Subtitled “The investment case for emerging accommodation segments”, the Hotel Alternatives conference, hosted by Hotel Analyst’s Andrew Sangster, took place in London today.
After an introduction from the host, Patrick Angwin of Horwath HTL gave an overview of some alternative asset classes, and outlined why they might be attractive against the backdrop of a buoyant UK hotel transaction market which saw sales of £5.4 billion in 2017, but which could be close to peaking.
These include micro or pod hotels, serviced apartments, co-living, student housing, hostels, holiday parks and retirement living. After outlining the most significant investments and transactions in the aparthotel sector, Angwin focused on co-living, which he described as “still a very immature sector, sparked by a lack of affordable rental housing for millennials”, a group he said look at housing “as a service, not as something you own”.
Brands such as The Collective, Fish Island, WeLive, Common, Ollie, Zoku and Roam were cited as leading players in the space.
Student housing is a strong market in the UK, more so than Europe, said Angwin, who emphasised that although there is an undersupply of 200,000 student bends in London alone, other markets, including Liverpool and Plymouth have oversupply. The potential for hostels was then discussed – Angwin pointed out that London has 2.8 hostel beds per 1,000 youth visitors compared with Berlin’s 11.2.
A panel of leaders then followed featuring Meininger’s Navneet Bali, Tom Walsh of Staycity, Sean Worker of BridgeStreet Global Hospitality and Guy Parsons of easyHotels.
Walsh began by placing the European market in contrast with other territories where serviced apartments/extended stay has a much higher penetration, including Australia, where 25 per cent of hotel stock is extended stay, and the US where it is seven per went, rising to 10 per cent in major cities. Walsh said Staycity was achieving close to 90 per cent occupancy across its estate despite being in the middle of a significant expansion programme.
Moving on to distribution, Sean Worker said the landscape is crowded but it’s not segmented. Talking about the bridgeStreet.com platform, he said: “Our approach has been to address the needs of 5,000 key corporate clients. We offer 12 verticals of curated supply, from five-star hotels, to serviced apartments, to hostels. We’re adding 3,000 units per month to what is essentially a boutique distribution platform, and expect to reach 350,000 units.” Worker highlighted that the commission fees for the BridgeStreet platform are 12 to 14 per cent, including credit card fees, so around 10 per cent net.
Walsh said that acting on customer feedback is essential to Staycity, and that the company is about to relaunch the interior design of its core brand, as well as opening the first Wilde aparthotel.
Bali was asked about the new Schulz brand, a project by the original founders of Meininger, which is opening in Berlin in May. Described as a “tribrid” as it features element of hotel, hostel and serviced apartment offering, Bali said he thinks the concept will work but that the apartment element was insisted upon by the Berlin planners, and that the creators would rather not include it.
A battle of the brokers session featured three speakers putting the investment case for their respective areas of expertise – serviced apartments, care homes and student housing. Saxbury’s Ben Davis was the serviced apartment advocate, and after highlighting the attractiveness of the UK sector to overseas investors, his argument won the day when the audience was polled about where they would put their own money.
Event host Andrew Sangster interviewed Cheval Residences director George Westwell about the company’s business model and growth plans. Westwell said the value of Cheval’s London portfolio – all of which it owns – has increased by an average of 15 per cent year on year but that the company is keen to move in to managing other people’s assets too. “Moving in to management gives us the opportunity to grow the brand with relatively little risk and no capital investment. We can use our experience to advise developers at an early stage on how to plan an efficient fit-for-purpose building.”
This move has resulted in Cheval changing its company structure to become an opco/propco by “delinking” the two sides of the business. It is also finalising brand standards for three sub-brands, one for its London serviced apartments, one for its longer (six to nine month stay) business and a third which will allow it to work with developers who offer smaller units than the company is currently operating in London.
Westwell also claimed that when measuring a serviced apartment company’s performance, “REVPAR is dead”, and that it needs to be replaced by comparing profit per square metre as well as costs of sales.
