Serviced Apartment Sector Guide 2018 - The UK's fastest growing hospitality sector - Emerging Property
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Serviced Apartment Sector Guide 2018 Informed
Investing
The UK’s
fastest growing
hospitality
sector
Sector
overview
What are serviced
apartments?
A serviced apartment is a fully furnished
property, available for both short-term and
long-term stays.
This flexible accommodation option comes
inclusive of all bills and provides a range of
hotel-like services, such as housekeeping,
reception and 24-hour customer service.
There is also often a range of appealing onsite
facilities, including swimming pools, gyms,
restaurants and bars.
2
Sector overview Serviced Apartment
Sector Guide 2018
Serviced apartments are a relatively new form of visitor They have also capitalised on changing consumer preferences, the
accommodation that have existed for just over a decade. rise of the sharing economy and a shift in demand away from the
traditional hotel sector.
Today, they represent the UK’s fastest growing hospitality sector
and have been recognised as one of the most secure and highest Total investment volumes in the UK have grown from £7.3 million in
yielding assets over the last few years (Savills). Average annual 2008 to £325 million in 2015, while the sector now accounts for 6% of
NET yields sit between 6.5% and 9.5% - higher than hotels (ASAP). hotel investment volumes - up from just 2% in 2011 (JLL).
As a result of the UK’s popularity as a global holiday destination, Occupancy levels overtook hotels in 2016
ever-increasing visitor numbers and a shortage of tourist
accommodation to meet the needs of modern travellers, property Longer length of stay (up to 365 days a year) ensures a more
investors benefit from sustained demand, positive rental growth stable cash flow than hotels
and reliable high yields.
3
The UK tourism sector
Tourism is one of the largest increase of 4.4% (VisitBritain). Last
industries in the UK. It is the year was also the 11th consecutive Year Number of visits (m) Spend (£bn)
country’s third largest employer and record-breaking year for visitor 2003 24,715 £11,855
has been responsible for a third of spending.
all new jobs created nationally since 2004 27,755 £13,947
2010. This demand shows no sign of
2005 29,970 £14,248
slowing down, with a record 41.7
The sector is worth £127 billion to million visitors expected in 2018 2006 32,173 £16,002
the economy each year - equivalent (VisitBritain).
to 9% of the country’s gross 2007 32,778 £15,960
domestic product, and is the fifth The decreased value of sterling, 2008 31,888 £16,323
largest export earner (Deloitte). better value for money compared
with previous years and popularity 2009 29,889 £16,592
The UK is the seventh most visited of shows such as Game of Thrones 2010 29,803 £16,899
country in the world, with a record and The Crown are driving overseas
39.9 million visits in 2017 - an annual visitor numbers in 2018. 2011 30,798 £17,998
2012 31,084 £18,640
UK serviced apartments transactions 2013 32,692 £21,258
£350 2014 34,377 £21,849
£250 2015 36,115 £22,072
Millions
£150
2016 37,609 £22,543
£50
0 2017 39,865 £25,071
2008 2009 2010 2011 2012 2013 2014 2015
4
The UK tourism sector
Top 10 source Country Spend (£ million) % of total spend
countries by visitor spend
1. US £3,354 15%
2. Germany £1,490 7%
In total, there were over a 3. France £1,372 6%
third more more visitors to
the UK last year than in 2010
4. Australia £1,060 5%
5. Republic of Ireland £1,059 5%
19.6 million visits were 6. Spain £992 4%
recorded from the EU Q1-3
2017 - up 4% on 2016
7. Italy £980 4%
8. Switzerland £792 4%
3.8 million American tourists 9. Holland £714 3%
visited the UK Q1-3 2017 - a
14% annual increase
10. Canada £634 3%
5
Domestic tourism
Domestic tourism had a very strong 2017, with searches and
bookings 23.8% higher than the same period in 2016 (Sojern travel Isle of Wight
marketing group).
This is backed up by research from Airbnb, showing that 83% of
Britons are choosing to holiday in the UK this year:
Top 5 reasons for holidaying domestically
Less stressful than going abroad
Scenery as beautiful as anywhere else
So much still to discover domestically
Landscapes not as beautiful abroad
Cheaper to stay in the UK this year
Source - Airbnb
Spending by this group has risen from around £16 billion in 2006 to
nearly £20 billion in 2016.
Looking forward, the sector is predicted to grow by 2.9% every year
until 2025 – outpacing the national economy (Local Government
Association).
6
Britain better value than ever
As a result of the Brexit referendum, the pound dropped to a 30- The UK market is ripe for development and has been the nation’s
year low against the dollar - and nearly 2 years on, it has still not fastest growing hospitality sector since 2014 (Savills). Supply now
returned to previous levels. sits at 19,000 units - 81% higher than the figure back in 2008.
This means that this ever-increasing number of overseas visitors are The UK leads Europe’s pipeline of serviced apartments, accounting
enjoying extremely favourable exchange rates. Enquiries to airlines for 41% of the 10,000 planned units (HVS Hospitality Intelligence).
and UK tourist boards have rocketed, especially from China and the
US.
Supply of serviced apartments Source - GSAIR
And since foreign holidays now cost about £245 more for the 2008 2016
average British family of four, domestic tourism is experiencing a Worldwide 401,998 826,759
huge upturn (Travel Supermarket). Europe 43,687 114,021
UK 10,500 19,000
Global supply
Occupancy going from strength to
The global volume of serviced apartments doubled between 2008
and 2016 to nearly 827,000 units (Global Serviced Apartments
strength
Industry Report 2016/17). UK serviced apartments averaged an 81% occupancy rate in 2016 -
outperforming hotel rooms at 77.2%.
Europe has experienced a 250% increase in serviced apartments
supply during this time, with 114,000 units spread across the And with 94% of operators reporting that demand in their
continent. regions is increasing, compared to 77% in 2011, accommodation
requirements continue to outstrip supply (JLL).
Despite this impressive growth, the supply still continues to be far
from sufficient in meeting the demand from Europe’s 593 million Outside London, serviced apartments currently make up only 1.8%
visitors. of rooms across the country.
7
Why are tourists choosing serviced apartments?
There are a number of different groups that benefit from the enhanced
flexibility and cost-effectiveness of serviced apartments - as well as the
potential for longer-term stays.
3 Cost-effective travel option - not only are serviced
apartments more economical for families and larger groups,
but with the ability to cook and wash clothes in your own
apartment they also keep holiday costs down
Business travellers have become increasingly reliant on such
4
accommodation, with more frequent work-related travel on a Privacy - serviced apartments generally have a once or
global scale. twice-weekly housekeeping service, which is enough to
keep everything spick and span without the hassle of daily
intrusion that is part of the hotel experience
Also, families and large groups, who often find hotels both difficult and
expensive - sharing rooms with young children or forking out for several
rooms for individuals is never ideal - benefit from the increased space
An impressive 88% of
and sleeping options present in serviced apartments.
companies are now
The chance to ‘live like a local’ or find an affordable room in a prime utilising these cost-
location has tempted many a visitor away from hotels and into the effective and flexible
arms of peer-to-peer apartment rental sites. accommodation
1
options (GSAIR
More space to play with - on average, serviced apartments
offer at least 30% more space than hotel rooms of the same 2016/17), with overseas
price corporate travel
expected to increase
2 Comfortable home-from-home experience - with
well-equipped living rooms and kitchens, guests can
really settle in
50% between now and
2020 (PwC)
88% 50%
8
The Airbnb effect
Airbnb is the world’s leading marketplace for private tourist
accommodation – a sector that will represent 19% of global rental
bookings in 2018 (SIG).
With the number of customers in Europe expected to reach 24
million by 2020, Airbnb is increasing awareness about private
home-from-home accommodation.
The unique features of serviced apartments appeal to this emerging
group of travellers. In terms of their market position, serviced
apartments provide a bridge between hotels and Airbnb.
They offer the services and facilities of a hotel, while also providing
home-from-home comforts - with equipped kitchens, comfy living
spaces and multiple bedrooms.
Short-term rental sites
are facing increasing legal
opposition across the world,
as cities grapple with the
impact of the Airbnb boom on
local housing and hospitality
operators.
9
Investment showcase
Westbeach, Devon
New build serviced apartments
Available from £160,000
Westbeach, Devon offers the rare opportunity to purchase a brand new
beachside apartment, with proven performance levels from two operational
phases.
All guests and residents will have access to the property’s excellent onsite
facilities, including indoor and rooftop swimming pools, luxury Spa, a restaurant
and fully-licensed bar.
Buyers benefit from an impressive 8-10% NET fixed income for 10 years, with full
leasehold ownership and flexible resale options. Contracts are tied directly to an
established company and come with a 10-year build warranty.
8 %
NET 10 %
NET
Annual income Annual income Zero costs during fixed Discover more about this property
(years 1-5) (years 6-10) income agreement
10Investment showcase
Ilfracombe Holiday Park
Operational serviced apartments
Available from £59,500
Ilfracombe Holiday Park is a well-established development in the UK’s most
popular tourist region.
Despite its popularity among visitors to North Devon’s coastal hub, our
experienced developer has been upgrading every aspect of this holiday park
since purchasing the site last year.
This includes a new onsite management team, a full internal and external
refurbishment and new facilities throughout.
The holiday park boasts a prime hilltop position overlooking Ilfracombe and the
Atlantic ocean, with the harbour, beach, town centre, all restaurants and bars
within walking distance. Other great attractions are also just a short drive away.
10 %
NET 12 %
NET
Discover more about this property
Immediate & Annual income Annual income
effortless income (years 1-5) (years 6-10)
11The US has an equally thriving serviced apartments sector
Lakeside Serviced
Apartments Resort & Spa
Rental-ready US property investment
Available from $311,900
The Lakeside is our new build development of luxury serviced apartments in
Orlando – the number 1 US tourist destination and the most visited city in the
world (Guinness World Record 2016).
With America’s Best Builder constructing the property and Benchmark Hospitality –
a top 20 US management company – operating onsite, this 106-acre development
was one of the 12 most anticipated US hotel openings in 2017.
The Lakeside is the first destination resort in the last area of Greater Orlando with
development potential. Less than 10 minutes from Disney, its excellent facilities
include a fully equipped waterpark, four restaurants, fitness centre and luxury Spa.
Discover more about this property
9.4%+ NET annual Flexible personal Priced at 40% below
income usage market value
12Why choose Emerging Property?
Emerging Property provide sector-leading SS Luxury serviced apartments & purpose built student accommodation
returns of 8-12% NET in the UK's top performing
yield-driven asset classes. SS Experienced developer with national award for build quality
The handpicked method through which we SS Proven delivery of sector-high NET yields
select our properties ensures sustained demand
in prime regional locations. SS Transferable fixed income periods provide flexible resale options (in UK)
Member of the Property Ombudsman
All our properties are fully managed by specialist
The Property Ombudsman (TPO) is a UK government approved organisation that
onsite teams - every detail, every day - ensuring ensures better consumer protection for home buyers and sellers, landlords and tenants
an effortless income.
13Next steps...
Talk with us today
Your questions answered +44 (0) 203 287 8727
info@emergingproperty.co.uk
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Reserve a unit www.emergingproperty.co.uk
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Our vision is to help you to tap into the enormous potential of yield-
driven UK property.
We are the exclusive master agent for an award-winning property
developer, with offices in the UK and Dubai and supported by a global
network of agents.
Our consultative approach and committed after-sales team ensure
that we keep buyers informed from purchase to resale.
Realise your investment goals, speak with us today
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