The stratospheric rise of hospitality alternatives

Max Thorne, CEO Beyonder Group and Sean Worker representing BridgeStreet Global Hospitality featured on the Stratospheric Rise of Hospitality Alternatives breakout panel session at last week’s International Hotel Investment Forum, held in Berlin.

Serviced apartments – hospitality alternatives?

Moderated by Philip Bacon, Horwath HTL Madrid, Thorne and Worker were joined by fellow panelists Navneet Bali, CEO at MEININGER Hotels and Anton Bawab of Viceroy Hotels and Resorts.

Early conversations focussed on whether the serviced apartment sector was indeed a hospitality alternative. “It’s not an alternative. We (serviced apartments) are experiencing a fundamental change in hospitality.” Sean Worker continued, “the influx of capital on a flight to safety (from other lesser performing investment sectors), hence demand in our segment. Investors’ demands are changing – they want yield and they want a strong covenant. We can segment price based on our five to three star offerings.”

Max Thorne agreed that the serviced apartment and aparthotel sector shouldn’t be classed as ‘alternative’ because it’s the customer driving change and enjoying new experiences – “consumers are very smart” said Thorne, “they value flexibility that the aparthotel and serviced apartment verticals offer, we’re expanding those at Beyonder.”

Navneet Bali, CEO MEININGER Hotels felt increased flexibility of offering was essential to prosper in his hotel and hostel business targeting millennial travellers; families; groups; celebration and flashpacking guests. “Our multi-bed demand generators produced 79% total occupancy, which converts to 95% room occupany in 2014. MEININGER Hotels generates more EBITDA than any other hotel product in the last 30 years” he said.

Investor appetite, opportunities and barriers to growth

Philip Bacon moved the conversation on by asking “that being said then, why are hotel alternatives not as popular with hotel investors?”.

The general consensus was this is changing, but lack of knowledge and understanding hinders growth. “Get us involved earlier (investors), there are more growth opportunities than before – they are predictable investments” said Worker. Availability of suitable assets is a concern, together with tightening planning rules.

The conversation then focussed on what to build and accommodation of the future. “Choice is diminishing, driven by the business traveller and £ per sq ft. We need to get unit count in, which compresses room dimensions” said Thorne.

Consumer trends

“The consumer is fast moving, developers are very slow – projects are delivered to market around 36 months from concept idea” said Bawab. This becomes more magnified when one takes a look at consumer booking trends, “self-select is moving faster than Moore’s Law” said Worker, ” in our recent industry study, 64% used OTA’s; 73% liked serviced apartments; 44% book 1-4 nights, less than two weeks before their trip meaning short term stays (and booking window) are on the increase.”

Sales teams

Panellists agreed hotel sales teams could not be transposed into a serviced apartment sales environment. “They behave differently – hotels have a more transactional sales approach, whereby serviced apartments is more consultative” said Thorne.