Should You Consider Serviced Accommodation?

Nikka Sulton

Should You Consider Serviced Accommodation?

Should You Consider Serviced Accommodation? The growing popularity of serviced apartments is luring guests seeking hotel-like comforts with added privacy. To boost profitability and outshine competitors, enhancing your marketing strategies for multiple properties in the area is essential.

Success in property investment doesn’t solely rely on the traditional buy-to-let approach. So, is investing in serviced accommodation a worthwhile strategy? This relatively new approach to serviced accommodation has the potential to yield impressive rental returns, making it attractive to certain investors.

If you own or are about to acquire a property in a desirable location suitable for serviced accommodation, exploring this investment path may be a wise choice.

What is Serviced Accommodation?

Serviced accommodation refers to fully-equipped, self-contained properties available for both brief and extended stays, often offering amenities akin to hotels, such as regular housekeeping and use of on-site facilities like pools, gyms, or spas.

Typically located within residential complexes, serviced apartments might not always have on-site personnel. In such cases, providers usually coordinate guest arrivals, supply safety deposit boxes, or even provide keyless entry systems.

It’s crucial to distinguish between serviced accommodation and ‘short-term lets’. The latter might operate under varied legal frameworks like the Assured Shorthold Tenancy agreement, while serviced accommodations operate in a manner reminiscent of hotels.

Historically favoured by corporate travellers and those relocating for work, these accommodations often fall under the ‘apartment’ label on hotel booking platforms. However, in essence, they offer more than a mere apartment.

Increasingly, serviced apartments are recognised as a viable, cost-effective alternative to hotels, especially for extended stays, granting guests the convenience of home-like amenities and an opportunity to immerse themselves in local living.

What are the amenities and facilities in a serviced apartment?

Understanding the amenities and facilities offered in a serviced apartment is essential before delving into marketing strategies. Identifying your core strengths plays a vital role in the hospitality business.

Spacious rooms
Fully furnished kitchen
Regular housekeeping
Free Wi-Fi
Access to the swimming pool in society
24*7 security (CCTV, guards, app-based security system)
Entertainment facilities (Smart TV, society’s clubhouse, garden area)
Centralized air conditioning
Attractive interiors
Power back-up
Water purifier

Why is serviced accommodation getting so popular?

Should You Consider Serviced Accommodation? Thinking about entering the world of serviced property investments or renting out your furnished flat? Understanding the core advantages of such accommodations can provide valuable insights.

Space

One of the key benefits of serviced flats is the extra space they offer, replicating the comfort of home, which hotels often can’t match. Reports indicate that furnished flats provide around 30% more space than equivalent hotel rooms. This additional room allows guests to work, relax, cook, and rest in an environment they can truly call their own during their stay.

Affordability

Many guests see serviced apartments as a better value for their money, with prices typically lower than equivalent hotel rates by about 20%. Additionally, guests don’t encounter surprise charges like minibar expenses or room service fees. An important advantage is the VAT reduction to just 4% after a 28-night stay, leading to significant savings for longer-term guests.

Flexibility

One of the primary attractions of serviced accommodations is the flexibility they offer, allowing guests to follow their own routines. They have the freedom to prepare meals, work, hold meetings, or receive visitors at their convenience.

In spacious serviced flats, separate bedrooms and bathrooms ensure that groups or colleagues can maintain personal space and independence. Such accommodations are favored not only by business travelers but also by families.

For families with young children, the ability to adjust meal times or provide separate rooms for kids, similar to their home environment, makes these flats a preferred choice.

Location

Serviced flats are situated in key city locations worldwide. They are strategically positioned near business districts, major attractions, and have excellent transportation connections. This strategic placement enhances their appeal to travelers.

Safety and Security

The attraction of a private and secure space lures many to serviced residences, offering a sense of home that might be missing in a hotel. Minimal service interruptions mean guests can truly settle in.

Furthermore, security is a notable feature in these accommodations. Modern serviced residences may feature secure access, surveillance systems, concierge services, and round-the-clock security.

Is investing in serviced apartments worthwhile?

Should You Consider Serviced Accommodation? Over the years, the serviced apartment sector has witnessed a surge, outstripping investment in hotel rooms.

A study by the global property firm, Savills, which centred on the European Serviced Apartment Market, showcased that, in occupancy terms, serviced lodgings weathered the pandemic better than their hotel counterparts.

While the pandemic did impact the demand for serviced apartments, predictions indicate that this sector will bounce back the fastest, expecting a 41% growth in serviced apartment RevPAR (revenue per available room) this year.

Considering their lower operational expenses and the trend of guests opting for longer stays, it reinforces the argument that serviced apartments present a promising investment opportunity.

Is serviced accommodation profitable?

Location remains a critical factor. Selecting a desirable area and setting an appropriate price for your property should make it easier to attract guests. On the flip side, investing in a less popular location may result in extended vacancy periods.

It’s important that your rental income not only covers mortgage payments and landlord responsibilities but also includes expenses related to guest services.

In general, serviced apartments tend to yield higher rates than standard buy-to-let properties leased under an AST, with returns ranging from 6-9% compared to 3-5%.

What are the drawbacks for landlords of serviced accommodation?

While the potential income from serviced accommodation can be appealing, several considerations should be kept in mind:

The responsibility of arranging and covering the costs of essential services like housekeeping, WiFi, gas, and electricity lies with the landlord.
Marketing expenses may be higher compared to regular buy-to-let rentals, as attracting guests regularly is necessary.
Income may decrease during void periods, particularly in winter months.
The property must be furnished to a high standard that aligns with the rental charges for guests.
If self-managing the property, the landlord must be readily available to address guest inquiries and any arising issues. Alternatively, using a specialist letting agency incurs fees to be factored into yield calculations.
Arranging a meet and greet for new guests or setting up a coded security box for key retrieval is essential.

What are the benefits to landlords of serviced accommodation?

Increasingly, landlords and property owners are turning to serviced accommodation as a way to maximize rental property yields.

Unlike traditional buy-to-let properties leased on a six-month assured shorthold tenancy (AST) agreement, serviced accommodation offers greater flexibility with the option to rent for short or extended periods.

This arrangement presents an opportunity to significantly boost rental income compared to monthly AST payments. For instance, renting out a property for short stays at £80 a night or £560 a week may surpass the £600 monthly income from an AST.

Although there might be occasional void periods, location and marketing efforts can lead to surpassing the monthly AST rental income.

Furthermore, property owners find that selling a short-term rental is often easier and quicker since there are no tenant considerations involved.

How to set up serviced accommodation

When setting up serviced accommodation, make sure to:

Use the appropriate mortgage that complies with the lender’s terms, avoiding buy-to-let or standard mortgages.
Verify if your lease allows for short-term lets.
Secure specialized insurance for comprehensive coverage.
Consult the local council for regulations regarding serviced accommodation, rental periods, and potential change of use requirements.

In addition, fully furnish the property, ensure utilities and WiFi are functional, and arrange for services such as cleaning and laundry. You can manage these tasks yourself if available, or opt to hire a professional company, incurring additional costs.

How to market serviced apartments?

Having identified your property’s unique selling points (USPs), it’s time to effectively promote them to your guests. Without further ado, let’s explore some proven strategies for successful marketing of serviced apartments.

1. Identify Your Target Audience

An essential step in any marketing strategy is identifying your target audience. Interestingly, around 80% of marketing content is often directed at the wrong audience, leading to wasted efforts and expenses.

For serviced apartments, there are four key guest segments to focus on:

Families seeking a homely environment for an extended vacation.
Corporate employees on prolonged business trips.
International guests in search of temporary accommodation.
Individuals relocating to the city and in need of short-term housing.

Since the pandemic, many organizations have embraced the work-from-home (WFH) policy. Consequently, numerous corporate employees now seek the convenience of serviced apartments to escape domestic chores during their extended stays, which can range from a week to a few months. Targeting this demographic could prove beneficial for your serviced apartment business.

2. List on online booking platforms

Online Travel Agencies (OTAs) have revolutionized the way people book properties. It’s essential to register your serviced apartment on these platforms to tap into a global customer base.

Several OTAs now cater specifically to certain niches. For instance, numerous websites specialize in facilitating bookings exclusively for serviced apartments. Some well-known examples include:

TripAdvisor Vacation Rentals
Rent a villa
Couchsurfing
Blueground
OneFineStay
Quest Apartments
Agoda Homes

In addition to these, consider listing your property on local real estate websites and other popular OTAs like Airbnb, Booking.com, and Go-MMT to expand your reach and attract a diverse range of guests.

3. Establish connections with corporate organizations

As mentioned earlier, serviced apartments are highly favored by business travelers and professionals seeking extended stays.

To capitalize on this opportunity, consider forming strategic partnerships with IT firms, MNCs, BPOs, KPOs, and other companies implementing work-from-home policies for their employees.

A key aspect is to offer a flexible tariff structure that benefits both your serviced apartment business and the partnering organization. Introducing corporate rates, such as weekly and monthly tariffs, can be advantageous for this guest segment.

Additionally, corporate organizations often have recurring projects and business meetings, making them an ideal target audience for your serviced apartment marketing strategy.

4. Invest in a website

Having a website is crucial for any hospitality business, and it can set you apart from the competition.

For serviced apartments, a well-designed website creates the first impression on potential guests. Engaging content and high-quality property photographs are essential to capture their attention.

Consider investing in a user-friendly website builder that allows easy updates, and ensure it is optimized for improved conversions. Once your website is ready, link it to your Google My Business listing and your serviced apartment’s social media pages for better visibility and reach.

5. Social media pages and groups can do wonders

Social media platforms have transformed from connecting friends to generating business opportunities. Countless businesses now have a strong presence on these platforms.

Facebook, for instance, offers a dedicated ‘Marketplace’ feature for business-minded individuals. If you haven’t already, create a page for your serviced apartment on social media platforms immediately.

Moreover, being active on social media allows you to stay connected with various city groups. When people plan to move to new cities, they often search for accommodation in real-estate groups, such as flats and flatmates in Mumbai, serviced apartments in Delhi, New York homes, flats, and PGs in Bangkok.

By posting about your serviced apartments in these groups, you can effectively capture potential leads.

6. Partner with other businesses

The market for serviced apartments is highly competitive, with numerous options available to customers. Aparthotels must distinguish themselves from the rest by offering exceptional services. Collaborating with other businesses can be a fantastic strategy to attract new customers.

Indeed, partnering with other businesses is an excellent advertising idea for apartments.

By joining forces, businesses can run more extensive and cost-effective promotions. If you apply this approach to your serviced apartment, you can streamline your marketing efforts, save time, and reduce expenses on individual promotions, resulting in a more impactful and successful marketing campaign.