Brexit may have derailed investment transactions in London and caused a lockdown of open-ended real estate funds, but the extended stay property sector could actually survive and thrive in the post-referendum environment, according to Cycas Hospitality.
Eduard Elias, managing partner of Cycas Hospitality said the sub-sector of the hospitality industry has strong fundamentals. 'The Brexit situation may have a positive impact on the extended stay property market in the UK.'
'The lack of abundant supply and the small percentage of anticipated supply growth in the segment offers both near- and long-term potential for the properties that specialise in the long-stay sector of the overall lodging industry,' Elias said.
Supply of properties remains low, but demand seems set to remain at or near current levels for the foreseeable future - wider factors such as Brexit notwithstanding, he added.
Research into demand for rooms in Greater London by Savills supports this. The market is still growing and, at 10.5% below the all-time peak, it has yet to hit the kind of business travel levels last seen in 2006. During 2015 the RevPAR or ‘Revenue Per Available Room’, figure grew by an annual 3.1% within the sector, clearly demonstrating a robust underlying industry structure, Elias argues.
The UK extended stay market is still nascent. In London, the market for extended stay hotels or serviced apartments represents something under 2% of the total room stock, whereas in the US this figure is approximately 8%.
Currency effects
Elias also argued that the fall of the pound against currencies from around the world may work as an advantage to make the UK a more attractive and affordable leisure destination for travellers from the likes of Europe, Asia and the US.
The growth of Airbnb, Elias said, highlights the opportunities in the extended stay market. 'Airbnb shows a move away from the standard hotel offer within the leisure market, and toward larger units or self-contained apartments. This is an untapped market which is ripe for exploitation.'
Historically, long-stay hotels outperform the standard model during times of recession. Elias said that Cycas witnessed this phenomenon first hand in 2008, when its Liverpool hotel opened and thrived at the very moment that the economic crisis hit and other parts of the hotel market began to suffer. The extended stay hotel sector in the US, which suffered a small drop in room revenues in 2009, rallied soon after and has experienced steady yearly growth ever since. In the period between 2011 and 2015, for example, overall revenues went from $6.8 bn (€6.1 bn) per year to $10 bn.
Cycas Hospitality is a hotel management company specialising in extended-stay hotels. The company manages extended stay properties in London and one each at Heathrow, Manchester and Liverpool.
A Serviced Apartment Summit takes place in London on 12-13 July
