GSAIR 2023 40
Blurred lines
By George Sell and Ben Davis
In this article , we look at the fragmentation of the alternative ( i . e . non-hotel ) accommodation market ; at what makes a serviced apartment a serviced apartment , and what is making these lines blurred .
Firstly , George Sell , Editor-in-Chief of Serviced Apartment News looks at how the supply landscape is changing .
Then , Ben Davis of real estate practice Saxbury , which represents commercial landlords and developers with projects ranging £ 10- £ 110m GDV , provides an investor ’ s perspective , predominantly on the UK market .
What is a serviced apartment ?
Serviced apartments are custom built or residential blocks converted for business travel-related long stays . We also have aparthotels which also serve the business travel market , but for shorter stays , and which also target the leisure market . Then there are short term and vacation rentals , which both serve the serviced apartment and short-stay markets .
The lines between these products become blurred when a hotel room has a kitchenette and when an operator takes standard residential stock from a traditional residential building and turns it into a corporate / commercial product , and then everything in between .
For example , a recent London entrant chose not to include hobs / a stove top in their offering as their research showed that their guest demographic didn ’ t want them .
In reality , these and others like them are niche products that may confuse the customer , but it ’ s a good example of the continued diversification and layering of operator solutions that are now available to the corporate market .
Such a property is restricted in their ability to target long or even medium term business due to the limitations of their kitchens . It ’ s unlikely to be too much of an issue for their given guest demographic , due to the plethora of eateries on their doorstep .
Changing demographics
There ’ s a new guest demographic out there called Global Nomads ; people who have jobs where they don ’ t need to be located in one particular place , and who can move around and do their job from anywhere .
This group is small but growing and increasingly ; they tend to be younger people who want something with more character and individuality .
Co-living appeals to the same audience and is a lowcost option as your primary address . Global Nomads may go somewhere for three or six months , find a Coliving development , move in the next day and the bills are inclusive . An excellent example is the successful and long established brand and operation , Selina , although one could argue that their product currently appeals primarily to a leisure customer .
Originally built as a Citadines aparthotel , the new Wembley ARK has been converted into a Co-living product offering stays of one , two and three nights . This demonstrates the ease of converting an aparthotel to Co-living , and the overlap between the two formats depends on the markets the developer is targeting .
Are the lines becoming blurred ? The industry believes they are , but I don ’ t think the end-user is bothered whether something is termed a serviced apartment , an aparthotel or Co-living , at the end of the day , it ’ s somewhere to stay .
Investor perspective on Serviced Apartments
Ben Davis is co-founder of Saxbury and is an operational real estate expert with over 18-years ’ experience of the serviced apartment and aparthotel industry .
The private rental system in the UK has never been geared up for short term stays because applicants are required to sign up to a 12-month tenancy agreement , whereas people who are relocating and corporates generally require greater flexibility . That ’ s how the serviced apartment sector found its calling .
Save for a tiny number of permitted serviced apartments ( use class C1 ), the industry has flourished with operators leasing up blocks of residential properties ( use class C3 ) to offer on a bills-andservice-included basis for shorter periods , whilst remaining strictly in the shadows of planning regulations .