Knight Frank Says: UK Serviced Apartment Sector Shows Resilience – With YTD Profitability 20% Ahead of the Regional UK Hotel Market
Main Photo: The Other House, one of 2022’s opening in London’s South Kensington; Photo Credit: Jack Hardy
Date: July 2022
Name: Serviced Apartments/Aparhotels
Location: UK (and probably the same in Europe)
Number of Keys: 27,000 + in the UK
Who Said: Knight Frank LLP
Throughout the extended lockdowns and periods of recovery which followed, the UK aparthotel sector has performed robustly, with further strong trading performance predicted for 2022, according to global property adviser Knight Frank.
Both 2020 and 2021 saw the regional UK serviced apartment sector operate at a significant profit, outperforming the wider regional UK hotel market in 2021 by 40%. Despite the recovery in hotel demand across all sectors, the gap in occupancy performance, at the end of May 2022, between regional UK serviced aparthotels and the wider regional UK hotel market stood at 9.5%.
The outlook for the UK’s serviced apartment sector remains positive according to Knight Frank’s latest analysis which projects annual supply growth of 5.5%, and total stock rising to over 27,000 apartments. Knight Frank predicts that of this expansion, over 70% of the new supply will be delivered by independent operators.
Some 3,500 new serviced apartment units have opened in the UK since the beginning of 2020, with Staycity Group, edyn Group and Adagio aparthotels accounting for over half of this new supply. Similarly, during the first six months of 2022, seven new apart-hotel openings have taken place, totalling over 650 new apartments, with London accounting for 48% of the new stock. Openings included, The Other House South Kensington – a 200-suite Resident’s Club and the 256-room Wilde Aparthotel by Staycity, St Peters Square, Manchester.
Knight Frank anticipates further expansion in the UK market from European brands and operators, following the growth of serviced apartments throughout Europe. The recent partnership announced between LaSalle and Numa Group launching a £500 million pan European urban hotel portfolio strategy, as well as institutional investors APG and Aware City’s equity stake in the Dutch operator City ID, and Ascott’s acquisition of Oakwood Worldwide, indicate that fully integrated owner-operators have their sights on the UK to achieve their expansion plans.
The versatility of the serviced apartment business model underpins its continued growth. Changing consumer trends such as the demand for co-living, co-working space and eco-consciousness, are providing catalysts for new concepts, leading to further brand evolution and investment across the sector.
With the growing appeal for apart-hotels, Knight Frank predicts that current operators will seek to grow their market share in cities with an established presence, whilst also targeting locations which have a mature hotel market. Regional cities such as Leeds, Bristol, Cardiff, Oxford, Nottingham, York and Reading are all likely to benefit.
Philippa Goldstein, Senior Analyst, Hotels & Leisure at Knight Frank, commented: “Despite the weakening UK economy, the outlook for the serviced apartment sector remains one of continued optimism and growth. The resilience to the difficulties posed by the pandemic demonstrates that the sector is well placed to not just withstand, but successfully overcome further challenges, with its robust and flexible business model and the general flight to quality.
Aided by significantly reduced staffing headcounts, greater control over costs and higher profit margins achieved than more traditional hotels, serviced apartments are less exposed to many of the challenges faced by the wider UK hotel sector. As such the outlook for the sector remains strong from both a trading and investment perspective.”
THPT Comment: If you take into account that there are still several regional UK hotels operating as government asylum and homeless hotels with 100% occupamcy accounted for by this group…and many top-end London and UK hotels only operating 50% of the hotels due to staff shortgaes, it makes the resilience of serviced apartments even greater.
First Seen: Knight Frank press release
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