Herbert Lui shares his insights on the growth of the serviced apartment sector

Following the second annual Serviced Apartment Summit earlier this month DMA’s Herbert Lui talks about the rise of the extended stay sector and how London is getting in on the action.

There is often a lack of clarity as to what distinguishes a serviced apartment from an aparthotel or even a hotel. How would you define the difference? In the UK the definition of what makes up a serviced apartment is still very much a ‘grey area’.  The product, planning, level of service and ownership model are all mitigating factors which contribute to the Serviced Apartment title. There are two ends of the spectrum with aparthotels having been derived from the hotel sector and corporate housing from residential. One possible way is to look at the planning uses – corporate housing typically falls under C3 residential use, whereas aparthotels is C1, which is the same classification for hotels.

What are the key design components typical of a serviced apartment? Serviced apartments range in standard from economy to luxury often depending on brand but the key attribute common to all is that of making a guest feel as much at home as possible. From studio to one, two or three bedrooms, the apartments typically feature kitchen & dining areas as well as a living space. The open plan living style preferred in other parts of the world is fast becoming the norm in the UK and offers overseas guests the comforts of more familiar surrounds. A defining characteristic of a serviced apartment development versus that of a hotel is generally defined by the level of public areas and amenities, so typically a serviced apartment will have a small reception, possibly a breakfast & lounge area and a gym but little else.

What are some of the key factors that will influence the serviced apartment sector in the next year? Because this sector is relatively new to the UK one of the biggest challenges is in the funding model. The lack of definition within the sector can make funding more difficult to secure than for other more established models, such as residential or hotel use. And of course there is a lot of competition for sites, particularly in London.

Does the London market differ to elsewhere? Whilst the UK serviced apartment sector is growing there is something to be learned from more established markets around the globe. For example, Singapore is the most established market where supply is equal to demand. In Europe, countries such as France and Germany are very established. And according to HSV, Dubai has been identified as the fastest growth sector with great potential for branded products.

Why do you think there has been such a boom in this sector in recent times? The increase in people travelling further and for longer, and the growth in guest awareness of brands and the range of accommodation types have all contributed extensively to the popularity of the extended stay sector. Companies such as Airbnb have highlighted to investors, developers and brands the appetite for ‘home away from home’ style accommodation and that there was a gap in the market for such offerings. Particularly in London people are always on the lookout for the next big thing.

Why would a guest choose a serviced apartment over a hotel? Serviced apartments are ideal for guests wanting to combine business and leisure be it for a couple of nights or a month. ‘Bleisure’ guests and those travelling with families can enjoy the choice & flexibility afforded to them by extended stay offerings. As well as providing the home-from-home experience, serviced apartments give guests a feeling of staying in a more local, less formal setting within a city. The discreet entrances and lack of bright hotel signage mean guests can feel less like a tourist and more integrated with the locale.

Which brands are leading the way in the extended stay sector? Brand identity is crucial as the sector is in its infancy. The international hotel brands have recognised this and are all delivering offerings within the extended stay sector. For example, Accor Hotels’ Adagio brand. We’re currently working with them on their first UK development in Aldgate. DMA also have projects in the pipeline with leading operators to include Adina and CLSA both in the UK and overseas. The Ascott Group with their Citadines brand is an example of one of the most established operators in London.

How do you see the sector developing over the coming years? The serviced apartment industry is clearly on the edge of big things. In order for it to develop and grow as projected a certain level of education and definition is required. Once this happens the growth in consumer and investor awareness will see it reach its full potential.