Blurred lines: How hotels are co-opting serviced apartments while co-living takes up the slack on extended stay
By Paul Wells, Partner
A few years ago, some predicted that new accommodation models, including serviced apartments, aparthotels and online platforms such as Airbnb, would erode the market share for traditional hotels. This has not been the case, and the latter has continued to thrive attracting near record levels of investment in the UK in 2018, and continued strong investment in 2019. Hotels are not only learning from these newer models but also, in some cases, co-opting them either as a fully integrated offer, or creating a dual-branded concept.
It’s not hard to see the appeal of serviced apartments. Families like being able to stay together in a self-contained space, while business travellers welcome the opportunity to experience a more residential environment during work trips.
Despite this, there are still plenty of people who appreciate the convenience and services that come with the hotel experience. What’s more, the difference between ‘traditional’ hotels and other accommodation models has greatly decreased in recent years.
In the past, aparthotels and serviced apartments tended to offer a more immersive experience than hotels, putting travellers at the heart of the local community. Hotels are now increasingly looking to engage with their local community: using their design to help tell the ‘neighbourhood story’, and opening up spaces such as bars, restaurants, lobbies and gyms, to non-guests. All this helps to create a more inclusive atmosphere, generating the sense of place and connection to the community that is important to many travellers today.
A further shift has been in the way that aparthotels have steadily reduced their key size to compete in more urban locations with the hotel market. Now, particularly in London where the UK market is biggest, rising land values and changing consumer demand have driven a reduction in room size to a comparable level.
At the 2019 Serviced Apartment Summit serviced apartment provider Nomad reported that only 15% of their customers actually use their kitchens.
This is likely to lead operators to question the value-add of a full kitchen. Driven by greater availability of restaurant quality take-out, supplied by the likes of UberEats, it is likely this trend will continue. It is also apparent that the length of stay in serviced apartments is not a key point of difference. Statistics show that serviced apartments tend to be used for relatively short stays averaging 6.1 days, with only 29% of occupants staying for over 29 nights (SAS19).
So, if serviced apartments are merging into hotels what about other extended stay options? In recent years we have seen an explosion in the growth of co-living accommodation as companies look to service the rental market with a well-marketed, service-led offer. Residents typically have their own bed and bathroom but share other facilities which include everything from kitchens to workspaces and workout areas.
Co-living has historically been a longer-term option, but many providers such as The Collective are incorporating more flexible shorter term offers. In this way it could be said that while hotels are co-opting serviced apartments or aparthotels into their offer, co-living providers are servicing the extended stay market. Serviced apartments or aparthotels tend to be upscale with no budget offer currently available in the UK. Arguably an extended stay offer in a co-living product will usually be a more economical alternative.
It is clear that as the market for different accommodation options develops, the lines are blurring and moving between the offers. Much of this is being driven by changing consumer demand and as millennials mature we should expect it will continue to be a fluid sector. Far from being pushed out by these alternative models, hotels are seizing the opportunity to incorporate elements into their offer and evolving into a new form, but perhaps it’s the challenge from co-living that now needs to be taken notice of.