Europe: An HVS survey of the serviced apartment market in Europe reveals profitability has returned to pre-pandemic levels, driven by leisure demand.
Performance analysis of around 9,000 serviced apartments across Europe reveals that occupancy increased by two per cent between 2022 and 2023, along with a 13 per cent increase in average rate. This resulted in a 15 per cent growth in RevPAR.
HVS estimated that since 2019, the average rate and RevPAR of both hotels and serviced apartments have grown above inflation. In real terms, the average rate of serviced apartments caught up with inflation in 2022 and exceeded it in 2023, allowing RevPAR to also grow in real terms, despite occupancy not having fully stabilised yet.
Analysis shows that the 2023 rates for serviced apartments are more than 6.5 per cent ahead of 2019, in real terms. However, over the same period hotels show 11 per cent growth in real terms.
With strong rates and gradual occupancy growth, operators have witnessed a full rebound of profitability margins comparable to pre-pandemic levels.
While leisure travel has continued into H1 2024, it has shortened the average length of stay. The expectation is that the ramping up of business travel will fill the occupancy gap.
Operators which participated in the survey expressed an interest in developing in southern Europe, with Italy, Spain and Portugal the main target markets. Western Europe remains appealing, such as France, Germany, the Netherlands and the UK.
More than 12,600 rooms are expected to open within the next four years. Of these, 33 per cent of units (around 4,100) are due to open in H2 2024, followed by 45 per cent in 2025, 12 per cent in 2026 and 10 per cent in 2027. The sizes of planned projects vary from 7 to 370 units, with an average of 98 units.
Analysis indicates that Accor has the largest pipeline, with around 2,300 units to open in the next 3.5 years. City Pop closely follows with around 1,800 units to open during the second half of 2024 or in 2025.
With the third-biggest pipeline in Europe, limehome has more than 900 units set to open in the next two-and-a-half years, mainly in Spain and Germany. Marriott ranks fourth with 820 units expected to open before 2028. STAYERY will open 640 units before 2026, across seven projects, all located in Germany.
One of the biggest challenges noted by investors is the restriction on capital allocated to new builds, due to increases in the cost of debt and construction. This challenge has led to an accrued interest in refurbishments and conversions rather than developments. It was agreed that growth opportunities have been, and will continue to be, in conversion of real estate.
Findings from the HVS Serviced Apartment Sector in Europe 2024 survey can be read in full here.
