The ability of serviced apartments and extended stay to breakeven at 20% made them more attractive to investors and developers, according to a session at the recent AHC Reimagined.
The pandemic had seen many more sites in the segment stay open than traditional hotels, in part because of their ability to accommodate social distancing.
George Sell, editor-in-chief, International Hospitality Media, who was chairing the debate, said: “You can be viable at 20% occupancy with leaner operations and that makes it attractive to developers and investors. Corporate demand is traditionally the source of demand to the sector, although that has changed in recent years.”
Neil Short, Staycity, added: “We’ve had an interesting journey. We had quite a lot of government contracts going into this, which helped with occupancy, but was at a lower rate. The summer months were a strong bounce back but we had quite a different profile of customer - it was a young age group which wanted to travel and from an operations point of view it was different to the older groups. We’re seeing a flight to branded products because people want to know that there is a standard of cleanliness that you don’t get in, for example, an Airbnb.
“Business travel is what has fallen away, they are just not travelling at the moment. People are still working, but there are a lot less of them. OTAs have fallen away because they tend to be discretionary - our margins have gone up because we have been driving more direct sales. It’s a period to hunker down.”
Commenting on operations, Alex van Pelt, Adagio, said: “We operate in 13 countries and each had their own rules and regulations [during lockdown], we kept around 30% of the estate open. We have long-term guests and guests coming for medical reasons, we also had key workers and medical staff. We had a target of 90% reopening by the end of June and we looked at what we’d need to trigger a reopening and decided 15% to 20% occupancy and achieved our target. Our staff costs are 12% to 15%, with traditional hotels higher, at 30%. It’s compelling. Over 95% of our revenue comes from rooms - F&B is limited.
"As an Aparthotel we have been able to accommodate guests who wanted to isolate and keep themselves from other guests. We converted our buffet breakfast to breakfast in a box, with Accor we partnered with Bureau Veritas to provide a safety label - we are Covid safe.”
Van Pelt said that the company had attracted attention from “developers who might have been looking at hotels, they are now looking at apart hotels. We’ve come out looking stronger than the traditional hotel products”.
Commenting on why there was less of a proliferation of international brands in the segment compared to the US, Melvin Gold, consultant, said: “In the US it’s a specifically segmented market. There are differences between aparthotels and extended stay and corporate housing and in Europe we’re still in the infancy and I don’t think the market sees the brands quite as differently. I think that Marriott and IHG and Accor have brands that they’re keen to roll out, but they’re competing with the Staycitys and others that have got some real traction. But there is a not a lack of willingness from these multinational brands to rollout in Europe.”