Hotel Quarterly Bulletin - Q3, 2017
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Hotel
Quarterly Bulletin
Q3, 2017
Optimism in the
Residence Inn Kensington (Opening Q4 2017) UK Serviced Apartment Sector
New Supply by City 2013-2019 (Units)
100%
80%
60%
40%
The UK Serviced
20%
0%
Apartment Sector
2013
2014
2015
2016
2017
Due 2017
Due 2018
Due 2019
Speculative
London Bristol Aberdeen
London leads the way in the supply boom of the UK serviced Manchester Birmingham Liverpool
apartment sector – evidence that the sector is fast becoming York Edinburgh Other UK City
a mainstream competitor in the UK hotel market.
Leading UK Serviced Apartments Brands
(as at September 2017)
In 2017, the supply of serviced apartments and regional cities, accounting for approximately 5,000 1,600 160
aparthotels will witness a year of phenomenal growth serviced apartment units, representing 24% of the 1,400 140
Number of units
for both London and regional UK, with supply total supply. 1,300 120
Average size
1,000 100
forecast to grow by 10% and 10.4% respectively.
800 80
During the past few years the serviced apartment
600 60
The serviced apartment sector is one of the fastest sector has gained significant momentum in terms
400 40
growing sectors in the UK, with a compound annual of development and branding. Alongside a number 200 20
average growth rate of 6.8% per annum between of specialist extended stay operators, the rollout 0 0
2013 and forecast year end supply 2017, with the of the extended stay concept by a number of the
Staycity
Marlin Apartments
SACO
Staybridge Suites
Citadines
Living by Bridge Street
Cheval Residences
Roomzzz
Premier Suites
Adagio
Locke by SACO
Macdonald Hotels
Go Native
total units rising to over 21,500 units. global hotel operators, has reinforced the sector’s
position as a mainstream asset class within the wider
With supply in London set to increase by over hotel market. To date, international branded supply
1,000 units, London’s share of the market is set accounts for 40% of the serviced apartment stock in
to rise closer to its five-year average of 53%, with London and 30% in regional UK. Significant scope
supply growth in regional UK having outperformed for consolidation exists, with the market remaining
the capital in 2016. Edinburgh, Manchester, highly fragmented, with a plethora of regional brands,
Liverpool, Birmingham and Aberdeen are the top 5 representing 20% of the UK market. Number of Apartments Average Apartment Size
As the sector continues to grow, competing brands
will contribute to the heightened blurring of a
traditional serviced apartment and a select service
product. Brands will increasingly seek to develop
their distinctive style and personality, through the
design and product offering. Whilst offering the
comfort and space of a home-away-from-home
product remains at the core, evidence exists of
operators becoming more creative in terms of
product offering with self-service communal dining Roomzzz Manchester City
(individually designed aparthotel, 59 apartments)
areas and enhanced in-room technology becoming
increasingly the norm.
The sector is set to expand by approximately 2,000 branded apartments scheduled European extended stay specialists in their bid to amongst international operators, such as Mapletree
to open by the end of 2019 and a further 2,000 achieve ambitious development plans. The launch of Investments’ recent acquisition of Oakwood is
21% between 2017 and 2020, units in the pipeline. For example, luxury apart-hotel new innovative brands, are becoming an increasingly expected to further strengthen certain established
equating to approximately operator Roomzzz have an extensive pipeline of common occurrence, meanwhile consolidation global brands in the UK and European market.
seven UK developments, some 650 rooms in city-
23,500 apartment units. centre destinations nationwide. Meanwhile, Cycas
900 new apartments have Hospitality continue to foster partnerships by signing
opened to September YTD their third deal with Marriott, continuing the trend to
operate dual-branded hotel projects, with the signing
2017, with a further 1,000 of a 92-room Residence Inn and 144-room boutique
apartments forecast to open Moxy hotel, to be operated under a single lease
by the year end. agreement in the same building.
Operators such as Staycity, Cycas Hospitality,
Of particular prominence is the acceleration of Roomzzz and Go Native are some of the most active
growth planned by the existing operators, with players in the market and will likely become pan-
RevPAR Performance London Top UK Serviced Apartment Operators
Serviced Apartments v London Upscale & Upper Upscale Hotels
Staycity
180 32%
SACO
160 31%
Cycas Hospitality
140 30% Marlin Apartments
Serviced Apartment
% RevPAR Uplift
120 Go Native
29%
RevPAR £
100 Roomzzz
28% BridgeStreet Global Hospitality
80
27% Ascott Group
60
Frasers Hospitality
40 26%
Nadler Hotels
20 25% PREM Group
0 24% Accor HotelServices
2015 2016 July YTD 2016 July YTD 2017 0 500 1,000 1,500 2,000 2,500
London Upscale & Serviced Apartments Serviced Apartments % Source: STR Existing Stock 2017 Total Pipeline 2017-2020 Speculative
Upper Upscale Hotels – London RevPAR uplift
The basic premise of an apart-hotel product is With specialist operators’ willingness to offer transactions or commit to development opportunities significant and expected to further enhance the
that with a longer average length of stay, the leases, combined with the perception of improved is expected to continue in order to benefit from a sector’s investment appeal.
impact of room vacancies is reduced. Based covenant strength associated with increased brand high yielding return post development.
upon data provided by STR, the RevPAR awareness, and the sector’s high margin / low cost
performance for a sample of London serviced operating model having the potential to generate Nevertheless, the opportunity to build a scalable,
apartments achieves a significant uplift in attractive income and capital returns, combined recognisable and established brand, with the
performance compared to a sample set of London these factors serve to deliver increased investment forthcoming disposal of SACO, the UK’s second
upscale and upper upscale hotels. This enhanced appetite from institutional and private equity largest extended stay operator, is expected to result
performance is achieved through strong occupancy investors seeking to diversify their portfolios. in a new wave of investment activity and interest in
and a significant premium in the average room rate. the sector. Furthermore, with specialist operators
In particular, serviced apartments benefit from the To date one of the biggest barrier to institutional such as Go Native exploring a diversified operating
high yielding corporate market and stability investment in the sector has been a lack of sizeable, model in order to underpin long-term value creation,
throughout the entire week in the average daily purpose built stock. As such, the growing trend for the opportunities presented through the embryonic
Staycity Aparthotels London Heathrow
rate achieved. institutional investors to participate in forward funding Private Rental Sector and Build to Rent Sector are
Julian Evans, FRICS
Head of Healthcare. Hotels & Leisure
T: +44 207 861 1147
E: julian.evans@knightfrank.com
Alex Sturgess, FRICS
Partner
T: +44 207 861 1164
E: alex.sturgess@knightfrank.com
Ian Elliott, FRICS
Partner
T:+44 207 861 1082
E: ian.elliott@knightfrank.com
Henry Jackson, FRICS
Partner
T: +44 207 861 1085
E: henry.jackson@knightfrank.com
Philippa Goldstein
Hotel Analyst
T:+44 203 826 0600
E: philippa.goldstein@knightfrank.com
Residence Inn London Bridge (Opened August 2017)
418 OFFICES
60 COUNTRIES United Kingdom Continental Europe
15,020 PEOPLE
16 Countries
Austria / Belgium / Cyprus
The Americas
Czech Republic / France
Germany / Ireland / Italy / Monaco
15 Countries
The Netherlands / Poland / Portugal
Argentina / Brazil
Romania / Russia / Spain
Canada / Chile / Colombia
Switzerland
Costa Rica / Dominican Republic
Mexico / Peru
Puerto Rico / The Caribbean (4)
USA
85
OFFICES
2,145
80
PEOPLE
OFFICES
1,035
P
PEEO
OPPLLE
E
169 3
OFFICES
5,475
OFFICES
PEOPLE
50
PEOPLE
23
OFFICES
58
OFFICES
700 5,615
PEOPLE PEOPLE
Asia Pacific
Africa 14 Countries
Australia / Cambodia
10 Countries China / Hong Kong
Botswana / Kenya / Malawi The Middle East India / Indonesia
Nigeria / Rwanda / South Africa Japan / Malaysia
Tanzania / Uganda / Zambia 2 Countries New Zealand / Philippines
Zimbabwe The Kingdom of Saudi Arabia Singapore / South Korea
The United Arab Emirates Taiwan / Thailand© Knight Frank LLP 2017 - Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London, W1U 8AN, where you may look at a list of members’ names.
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