The Association of Serviced Apartment Providers (ASAP) and Savills released the headline results for the sector from their Operator Sentiment Tracker Survey (November 2017), which confirm that the sector has delivered a strong performance in 2017 and expects to deliver an even better performance in 2018, in spite of the challenging economic environment.

Optimism in the serviced apartment sector

Overall, optimism within the serviced apartment sector in the UK remains strong. The study found 47.7 per cent of respondents were more positive about current business prospects, compared to the previous June 2017 survey.For the next 12 months optimism remains robust with the net balance (i.e. net balance of respondents who are optimistic vs less optimistic) at 34.1 per cent, marginally down on the 36.7 per cent reported in June, but significantly down on the 55 per cent reported in November 2016. The study suggests that the uncertainty around Brexit is starting to take a more significant hold in the sector.

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Expansion plan set to accelerate for many

Operators confirm they are continuing to pursue expansion plans for 2018, with an increase in the proportion of respondents stating they were accelerating expansion plans; up from 36.7 per cent to 40.9 per cent. This represents a significant increase on the November ’16 survey where only 28.2 per cent of respondents stated they were accelerating expansion plans.In line with improving operational conditions in London this year compared to 2016, operators’ outlook for year end performance for both occupancy and average daily rate (ADR) remained positive, particularly for ADR with 47.6 per cent expecting year end ADR to be up on last year (equal proportion reported that they expect ADR performance to be in line with 2016).

Operational performance expected to improve

This optimism surrounding operational performance also extends into 2018 with 63.6 per cent of respondents stating that 2018 operational performance will be up on that reported in 2017.The survey shows the real driver of improved operational performance in 2017 to be coming from the improved demand from the leisure segment with 70.6 per cent of respondents stating this is up on last year compared to 56.8 per cent in June.

Corporate demand on the rise

There also appears to be an improvement in corporate demand, however this remains relatively muted with a net balance (difference between those that state it is up vs down) of 15.9 per cent; in November ’16 this was in negative territory of -10 per cent.Demand over the next 6 months is expected to be dominated by the UK (53.5 per cent), yet there were increases in those expecting increased demand originating from Europe and North American markets.Wider economic conditions remain the principal perceived challenge facing the sector over the next three years, with 65.9 per cent of respondents noting it as posing a slight to significant challenge to their business.However, property acquisition costs and increased competition moved up the agenda in the November survey ranking second (63.7 per cent) and third (59.1 per cent) respectively, whereas in June ’17 they ranked fourth and sixth. The moving up the ranking of ‘increased competition’ reflects that 2017 has seen a significant increase in stock, as operators have pursued their own purpose built developments, which in some markets is generating some absorption issues, although it is expected these will be relatively short lived, as the fundaments of the sector remain robust.In terms of significant challenges, Business Rates continue to top the bill with 29.5 per cent of respondents citing this as posing a significant challenge to their business over the next 3 years.

ASAP and Savills encouraged by survey

Commenting on the November Sentiment Survey, James Foice, chief executive of the ASAP said, “It’s been a phenomenal year of growth for our serviced apartment sector right across the UK and it’s particularly encouraging to see operators confirming in our Sentiment Survey that, in spite of the challenging economic environment, they remain firmly committed to their future expansion plans, firm proof that demand for this flexible way to stay from both the business and leisure traveller is set to continue unabated.”Marie Hickey, commercial director of research at Savills, added, “It’s [serviced apartment sector] growing appeal, to both consumers and investors, is generating some unintended challenges in some parts of the market as operators pursue expansion plans to meet this growing demand.“These will be short-lived absorption issues as the fundamentals supporting further expansion remain robust.”These headline results will be shared with the industry at the ASAP 2017 Serviced Apartment Convention in London, which sees 400 delegates come together from 14 countries to hear the latest industry insights and debate future trends.For related news and features, visit our Serviced Apartments section.Relocate’s new Global Mobility Toolkit provides free information, practical advice and support for HR, global mobility managers and global teams operating overseas.Access hundreds of global services and suppliers in our Online Directory  

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