Serviced apartment sector recovers to pre-Pandemic levels

The serviced apartment demand has largely recovered to pre-Covid levels, with 91% of operator respondents stating occupancy is currently exceeding 2019 levels, according to the latest Savills/ASAP sentiment survey.

In turn, confidence remains in line with confidence reported in the February 2022 survey at 77%, however it added that “mounting economic headwinds’ since the close of the survey is likely to have had a bearing.

Over three quarters (77%) of operators listed rising energy costs as a challenge, representing the most significant headwind currently facing operators, up from over half (53.8%) in February 2022.

This was reflected in the “significant increase” in responses around future expansion, with the vast majority of respondents (86.4%) stating securing more energy efficient stock was ‘very’ to ‘extremely’ important, up from 61.5% in February 2022.

Additionally, both staffing costs and the rising cost of living were also deemed significant headwinds for the sector, each with 73% of respondents listing them as a challenge facing their business over the next three years.

Marie Hickey, commercial research director, at Savills said: “While operator confidence is largely in line with that reported earlier this year, wider economic uncertainty over the last few weeks, post the close of the survey in September, is likely to have dampened confidence levels somewhat.

“However, the subsequent currency depreciation could boost international visitor demand in Q4, particularly from the US, pointing to resilient operator performance predominantly in tourist destinations like London and Edinburgh.”

He added: “Additionally, the recent energy cost crisis has elevated operator concerns around the long-term impact of higher energy costs on profit margins, accelerating demand for more energy efficient properties.

“Operators on the whole were already moving towards ‘greener’ stock so as to align with their ESG aspirations, but also that of the lending and investor community. Rising energy costs has hastened this shift as more energy efficient stock, if occupied efficiently, should reduce energy bills to the benefit of margins.”

James Foice, ASAP CEO, said: “It is heartening to see general optimism in the serviced accommodation sector, with occupancy recovering to pre-pandemic levels. It shows once again the resilience of the sector and confidence in the recovery of business travel.

“At our Annual September Business Meeting, we had an expert panel and breakout discussions centring around exactly these same headwinds, showing that these challenges are a focus everywhere. Fortunately, the serviced accommodation sector is a collaborative and supportive space. We are confident that by sharing ideas and solutions, our Membership will continue to thrive as conditions steady around property, staffing, the energy crisis and rising costs.”