UK: The June 2018 Operator Sentiment Tracker Survey from ASAP and Savills shows a slight fall in optimism compared with November 2017.
The key findings for the UK serviced apartment sector are:
• Overall optimism in the sector remains positive with 38.5 per cent of respondents slightly to significantly more optimistic about business prospects compared to six months ago, but this is down on the 47.7 per cent reported in November 2017.
• However looking forward, in terms of business prospects for the next 12 months, the level of optimism has softened to 13.5 per cent, down from 34.1 per cent in November 2017 (ie the net balance of respondents who are optimistic vs less optimistic).
• Expansion plans remain robust with 37.7 per cent of respondents stating they are accelerating expansion plans, slightly below the 40.9 per cent in the November 2017 survey but comparable to 36.7 per cent of respondents in the June 2017 survey.
• In terms of the operational outlook, the majority of respondents believe year-end performance will be broadly in line with 2017. This is the case for both occupancy (50% of operators expect year-end performance to be similar to 2017) and ADR (average daily rate) for 37.7 per cent of operators, which is encouraging off the back of the very strong year-end performance of the sector in 2017.
• The large increase in demand from the leisure segment reported in the November survey has not been sustained with 32 per cent of operators reporting demand down on last year vs 22 per cent reporting demand up, and the remainder (46 per cent) broadly in line with last year.
• However in terms of corporate demand the net balance (difference between those who stated demand was up vs down) remains positive at 3.8 per cent, although this is also lower than in November 2017.
• Future demand over the next six months is expected to continue to be dominated by demand from the UK market (54.9 per cent), with demand from both Europe (21.6 per cent) and the Middle East also expected to increase (9.8 per cent of respondents).
• Business rates have overtaken wider economic conditions to become the biggest perceived challenge facing the sector over the next 3 years with 60.4% of respondents noting it as posing a challenge to their business.
• Increased competition continues to pose as a significant challenge, ranking 2nd (58.5 per cent) which reflects the increase in stock experienced over the past 12 months. Wider economic conditions and property acquisition costs both remain in the top 5 challenges to operators.
Marie Hickey, commercial director of Research at Savills, said: “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, chief executive of ASAP said: “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 (37.7 per cent) state that they are accelerating their expansion plans which confirms the confidence in the future prospects for our vibrant industry.”
