Staycity Group has agreed €22.5m in new financing to fund its growth target of 15,000 apartments by 2024.
The company plans to open around 1,800 keys over the next two years, moving into new territories as well as the resort sector.
CFO Wayne Arthur said: “The year was a challenging one, particularly in the UK where confidence has been fragile due to Brexit uncertainty. Despite these challenges we delivered a record like-for-like occupancy of 87.3% and are delighted to have signed a new €22.5m loan facility with Dunport Capital, after five years of fantastic support from Proventus, which has secured Staycity with a flexible, seven-year loan as well as significant interest savings and a supportive Dublin-based partner.”
The group, which currently operates nearly 3,000 apartments across 12 European cities, expanded into Germany last year, with a site in Berlin, as well as into Italy, with a property in Venice. In September last year it opened a resort-style offering with a 284-key aparthotel in the Val d’Europe area near Disneyland Paris. Facilities include an outdoor swimming pool, café, lounge, restaurant, children’s play area and gym as well as gardens and lakes.
The group said that turnover for the year to December was expected to have grown by 14% to €78m, with Ebitda rising around 11%. The group had previously reported a softening in demand for corporate travel.
Staycity co-founder and CEO Tom Walsh added: “I am delighted with the progress made in 2019, not only did we deliver industry-leading occupancy levels, we’ve also gained our strongest ever guest satisfaction scores. We are on target to deliver revenues of over €100m in 2020 along with continued profit growth.”
This year the group planned to open a 224-apartment property in Manchester’s Northern Quarter in March 2020, to be followed in November by a 142-apartment building on Dublin’s Mark Street. By 2021 Staycity expects to have over 1,000 apartments operating in Dublin.
The end of last year saw Lambert Smith Hampton report that serviced apartments and aparthotels were the fastest-growing segment of the UK’s hospitality accommodation market, set to move up from 3% of current room stock.
In the US, the sector has a 9% market share, suggesting that there was considerable room for growth in the UK. The current pipeline should see approximately 6,000 new units open over the next two years. While London has historically been the main focus for operators, key target markets for aparthotel operators also included regional centres such as Manchester, Glasgow and Liverpool.
Simon Stevens, LSH hotels director said: “The aparthotel sector is currently one of the most exciting parts of the market. While the rise of the Airbnb sector is sometimes viewed as a threat to more traditional types of accommodation, it is actually benefiting aparthotels by making consumers more receptive to alternatives to conventional hotels.”
“With new brands being launched and established operators reinventing their products, serviced apartments and aparthotels will continue to innovate and grow. The sector will remain a melting pot for new ideas; borrowing from alternative concepts such as co-living and co-working to create inventive new hybrids.”
In the serviced apartment sector, demand was also being driven by an increased familiarisation with Airbnb, with HVS reporting that the development pipeline continued to accelerate across Europe and was set to approach 23,600 additional units by 2022, making it one of the most active sub-sectors in the hotel industry. The UK and Germany represented the vast majority of the total pipeline (similar to the hotel pipeline), although the market continued to experience further diversification in secondary and tertiary cities.
The company said: “The sector continues to innovate, with exciting new brands being introduced and traditional brands being reinvented. Alternative concepts such as co-living, co-working, student accommodation and home-sharing are merging with the serviced apartment concept, creating hybrids as a response to changing demand behaviours.
“Demand for serviced apartment accommodation remains vigorous across Western Europe. Revpar performance in 2018 in Europe indicates that the sector is still growing at a quicker pace than the traditional hotel industry.”
Insight: As we have heard from Savills this week, enthusiasm is returning to investors who were querulous about Brexit and the hope is that this will trickle down to corporate guests who will hit the road again, even if the road is getting ever-further away from mainland Europe.
Staycity has already made its leap over the Channel and, being Dublin-based, should face none of the divergence issues which could have an impact on those headquartered in the UK. The group is known for its pickiness over sites – Arthur told this hack that, for every 35 they looked at, they choose one, which makes the case that bit more convincing when going for funding, funding that they now have.
Should trading conditions in the UK tighten, as HVS thinks they may do, Staycity is in a stronger position than many of its hotel counterparts, with longer stays meaning less servicing of rooms and lower costs. The leisure market, educated by Airbnb, is also moving into the segment, adding occupancy at weekends and viewing the properties, with their extra space, as better value for money than traditional hotels.
This takes us back to those alternative assets, which are growing in popularity with both guests and investors and creeping ever-closer to the mainstream hotel offering. Staycity has brands such as Wilde which compete in the boutique sector and pushes its F&B offering. These are not sterile rooms to while away a week or two.
As the downturn approaches – and surely it does – investors are likely to seek out properties which can offer not just revpar, but revenue per square metre and prove that every square metre has earned its right to be there. No more basement ballrooms for owners who are wise to the ways of the hotel market and are ready to find something which delivers.