Serviced apartments are yet to truly have their day, but a combination of European operators expanding and rising visitor numbers in key cities will provide the solution to lack of consumer and investor awareness.

Recent research by Savills found that just 59 per cent of consumers were familiar with serviced apartments and 43 per cent with apart hotels (although slightly higher at 72 per cent and 52 per cent respectively among business travellers). More than three quarters of those surveyed could not name a single serviced apartment or apart hotel operator.

This is set to change. There are 3,500 new units across 26 sites in the development pipeline in Continental Europe, compared with 12 sites this time last year. Staycity is developing 800 new units in cities that include Lyon and Edinburgh, Frasers Hospitality has 500 units planned across Germany and Switzerland and Starwood’s Element is developing 200 units in Amsterdam and London.

The number of international visitors staying in paid accommodation across nine key European cities (Zurich, Frankfurt, London, Paris, Amsterdam, Brussels, Dublin, Edinburgh and Aberdeen) have risen consistently over the last three years, which should prove beneficial in terms of demand. Furthermore, business travel is yet to return to pre-recession levels, suggesting the full upswing in serviced apartment demand is yet to be fully realised. In London, business visitor numbers are rising but still 10.5 per cent off their 2006 peak of 3.7 million.

When it comes to investment, heavily constrained transaction volumes can be attributed to lack of purpose-built stock. Activity in the UK, which is one of the largest markets in Europe, has totalled just £300 million across relatively few transactions since January 2014. However, the entrance of corporate private equity and institutional investors suggests that confidence and interest in the sector are expanding. The largest transaction to date in the UK was Starwood Capital’s £206 million acquisition of the Think portfolio earlier this year.

The market is definitely changing: Aviva and LaSalle have now entered the sector with acquisitions in London while Singapore’s Far East Hospitality has purchased a 50 per cent stake in four Adina branded properties. Some investors now see serviced apartments as a subsector of the ever-expanding hospitality landscape and not fundamentally different to hotels.This, combined with the expansion in purpose-built stock, means that we expect investor interest to rise accordingly.

Further information

For more details, contact the hotels team at Savills.