The maturation of the extended-stay/serviced-apartment sector is being fueled by new entrants and interest from established hotel companies.
LONDON—Major hotel companies have in recent years wanted to add a serviced-apartment/extended-stay brand to round out their portfolios, sources said, because those brands see more profit generated by longer guest stays.
These serviced-apartment brands will do even better with more awareness among guests and investors, sources said during a recent panel at the Serviced Apartment Summit Europe titled “Operations and the value of the brand.”
“We could sell better. There is a definite need for education, as there is a lack of understanding about what a serviced apartment is,” said Andrew Hunter, director, Europe, at Adina Apartment Hotels, a brand that started in Australia.
That lack of education means brand executives must be confident in their own brands and their place in the overall market.
“Our view is we have is to establish ourselves with our own capital and then begin leveraging with others,” Hunter said.
Simon Walford, development director of the United Kingdom for Staycity Aparthotels—which has assets in Ireland, France and the U.K.—said the extended-stay segment has plenty of potential.
“The sector has huge upsides, but you have to invest in it,” Walford said.
Education for all
Establishing a serviced-apartment brand also means starting with a business model understood by investors in any market, sources said, and that business model might be at odds with hotel companies’ other brands and their preferred approaches.
“All our (serviced-apartment) properties are leases, which are more profitable, but we would look at management agreements,” Walford said.
Andrew Shaw, associate VP of development for the United Kingdom and Ireland at InterContinental Hotels Group, represented the company’s Staybridge Suites brands. He said educating investors still poses a challenge for IHG.
“We’re 100% franchised in Europe, and we rely on partners to grow brands, although the lease market has driven Ireland and the U.K. in past years,” Shaw said, adding that Staybridge Suites has five assets in the U.K. with three more in the pipeline.
Asli Kutlucan, director of hotel development and hospitality at management and ownership company Cycas Hospitality, said her firm is the biggest franchisor in the sector in Europe, especially when its pipeline is taken into account.
Its current extended-stay portfolio consists of four Staybridge Suites, but the company also favors Marriott International’s Residence Inn under a lease structure. On the day of the panel, Kutlucan arrived after signing a dual-branded hotel with Marriott with its Residence Inn and Moxy brands in the town of Slough, just outside of London.
“We want to be known as the extended-stay guys,” said Kutlucan, who then joked “we are repositioning Slough,” a city famous for being the fictitious home of the hit U.K. comedy show “The Office.”
Management firms are expanding the segment across Europe by working with several of the major hospitality firms, while new entrants specializing in the sector also are making their marks.
The same is true of the hotel firms, and as the sector grows, new brands will be developed, sources said.
“We are franchisee-agnostic as the sector matures, just as (management firms) are with brands,” Shaw said.
Kutlucan said Cycas has not discounted adding a management platform.
“We’re discussing it, though we know it is heavy work,” she said.
Adina’s board prefers management, Hunter said, which might be a more difficult sell in Germany, which is very lease-driven. That said, the brand has nine assets in Europe, seven of which are in Germany.
“Germany is significant to us as an entry market, as there is very little serviced-apartment provision there, and our investors initially targeted it,” Hunter said.
The requirement for education concerning the sector, sources said, also has to target another set of students—sales teams.
“When Adina was brought over (to Europe), it was mega-local selling, within 1 mile of the hotel and generally by the GM,” Hunter said, who added that system no longer works, although relationships between serviced-apartment brands and customers still need to be close.
“The important thing is to how you set up your local sales teams and the relationship between (owners) and headquarters,” she said. “This is a sector where sales cannot rely on booking engines.”