Serviced apartment operators have seen top-line performance decline by 25% to 50% this year, compared with 2019, while a third of operators report declines of up to 75%, according to a study from HVS.
The figures suggested those operations were still largely profitable, albeit with reduced margins, with operators benefitting from the fact serviced apartments are self-contained with their own kitchens and amenities, making it easier for guests to social distance.
In addition leaner operating structures have enabled them to cut costs efficiently and be quick to adapt to the new challenges.
“Over half of the operators surveyed confirmed that at least three-quarters of their properties stayed open throughout the lockdown period,” said report co-author Maria Coll, consulting & valuation analyst at HVS London.
She added: “This has been helped by operators’ ability to adapt to new demand such as moving from primarily corporate and business bookings to opening for key workers, government employees and those self-isolating during lockdowns. When restrictions eased the sector was then able to focus on domestic leisure demand as well as new types of business such as selling rooms as office space during the day.”
While numerous serviced apartment projects in the European development pipeline face delays, few have been cancelled and despite the pandemic operators are continuing with their expansion plans. Around 20,000 serviced apartment units are due to come on stream in Europe over the next five years. The UK accounts for 29% of this new supply with development centred in London, Manchester and Cambridge, while Germany accounts for 22%, most notably Munich.
Over 70% of investors surveyed for the report said they were actively looking for serviced apartment deals for new developments in key markets, although lenders reported a more cautious approach. However, over 80% of respondents expect operating models for the sector to change going forward, shifting towards variable lease agreements, management agreements and owner-operated units.
“The positive resilience the sector has shown during the pandemic has been a real stress test for investors and lenders,” concluded HVS director Arlett Hoff, report co-author. “This sector will continue to grow even during the pandemic and once recovery sets in we are likely to see expansion accelerate.”