Year in Review: Finally! The pandemic seems to be behind us and, as we enter the endemic stage, we all dare to return to ‘normal’ life and travels.
However, the last two years have accelerated some fundamental and long-term changes in consumer behaviour that are driven by two main aspects: the awareness and desire to drive sustainability and the development and use of technology.
How will this impact the sector in the short and long term? Our Sentiment Survey invited 90 lenders, investors, and operators to share their views on the challenges and strategic focus points in 2022 and beyond.
In the real estate industry, co-living is the buzz word. But what does it stand for? In the strictest sense it is defined as a residential community living model that accommodates three or more unrelated people. In other words, co-living is a type of intentional community that provides shared housing for people with similar values or intentions; this group of people being students, professionals, or the elderly.
Of these groups, the serviced apartment sector is targeting the professional traveller with its new concept creations. Many new serviced apartment brands are carrying the term co-living and increasingly focus on building a residential community for the short to medium term by providing ample space for residents to interact and co-work.
Whereas so far we have seen self-contained units with their own kitchen(ette), living room and bedroom(s), we are now also seeing the emergence of concepts providing a shared living and kitchen space amongst a number of en suite bedrooms. Think student flat share but for the corporate world, with a target audience reaching from graduates to colleagues during work projects.
An increase in remote working also means that boundaries between leisure and business are becoming increasingly blurred, which is one of the main reasons why the serviced apartment sector continues to do so well: its products are versatile enough to cater for many different purposes.
The new breed of brands tends to put connection at its forefront. Access to the local neighbourhood as well as like-minded guests provide an opportunity to feel part of a tribe, despite being away from home.
Operators’ Sentiment
Despite a substantial pipeline of openings in 2021, operators are still in ‘expansion mode’: Growth is the number one goal for 2022 amongst our surveyed operators (see the European projects that have been announced so far in our new supply tables in Charts 8 and 9).
The way to grow portfolios differs amongst players, with management agreements in first place, closely followed by leases.
At the same time as growing their portfolios, operators are also busy stabilising performance and operations after two years of challenging trading conditions. 26% of participants expect to reach pre-pandemic cash flows this year and another 26% by next year. The remainder forecast cash flows to be back to 2019 levels by 2024 (see Chart 1).
Chart 1: Year that Net Operating Cash Flows are Expected to Return to Pre-Pandemic Levels
Source: HVS Research
Despite a positive outlook for 2022, operators are particularly sensitive to staffing challenges (whether this is in operations or head office functions), increasing operational costs related to energy prices, food prices, payroll and comprised profit margins as a result.
Read the full report here
Note: Welcome to the 9th edition of the annual HVS Serviced Apartment report! We are excited to continue sharing our insights and experience from this growing sector. What started off as an InFocus piece in 2008 became an annual publication in 2013. We thank all the operators, lenders and investors in the sector that continue contributing so we can provide first-hand, first-class research. Please do be in contact with us for next year’s edition if you are an active player in the sector.
