The Serviced Apartment and Aparthotel Sector in the UK: A Business-Oriented Analysis

8 Nov

The serviced apartment and aparthotel sector in the UK has undergone significant transformation and growth over the last decade, emerging as a key segment in the broader hospitality industry.

Driven by changing consumer preferences, advancements in technology, and a demand for flexibility, serviced apartments and aparthotels have carved out a strong position in the UK market, offering a hybrid of traditional hotel services and extended-stay conveniences.

This analysis provides a business-oriented overview of the sector, highlighting its growth drivers, current market conditions, leading brands, and the opportunities and challenges ahead.

We have recently been working with Beyond Apartments and Aparthotels on their sustainable wellness strategy, bringing us into the world of home from home apartment stays with all the perks of a boutique hotel. These are versatile spaces for mini breaks in London with enough space for a small family or indeed for single person business trips.

Market Overview and Growth Drivers

The serviced apartment and aparthotel sector has seen remarkable growth in the UK over the past decade, driven by the convergence of several key factors:

Changing Consumer Preferences:

Modern travelers, particularly millennials and business professionals, value autonomy and flexibility during their stays. The serviced apartment model provides the desired home-like experience with the benefit of amenities and services akin to a hotel. This combination is appealing to both corporate travelers on extended stays and leisure guests seeking a more personalized experience.

Rise of Bleisure Travel:

The blending of business and leisure travel, often called "bleisure," has led to an increased demand for accommodation options that cater to longer stays and offer the comfort of home. The flexibility of serviced apartments is a perfect match for this trend, providing workspaces, kitchen facilities, and more living space compared to standard hotel rooms.

Attractive Investment Opportunity:

For property investors, the serviced apartment sector offers a more predictable income stream compared to traditional residential properties, largely because of the longer average length of stay. As demand for flexible accommodation options rises, many real estate investors are drawn to aparthotels as a relatively secure and high-yield asset class.

COVID-19 Pandemic Influence:

The pandemic significantly influenced the growth trajectory of serviced apartments. Many travelers, concerned about health and hygiene, preferred accommodations where they could minimize contact with staff and other guests. This led to a spike in demand for serviced apartments, which allowed for greater control over interactions and self-sufficient amenities such as kitchens and laundry facilities.

Key Players in the Service Apartment UK Market

The serviced apartment and aparthotel market in the UK is characterized by a diverse range of players, from international operators to boutique brands, each offering a unique blend of services and experiences. Below are some of the leading brands that have significantly shaped the landscape:

Locke:

Locke, part of Edyn Group, is a notable player in the UK aparthotel sector, known for its distinct lifestyle approach to extended-stay accommodation. Locke properties, such as those in London, Manchester, and Edinburgh, blend thoughtfully designed apartments with communal workspaces, co-living areas, and wellness amenities.

Their focus on creating vibrant, community-driven environments resonates with younger travelers seeking both comfort and a strong social experience during their stay.

Locke’s brand image emphasizes modern aesthetics, art-driven interiors, and locations in trendy urban neighborhoods, making it a favorite for millennials and digital nomads.

StayCity:

Another leading brand, StayCity, has rapidly expanded its footprint across the UK and Europe. Known for its affordability without compromising on quality, StayCity provides an attractive balance of comfort and convenience for business and leisure travelers alike.

StayCity offers a broad portfolio, from compact studio apartments to spacious multi-room options, catering to families and corporate groups. Their properties feature in-house facilities such as gyms, lounges, and dining areas, but with fewer frills compared to boutique brands like Locke, ensuring they stay budget-friendly.

Adagio:

Part of Accor Hotels, Adagio Aparthotels have established a significant presence in the UK market, targeting the mid-tier segment. Adagio focuses on providing practical and functional living spaces with access to hotel-like amenities.

Their properties appeal to corporate travelers looking for longer stays at a reasonable cost, while still benefiting from hotel services and connectivity.

Citadines:

Operated by The Ascott Limited, Citadines is another prominent brand in the serviced apartment market. With a strong presence in key cities like London, Citadines targets international business travelers and tourists looking for centrally located, well-appointed accommodation. The brand’s emphasis is on comfort, practicality, and proximity to urban centers.

BEYOND:

Beyond are carving a path for themselves as a dynamic newcomer in the space, focused on sustainable wellness concepts that have been integrated into the length of the customer journey. Expect to see hear a lot more about them as their first aparthotels come to market over the next 12-24 months, which is when things will get really interesting!

Target Market and Demand Trends

The demand for serviced apartments and aparthotels has been steadily rising, with both corporate and leisure travelers contributing to this growth. The primary customer segments include:

Corporate Travelers:

Companies are increasingly looking to serviced apartments as an alternative to hotels for their employees, particularly for medium- to long-term assignments. The availability of kitchen facilities, larger living spaces, and a more homely atmosphere appeals to corporate guests, enhancing employee satisfaction during their stay.

Leisure Travelers:

Leisure guests, including families and couples on extended trips, are another critical market for serviced apartments. The ability to cook meals, do laundry, and enjoy more space compared to a hotel room adds significant value, especially for those traveling for longer periods.

Digital Nomads and Remote Workers:

The rise of remote work has led to an increased number of digital nomads—professionals who choose to work while traveling. Aparthotels with co-working facilities, reliable Wi-Fi, and community spaces appeal to this segment, which values flexibility and the ability to work comfortably during their stay.

Competitive Landscape of UK serviced apartments

The UK serviced apartment market is highly competitive, with both large international players and smaller boutique operators vying for market share.

Each brand differentiates itself through a unique mix of amenities, design aesthetics, pricing strategies, and service offerings. We now see blurring borders between branded serviced apartments and aparthotels, all provided modern solutions for living efficiently while on the road, whether that be in London or a secondary city in the UK.

There are in other words, many ways to provide a home from home experience with uncluttered serviced apartments with designer interiors now.

Key differentiators

Design and Experience: Brands like Locke focus on creating immersive environments that combine accommodation with social experiences, drawing inspiration from boutique hotels.

Affordability and Practicality: StayCity, on the other hand, emphasizes providing essential services at an affordable price, targeting guests who prioritize function over luxury.

Location: Location is also a major competitive factor, with properties concentrated in major urban centers like London, Manchester, Birmingham, and Edinburgh, where demand from both corporate and leisure travelers is highest.

ESG and Sustainability: Not every temporary accommodation brand in the apart hotels space is playing the ESG or indeed sustainability game yet but newcomers such as Beyond in the United Kingdom are showing how it's done, with their versatile serviced apartments targeting clients on business trips for ESG-oriented organizations. Think Google, Meta or Amazon for example.

Luxury features: For many, privacy is the ultimate luxury to ensure seamless living while on the road, especially for certain Eastern cultures. Add in a city centre location, the lower rates on long stays, an on-site restaurant and gym, free wifi and a range of nearby take away eating options that only a city centre like London can provide, and you have a recipe for success.

Challenges and Opportunities for Serviced Apartments

Challenges:

Intense Competition: With a growing number of players entering the market, inner city competition is increasing, which could lead to downward pressure on occupancy rates and pricing.

Operational Complexity: Managing a property that combines the best aspects of residential living with hotel-like services presents unique operational challenges whether it is a 50-room or 200-room property. Maintaining a balance between quality, service, and cost-efficiency requires strong operational expertise, especially in a hotly competitive city like London, UK.

Economic Uncertainty: Economic volatility, changes in business travel dynamics, and shifts in consumer spending habits can directly impact demand for serviced apartments. Does a business traveller need his or her own apartment that has been carefully designed in the city centre in order to ensure they are working comfortably, nailing their creative thinking and maintaining a life work balance while away for work...?

Opportunities:

Hybrid Work Model: With companies increasingly adopting hybrid work models, there is a growing opportunity to capture remote workers and business travelers who prefer a more flexible accommodation option.
Expansion in Secondary Cities: Most serviced apartment properties are concentrated in major cities. There is considerable opportunity to expand to secondary cities and regions where demand for short-term rentals with home-like features is rising, particularly as remote working allows more flexibility in travel.
Focus on Sustainability: Brands that emphasize eco-friendly practices, such as energy-efficient buildings, sustainable materials, and wellness-focused design, can attract environmentally-conscious travelers, thereby gaining a competitive edge.

Conclusion for all our serviced apartments mentioned above

The serviced apartment and aparthotel sector in the UK has firmly established itself as a vital part of the hospitality landscape, providing a unique blend of flexibility, autonomy, and comfort.

Brands such as Locke and StayCity have successfully differentiated themselves by targeting specific market segments and adopting innovative strategies to meet evolving consumer demands.

Despite facing challenges, the sector has ample growth opportunities, driven by trends like remote work, rising leisure travel, and a growing preference for longer stays.

For investors and operators, understanding consumer preferences, location dynamics, and differentiating through branding and services will be crucial in navigating the competitive yet promising market of serviced apartments and aparthotels in the UK.

Matt Morley