Serviced apartment expansion is key to attracting consumers and investors

A lack of consumer and investor awareness has prevented the serviced apartment sector in Europe from reaching its potential, according to new research from property company Savills.

The company has found that just 59% of consumers were familiar with serviced apartments and 43% with aparthotels, although these figures were slightly higher at 72% and 52% respectively among business travellers. More than three quarters of those surveyed could not name a single serviced apartment or aparthotel operator.

Marie Hickey, commercial research director at Savills, said: "Brand development and concept awareness in the serviced apartment sector has picked up pace in recent years but we believe that there is still some way to go. Strengthening both will make consumers more familiar with the product and its advantages over a hotel for certain types of trip, widening demand as a result."

The firm also reports that the number of international visitors staying in paid accommodation in London, Edinburgh and Aberdeen, as well as six other European cities (Zurich, Frankfurt, Paris, Amsterdam, Brussels and Dublin) have risen consistently over the last three years, which should help boost demand.

And with business visitor numbers yet to return to pre-recession levels - 10.5% off their 2006 peak of 3.7 million - there is significant potential for the growth of serviced apartments.

A lack of purpose built serviced apartment properties have so far held back transaction volumes in the sector with activity in the UK totalling just £300m since January 2014. However, the entrance now of corporate private equity and institutional investors suggests that confidence and interest in serviced apartments is now expanding. The largest transaction to date this year has been Starwood Capital Group's £206m acquisition of the five-strong Think portfolio.

James Bradley, associate director of hotels at Savills, said: "Aviva and LaSalle have now entered the sector with acquisitions in London while Singapore's Far East Hospitality has purchased a 50% 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."

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