daniel Bischof.

They highlighted the importance of a good placement and how students today expect more responsibility at an earlier stage in their careers. Hiley-Jones, the most experienced of the cohort, has a professed interest in the traditional hotel sector which led some in the audience to consider the advantages of developing relationships with recognised training providers in order to capture the attention of top students before they commit to other branches of hospitality.

At the other end of the spectrum, five CEOs; Guus Bakker from Frasers Hospitality; Karim Malak from Aparthotels Adagio, Grange's Tony Matharu (whose first venture into the sector is due to debut in London next year), Staycity's Tom Walsh and BridgeStreet's Sean Worker debated the challenges facing those at the top end of the sector with Tony Matharu displaying his customary sang froid over Brexit while saying he thought there would be as many opportunities as challenges.

Recalling the attitude of some when he started out, he touched on the potential for property conversions as buildings faced possible change of use, as well as the impact of currency fluctuations on transactions, especially in London.

Staycity's Walsh reaffirmed his commitment to "growing a bigger business in the the medium term", reflecting the positions of the main players who said that while recent events gave pause for thought, no one is running for the hills just yet. This contrasted slightly with a comment during a previous panel when it was noted that some deals with a Brexit clause had been cancelled after parties invoked it following the referendum result.

A panel of travel buyers featuring Kevin Carr of UBS, Helen Jefferys of PWC, and Steve Proud of Citi provided some really positive stats for the serviced apartment sector. Jeffery revealed that PwC booked 77,000 room nights in serviced apartments during its last financial year, while both banks mandate the use of serviced apartments for stays of five or six nights and upwards. Jeffery also said that her travellers are increasingly asking to stay in serviced apartments on shorter trips of one and two nights.

None of the buyers reported a significant use of or demand for Airbnb and the like, stressing that safety and security are taken extremely importantly at their companies, and that sharing economy platforms can't meet the required standards in this respect.

One of the small but telling moments in the day was when panel members speaking on the 'Currency of Trust' all said they left feedback on social media following a positive stay away from home. Serviced Apartment Award winner George Westwell of Cheval Residences, Deemly founder Sara Green and Francine Heywood, director of reputation management specialist Guest Revu, talked metrics and the best way to encourage customers to share their experiences ("embed the feedback form in the post stay email", according to Westwell).

Making it as easy as possible for busy guests is key, said Westwell, who added that providing a seamless link to Tripadvisor or a similar platform also helped - his properties are currently among the top in the sector on the site.

The final panel looked towards the future - and especially what the sector can learn from other industries. Value Retail's Marco Nijhof, Hailo Cab's David Savage and Baxter Hoare Travel's MD Adam White urged continued innovation and where necessary, reinvention along with everyone's favourite topic: personalisation.

Adam White drew an appreciate response from a not insignificant section of the audience, when he pointed out that subtle recognition of the needs of female travellers is crucial: "They now represent 36 per cent and we know they want to have certain information ready as well as interaction with staff."

One senior woman in the sector, Corporate Keys founder Kathy Childs - who travelled from her base in Melbourne, Australia to attend this year's Summit found plenty of value in the conference panels. "We learned the value of data collection and personalisation, and it was great to get a view of the industry from the other side of the world. It was well worth the 28 hour trip," she said.

Speaker presentations from the Summit can be downloaded here.


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