A wealth of options. But can they all survive? If there is a threat to the aparthotel and hyphenated hospitality sector, it comes from the fairly simple mathematics of land values and labour costs, says Bořivoj – and it goes like this. Aparthotels use a lot more space per room than hotels, making the cost per room higher. But hotels need a lot more staff, making them more expensive per room to run. So if the income per room is roughly the same in both formats, the better bet is to build an aparthotel.
However, if hotels begin to control their labour costs and aparthotels are not a premium product with a higher income, then investors would be better off building a hotel because you get more rooms on the site, and hence more income.
‘If that happens it will become more challenging for aparthotels,’ says Bořivoj. Operators at the budget end will be particularly vulnerable.
Hyphenated hospitality still has a long way to go. Operators are exploring dual branding (putting a hostel, or aparthotel, in the same building as a hotel) and looking at rapid expansion. The pandemic hasn’t killed this part of the hospitality industry. Rather, with its emphasis on privacy and personal control, it promises to make it even stronger.
ARE APARTHOTELS PANDEMIC-PROOF?
Serviced apartments have not been immune to the COVID-19 crisis but have shown what researchers call ‘a degree of relative out-performance compared to other hotel sectors’. And they say this difference could become more pronounced once recovery starts to emerge.
Analysis conducted by Savills shows that serviced apartments had already started to outperform hotels before COVID-19. London serviced apartment RevPAR (revenue per available room) grew by an average of 3.9% a year between 2014 and the end of 2019, increasing to an average of 5.2% a year over the last three years. In contrast, London hotel RevPAR growth has lagged behind with an average annual growth of 2.0% over the last five years, and a three year average of 3.3%.
The data will encourage investors to fund new aparthotels in those cities that are underprovided.
Savills’ European Hotels Director, Richard Dawes, explains: ‘Serviced apartments are still relatively under-represented in key European markets, which not only points to further development opportunities, but also a potential mid-term structural shift in pricing outlook as the relative resilience of serviced apartments during this time is shining a light on the sector, which could result in further interest from new buyers, supporting pricing over the medium to longer-term.’