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BBT March/April 2019 cover
March/April 2019

Serviced apartment operators accelerating expansion plans

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A new survey of serviced apartment operators shows that general optimism about the sector is softening, but expansion plans remain robust.

The June 2018 Operator Sentiment Tracker Survey by the Association of Serviced Apartment Providers (ASAP) and Savills found that 38.5 per cent of respondents are slightly to significantly more optimistic about business prospects compared to six months ago, but that number is down from 47.7 per cent in November 2017.

However, only 13.5 per cent are optimistic about business prospects for the next 12 months – compared to 34.1 per cent in November 2017.

Despite their worries, 37.7 per cent of respondents are accelerating their expansion plans – still lower than the 40.9 per cent reported in November, but an improvement on the 36.7 per cent a year ago.

The majority of respondents believe operational performance will be in line with 2017, in terms of both occupancy (50 per cent expect similar results) and average daily rate (37.7 per cent).

While leisure demand for serviced apartments has dropped slightly, operators remain positive about demand from the corporate segment (3.8 per cent difference between those who saw increased demand verses those who reported a decrease).

Demand over the next six months is expected to be driven by the growing UK market, with 54.9 per cent expecting an increase in the region. Europe (21.6 per cent) and the Middle East (9.8 per cent) also expect an increase.

When asked what their biggest challenge for the next three years, 60.4 per cent of operators said business rates were their biggest concern, followed by increased competition (58.5 per cent). Wider economic conditions and property acquisition costs remain in the top five challenges faced by operators.

Marie Hickey, commercial director of research at Savills, commented: “Following a significantly strong year of growth for the serviced apartment sector in 2017, it is particularly encouraging to see from our Sentiment Survey that the vast majority of operators expect year-end performance to be in line with last year, despite increasing competition and wider economic conditions with the potential to create headwinds.”

James Foice, CEO of the ASAP, added: Whilst the current economic environment is presenting our sector with some challenges, it is encouraging to see the majority of our members remaining optimistic about their business prospects for the next 12 months. And it’s very positive to see over one third of operators state that they are accelerating their expansion plans, which confirms the confidence in the future prospects for our vibrant industry.”

theasap.org.uk; savills.com

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