Here to stay: Why the UK serviced apartment and aparthotel market continues to grow

The last six months has seen a number of new operators make their mark in the UK offering venues with furnished apartments for short or long stays which also offer some of the benefits of using a hotel - such as a manned reception or an F&B offer.

Before Christmas, Yorkshire-based business Roomzzz revealed plans to open at least two more venues this year​ while the new owners of Birchover Hotel Apartments in the East Midlands​ also have expansion plans in their midst.

2013 will see the launch of a large, luxury serviced apartment in Liverpool​ from newly-formed company Richmond Luxury Living and London hotel The Cavendish will be transformed into serviced residences​ by owner-operator The Ascott.

Attractive alternative​

According to property specialist Savills, the trend shows no sign of slowing down either.

"With long run occupancy 5.8 percentage points higher than hotels but with almost double the operating profit margin, serviced apartments clearly offer an attractive alternative to hotels," said Adrian Archer from Savills Hotels & Healthcare in a report on the market released last year.

According to the firm, one only needs to look stateside to see the potential for the market. Whereas New York has 5.2 units per 1,000 business visitors, London has just 1.2. The capital currently has around 8,000 serviced apartments making it one of the smallest markets internationally.

Enhanced marketing​

It is an American firm too which is helping to really drive the interest in the serviced apartment model here. The Staybridge Suites concept from InterContinental Hotels Group (IHG) is one of its fastest growing brands with 71 venues in the pipeline globally.

There are four properties in the UK - in London, Liverpool and Newcastle - each offering what IHG describes as a city centre 'home from home'. 

"As a new brand and concept Staybridge Suites has to work harder than our better established brands but the business case is compelling," a spokesperson for the firm told BigHospitality. "Based on how well the extended stay market is doing in the US, we see significant potential to grow the market in Europe."

"Whilst the majority of Staybridge Suites' guests are business travellers who tend to stay more than five nights a week, the suites are also ideal for families as the home-like environment and self-catering facilities can appeal," she added.

If London is to meet the potential Savills argues it has, there could be a 200 per cent increase in current supply. However, for that to happen it will require 'enhanced marketing' in particular from an increase of national branded operators such as Staybridge Suites.

Corporate demand​

Despite continuing occupancy levels and increased attractiveness to investors, Jonathan Langston, managing director of TRI Hospitality Consulting, told BigHospitality hotel operators could not simply introduce a serviced apartment model or brand to their business and reap the benefits.

"It’s clear that there is a limit to the number of market opportunities in the UK in terms of the destinations that have sufficient volume and diversity of demand to support serviced apartment provision. It is a defined sector and needs a particular focus and approach rather than just treating it as another niche in the traditional hotel market," he said.

So where in the UK do serviced apartments thrive, and why?

Much of the recent rise in demand has been attributed to corporate demand which has come back on-stream since the recession and the Olympic Games. However those making bookings for business guests are now a lot more cost-conscious. 

Much of the growth has occurred away from the capital - businessmen and women making trips to other parts of the UK - a trend which Carl Bridge, who has just taken over the ownership of Birchover Hotel Apartments, has benefited from.

"We have grown very quickly in the last three years," he told BigHospitality. "70 to 80 per cent of bookers say 'your bedroom and bathroom is bigger than I have had in a hotel plus I get the lounge and living area for the same price."

Cost control​

The key to the success of an aparthotel is cost control - less money spent on staffing, F&B or housekeeping. However there are differing levels of service offered which then determines the rate an operator can charge.

"Because they don't have a reception, most serviced apartments don't provide hot meals whereas we do," Bridge explained. "We have slightly higher costs but we tend to easily cover that by making sales from our reception.

Bridge also explained he had benefited from membership of ASAP, the Association of Serviced Apartment Providers and seeing how the business model can really work.

"If you are coming into the serviced apartment industry, you need to be really committed to working hard in terms of providing a really good service to make up for that fact that you don't have a bar or a restaurant," he said.

While the UK may not see as mature a serviced apartment market as the USA within the next twelve months, most experts expect an increase of operators and more existing independent hoteliers or hotel companies to increase a serviced apartment element to their venues.

"There is a bigger resource need than you might first think but I would be really surprised if a lot of hotel operators aren't looking at it because it is a lot lower cost generally and you generally get a higher room rate too," Bridge concluded.