From an investment standpoint, it’s crucial to recognise that serviced accommodation falls under the category of short-term letting. This distinction is significant for property investors seeking to explore opportunities in this sector.
Exploring Different Types of Serviced Accommodation
The world of serviced accommodation presents a wide array of options designed to meet the diverse needs and preferences of travelers. In this section, we will delve into three prominent types of serviced accommodation: serviced apartments, apart-hotels, and corporate housing.
While the traditional Airbnb-style rental houses are widely recognized and prevalent, we have chosen not to focus on them in the following subsections. Instead, our aim is to provide a comprehensive understanding of other specialised forms of serviced accommodation available in the UK.
These alternatives offer distinct benefits and advantages, catering to travelers seeking a more personalised and tailored experience.
Serviced Apartments
Serviced apartments have emerged as a highly sought-after accommodation choice, seamlessly combining the comforts and privacy of home with the convenience and services typically associated with hotels.
These purposefully designed apartments provide guests with fully furnished living spaces, complete with all the essential amenities they need, including bedrooms, living rooms, fully equipped kitchens, and private bathrooms.
Ideally located in prime areas with easy access to public transportation, dining options, and local attractions, serviced apartments cater to a diverse range of travelers.
Whether it’s business professionals, families, or individuals seeking a more personalized experience, serviced apartments offer a compelling solution.
In this section, we will delve into the distinctive features, amenities, and benefits that have contributed to the growing popularity of serviced apartments as the preferred accommodation choice in the UK.
Features and amenities:
Serviced apartments go above and beyond to cater to the diverse needs of travelers, offering a range of features and amenities that enhance the overall experience.
Guests can expect spacious and fully furnished living spaces, encompassing bedrooms, living rooms, fully equipped kitchens, and private bathrooms. In addition, amenities like Wi-Fi, laundry facilities, and housekeeping services are readily available.
Many serviced apartments also provide access to on-site facilities such as gyms, swimming pools, and convenient parking areas, adding an extra layer of convenience and luxury to the stay.
Catering to Business Travelers and Families:
Serviced apartments have earned their appeal among a wide range of travelers, making them an ideal choice for different purposes.
Business professionals seeking an extended stay can find solace in the comfortable and productive environment offered by serviced apartments. The spacious living spaces and essential amenities provide a conducive setting for work and relaxation.
For families, serviced apartments offer an exceptional alternative to traditional hotel rooms, providing ample space and a variety of amenities that go beyond expectations.
The additional room allows families to spread out and feel at home, while the self-catering facilities empower them to prepare meals and enjoy the freedom of their own schedule.
The homely atmosphere of serviced apartments adds an extra touch of comfort and familiarity, enhancing the experience for both extended stays and memorable vacations.atmosphere contribute to the appeal of serviced apartments for both extended stays and leisurely vacations.
With their versatility and thoughtful amenities, serviced apartments offer an enticing accommodation option that surpasses expectations.
The Rise of Aparthotels: Where Comfort Meets Convenience
Aparthotels have emerged as a distinctive and captivating accommodation option, capturing the attention of property investors aiming to seize the demand for a seamless fusion of cozy home-like comforts and luxurious hotel-style services.
Nestled within contemporary purpose-built structures or artfully renovated historic edifices, aparthotels beckon from prime locations in bustling urban centers, vibrant business districts, and popular tourist havens across the UK.
In this captivating exploration, we embark on a journey to uncover the unparalleled features, top-notch facilities, and exceptional services that make aparthotels an irresistible investment choice.
Tailored to cater to the discerning needs of travelers craving the flexibility of a serviced apartment with the unparalleled convenience of hotel amenities, aparthotels reveal a world of possibilities.
Armed with a comprehensive understanding of the remarkable advantages that this burgeoning market segment brings to the UK’s property landscape, investors can confidently make informed decisions and unlock the boundless potential it holds.
The Perfect Fusion: Aparthotels Redefining Hospitality
Enter the world of aparthotels, an extraordinary hybrid merging the best of hotels and serviced apartments into a singular experience. Uniting the comforts of a fully-furnished apartment with the unmatched convenience of hotel-like services, aparthotels offer an unrivaled accommodation concept.
Within their walls, a diverse array of self-contained units awaits, ranging from cozy studios to spacious one-bedroom and two-bedroom apartments. Each exquisitely equipped with essential amenities including a well-appointed kitchenette, inviting living area, and a private bathroom, aparthotels redefine the very essence of modern hospitality.
Step into a realm where the boundaries between home and hotel dissolve, and a new era of personalized comfort and convenience beckons.
1. On-site facilities and services:
Aparthotels redefine hospitality with a seamless blend of apartment-style living and traditional hotel services. Discover a wealth of on-site facilities including reception desks, room service, and daily housekeeping that ensure a truly effortless stay.
Indulge in additional amenities like fitness centers, meeting rooms, and delightful dining options, elevating your experience to new heights. With the perfect fusion of independence and convenience, aparthotels offer an irresistible choice for discerning travelers seeking an exceptional stay.
2. Corporate Housing:
With the changing dynamics of the business world and the rise of global mobility, the demand for specialized accommodation solutions for business travelers has surged.
Corporate housing steps up to meet this need by providing fully-furnished and comfortable living spaces, along with a range of services designed to facilitate extended stays or relocations for professionals.
In this section, we will delve into the unique features and advantages of corporate housing, uncovering how this niche segment caters to the specific requirements of business travelers and unveils potential investment opportunities in the UK property market.
By grasping the distinct benefits of corporate housing, investors can make informed choices about the potential of this flourishing market segment in the UK property landscape.
3. For Business Professionals:
Corporate housing is a specialized form of serviced accommodation created to meet the unique requirements of business travelers, especially those embarking on extended stays or undergoing relocations.
These accommodations typically offer fully-furnished apartments or houses equipped with essential amenities like a well-appointed kitchen, cozy living areas, and designated workspaces.
With a focus on ensuring a smooth transition and a productive stay, corporate housing provides business professionals with a tailored and comfortable experience.
4. Extended Stays and Re-locations: Corporate housing is specifically designed to accommodate stays of one month or more, making it the perfect choice for employees on temporary assignments, projects, or individuals relocating to a new city.
Along with providing comfortable living spaces, corporate housing providers offer a range of additional services to assist clients in settling into their new environment.
These services may include help with local registration, setting up utilities, and access to nearby amenities, ensuring a smooth transition and facilitating integration into the community.
What to Expect in Serviced Accommodation:
Serviced accommodation offers fully furnished apartments or properties with essential amenities and services to ensure a comfortable and convenient stay for tenants. While the specific inclusions may vary, here are some common features you can expect:
1. Furnishings:
The accommodation will be furnished with all the necessary furniture and appliances, such as beds, sofas, tables, chairs, refrigerators, and cooking equipment.
2. Housekeeping:
Regular cleaning and maintenance services, including linen changes and waste disposal, are usually provided.
3. Utilities:
Essential utilities like water, electricity, heating, and air conditioning are included in the rental price.Internet and communication: Internet connectivity and communication facilities, such as phone lines, are typically available.
4. Security:
Measures are in place to ensure the safety of tenants and their belongings.
5. Access to amenities:
Depending on the provider, you may have access to additional amenities like a gym, swimming pool, or communal areas.
6. Flexible terms:
Serviced accommodation offers flexible rental terms to cater to the varying needs of tenants.
7. 24/7 customer service:
There is usually 24/7 customer service available to assist tenants with any issues or questions that may arise.
8. Convenient location:
Serviced accommodation is often centrally located, providing easy access to public transportation, shopping centers, dining options, and entertainment venues.
In summary, serviced accommodation provides a comfortable and flexible option for both short-term and extended stays, offering a welcoming “home away from home” experience. It serves as an alternative to traditional hotels and rental properties, ensuring a convenient and cozy stay for travelers.
Is Furnishing a Requirement for Serviced Accommodation?
In most cases, serviced accommodation is required to be furnished as it is a defining characteristic that sets it apart from traditional rental properties.
Typically, providers of serviced accommodation offer fully furnished apartments or properties that come complete with essential furniture and amenities. These may include beds, sofas, tables, chairs, refrigerators, and cooking equipment.
The inclusion of furniture and necessary amenities is a contributing factor to the higher cost of serviced accommodation compared to traditional rentals.
However, the added expense is balanced by the convenience and flexibility it offers. Serviced accommodation provides a comfortable and homely environment for both short-term and extended stays.
It often includes additional services such as housekeeping, 24/7 customer support, and access to amenities like gyms and swimming pools.
The Types of Guests Who Choose Serviced Accommodation
Serviced accommodation appeals to a diverse range of guests, including:
Business travelers:
Serviced accommodation is a popular choice for business travelers who require an extended stay in a specific location. It provides them with a comfortable and flexible alternative to hotels, offering private spaces to work and relax. Essential services like housekeeping and 24/7 customer support are available to meet their needs.
Tourists and vacationers:
Serviced accommodation is well-suited for tourists and vacationers seeking a comfortable and convenient base for exploring new cities or regions. It typically offers more space and privacy compared to hotels, along with essential amenities such as kitchen facilities, laundry options, and communal areas.
Professionals relocating for work:
Professionals relocating for work can benefit from serviced accommodation as a temporary residence while they search for more permanent housing. It provides them with a flexible and convenient solution for short-term stays, often at a lower cost compared to hotels or traditional rental properties.
Individuals undergoing medical treatment:
Serviced accommodation serves as an ideal option for individuals undergoing medical treatment who require an extended stay in a particular location. It offers a comfortable and homely environment, along with essential services like housekeeping and access to amenities like laundry facilities.
In general, serviced accommodation caters to anyone in need of a comfortable and convenient place to stay for both short-term and extended periods, whether for business or leisure purposes.
The Pros and Cons of Investing in Serviced Accommodation:
The Pros
Investing in serviced accommodation can offer several potential benefits for property investors:
Higher rental income potential:
Serviced accommodation often generates significantly higher rental income compared to long-term lettings. Renting a property on a short-term basis can yield much higher returns, allowing investors to maximize their rental income potential.
Strong yield potential:
Serviced accommodation has the potential for high yields, as short-term rentals can generate higher rents while the property purchase costs remain the same as long-term lettings.
According to Knight Frank, the serviced apartment sector has shown greater profitability than the regional UK hotel market, with impressive gross operating profit margins.
Growing demand and popularity:
The serviced accommodation sector is experiencing growth and increased demand. More people are recognizing the benefits of staying in serviced accommodation, which often provides not only a bedroom but also living space and kitchen facilities.
This expanding market offers opportunities for investors to cater to the rising demand.
Market gaps and opportunities:
Due to the relative novelty of the sector, there are still many locations with limited or no serviced accommodation offerings. This presents opportunities for investors to fill the gaps in the market and capitalize on the increasing demand for serviced accommodation.
Technological advancements and ease of management:
Advancements in technology, such as online platforms like Airbnb, Vrbo, Expedia, and Booking, have made it easier to market and manage serviced accommodation rentals.
These platforms provide efficient tools for advertising and booking management.
Favorable tenancy laws and regulations:
Serviced accommodation is typically governed by informal license agreements rather than regulated tenancy laws. This provides landlords with greater flexibility and ease in terminating short-term lets, evicting tenants if necessary, and exiting the market if desired.
Potential tax advantages: Serviced accommodation may offer tax benefits, such as qualifying as a furnished holiday let (FHL) where mortgage interest can be claimed as a tax allowance.
Additionally, there may be opportunities to pay business rates instead of council tax and mitigate capital gains tax and inheritance tax. Seeking professional financial advice is crucial to fully understand the tax implications and advantages associated with investing in serviced accommodation.
Investing in serviced accommodation can be a lucrative opportunity, but it’s essential to conduct thorough research and seek professional advice to make informed decisions based on individual circumstances and goals.
The Cons
Investing in serviced accommodation comes with certain potential disadvantages to consider:
Higher initial setup costs: Serviced accommodation requires a larger initial capital outlay compared to long-term lets because it needs to be fully furnished and equipped. The cost of furniture, soft furnishings, kitchen appliances, and equipment adds to the initial investment. Additionally, wear and tear, as well as repair or replacement costs, are likely to be higher over time.
Ongoing servicing and maintenance expenses: Serviced accommodation necessitates regular housekeeping services, including towel and linen changes, as well as cleaning. These services must be provided consistently, either daily or several times per week, which adds to the operational costs. Landlords need to make arrangements and budget for these ongoing servicing requirements.
Higher overheads: Compared to long-term let properties, serviced accommodation typically has higher overheads. Landlords are responsible for paying council tax or similar local taxes. Additionally, utility bills, TV, internet costs, and other amenities are usually included in the rent for serviced accommodation, further increasing the overhead expenses.
Leasehold and mortgage limitations: Leasehold properties may have restrictions within the lease that limit or prohibit short-term or serviced lets. It’s important for investors to thoroughly review lease agreements before considering investing in serviced accommodation. Moreover, many lenders have restrictions on short-term or serviced lets for properties with residential or buy-to-let mortgages. Securing financing for serviced accommodation may require specialized and potentially more expensive financial solutions.
VAT implications: Serviced accommodation lets are subject to Value Added Tax (VAT), unlike long-term assured shorthold tenancies (ASTs). This can have an impact on the investor’s individual tax situation, and it’s advisable to seek professional financial advice to understand the implications and obligations associated with VAT.
Local restrictions: Some areas may have regulations or planning controls that restrict or limit property owners from offering short-term lets or serviced accommodation. These restrictions can be enforced through licensing regulations for landlords and properties or planning regulations. Investors should be aware of and comply with any local restrictions before investing in serviced accommodation.
London-specific restrictions: In London, property owners are typically limited to renting their properties for a maximum of 90 nights in a calendar year for short-term lets, unless they obtain the necessary planning permission. This restriction should be taken into account when considering investment opportunities in the London market.
Careful consideration of these potential drawbacks, along with professional advice, is essential to make informed investment decisions in the serviced accommodation sector.
London’s 90-Day Rule: A Brief Overview
The 90-day rule in London applies to various forms of short-term accommodation, including serviced apartments, Airbnb rentals, and other similar rental properties. Introduced by the Greater London Authority, this regulation restricts the duration of short-term rentals to 90 days per calendar year for properties located within Greater London.
The purpose of this rule is to address concerns regarding the impact of short-term rentals on the availability of long-term housing in the city. By limiting the number of days a property can be used for short-term accommodation, the aim is to encourage property owners to prioritize long-term rentals, thus increasing the availability of affordable housing options in London.
It’s important to note that the 90-day rule applies to the property itself, regardless of the number of individual owners. In other words, if a property is co-owned by multiple individuals, the 90-day limit applies collectively to the property as a whole, rather than to each individual owner.
Property owners who intend to exceed the 90-day limit must seek planning permission from their local council in order to legally rent out their properties for a longer duration. This requirement ensures compliance with the regulations and helps maintain a balance between short-term accommodation and the long-term housing needs of London residents.
In Brief
This regulation is to strike a balance between residential and tourist accommodation within the city. By setting a cap on the number of days a property can be rented out for short-term stays, the rule aims to ensure that sufficient housing options are available for residents while still allowing for tourist accommodation.
The 90-Day Rule is designed to maintain the equilibrium between the needs of local residents and the demand for short-term accommodation in London, fostering a harmonious coexistence between the two.
Strategies for Dealing with the 90-Day Rule
Change the Property’s Classification:
If you’re determined to rent out a property in London for more than 90 days per year, consider changing its classification. Typically, London properties are classified as residential dwellings (C3). By applying to the local council, you can request a change to the classification to hotels and guesthouses (C1), bypassing the 90-Day Rule. Keep in mind that this process can be time-consuming and costly, so it’s important to assess the feasibility and costs involved before pursuing this option.
Rent for Exactly 90 Days During Peak Periods:
To comply with the rule, you can strategically rent out your property for exactly 90 days during peak periods. By carefully selecting the most profitable times of the year, you can still achieve a satisfactory return on investment. London’s short-term rental market remains robust, with around 7% of properties being rented out on platforms like Airbnb and Booking.com at some point each year, providing ample opportunity to capitalize on the city’s thriving tourism industry.
Explore Opportunities Beyond London:
To avoid the restrictions of the 90-Day Rule altogether, consider looking for investment opportunities outside of London. Explore cities like St Albans, Watford, or even consider venturing further north.
By broadening your search and focusing on areas with more flexible regulations, you can discover profitable investment prospects without being bound by the limitations of the 90-Day Rule.
By considering these strategies, you can navigate the challenges posed by the 90-Day Rule and make informed decisions that align with your investment goals in the serviced accommodation sector.
With careful planning and informed decision-making, you can unlock the full potential of the city’s property market and achieve success in your investment endeavors.
Setting Up a Serviced Accommodation Let: A Step-by-Step Guide
If you’re considering setting up a serviced accommodation let, there are several key steps to follow. By carefully navigating each stage, you can establish a successful and profitable venture. Here’s a simplified overview of the process:
Find the Ideal Property:
Search for properties in desirable locations with convenient access to amenities and public transportation. Consider the property’s size and capacity to accommodate your target market.
Furnish with Care:
Equip the property with comfortable and contemporary furniture that caters to the needs of your guests. Ensure all essential amenities are in place, including a well-equipped kitchen, high-speed internet, and cable TV.
Establish an Online Presence:
Create a dedicated website for your serviced accommodation and list it on popular online platforms like Airbnb, Booking.com, and Expedia. Provide accurate and detailed information about the property, highlighting its features, location, and unique selling points.
Implement Effective Marketing:
Promote your serviced accommodation through social media platforms and other relevant online channels. Utilize search engine optimization techniques to improve your website’s visibility and attract potential guests.
Deliver Outstanding Customer Service:
Prioritize excellent customer service by promptly responding to inquiries and addressing any concerns. Maintain a clean and comfortable living environment, ensuring your guests have a memorable experience during their stay.
Efficient Property Management:
Effectively manage your property by ensuring cleanliness, regular maintenance, and prompt resolution of any issues. Consider partnering with a property management company to assist with day-to-day operations and enhance the overall guest experience.
While setting up serviced accommodation requires a significant investment of time and resources, when executed diligently, it can lead to a profitable and fulfilling business endeavor. By following these steps and adapting them to your specific circumstances, you can establish a thriving serviced accommodation let.
Professional Services for Your Serviced Accommodation
When setting up your serviced accommodation, it’s important to consider professional services that can enhance the overall guest experience and streamline operations. Here are some key services to consider:
Cleaning Services:
Maintain a pristine environment for your guests by hiring a professional cleaning company specializing in servicing accommodations. Their expertise will ensure that your property remains spotless and ready for each guest’s arrival.
Photography Services:
Capture the essence of your property with high-quality photos that attract potential guests. Consider hiring a professional photographer who can showcase your space in its best light, enticing guests to book their stay.
Linen and Laundry Services:
Offer your guests the luxury of fresh and clean linens throughout their stay. Engage a professional laundry service to handle the regular cleaning and replacement of linens, ensuring a comfortable and enjoyable experience.
Property Management Services:
Simplify the day-to-day management of your serviced accommodation by partnering with a professional property management company. They can handle guest communication, check-ins, check-outs, cleaning, maintenance, and other operational tasks, freeing up your time to focus on other aspects of your business.
By availing these professional services, you can present your property in the best possible light, maintain high standards of cleanliness and comfort, and ensure a seamless guest experience.
Investing in Serviced Accommodation: A Step-by-Step Guide
If you’re interested in investing in serviced accommodation, there are several approaches you can take. Here’s a simple breakdown of the options available to you:
Purchase a New Property:
One option is to buy a new property specifically for serviced accommodation. Consider factors such as location, demand, and potential profitability. Assess the property’s suitability for short-term lets and weigh the pros and cons associated with this investment strategy.
Convert an Existing Buy-to-Let Property:
Another approach is to convert an existing buy-to-let property into serviced accommodation. Evaluate whether the property’s location and layout make it suitable for this purpose. Take into account the advantages and disadvantages of transforming your buy-to-let investment into a serviced accommodation venture.
Explore Rent-to-Rent Agreements:
An alternative route to enter the serviced accommodation market is through rent-to-rent agreements. This involves renting a property from its owner and then subletting it as serviced accommodation. Ensure you understand the terms and conditions of the agreement and evaluate the potential returns.
Whichever path you choose, it’s essential to conduct thorough research and due diligence. Assess the market demand, local regulations, and potential risks associated with the specific property and investment approach. By carefully considering the suitability of the property for serviced lets and weighing the pros and cons, you can make an informed decision and set yourself up for success in the serviced accommodation market.
Points to Consider When Investing in Serviced Accommodation
Location:
Choose an area with high potential for serviced accommodation, such as urban areas and city centres. Consider your target market and ensure the location attracts the type of guests you are targeting, whether tourists, business travelers, or others.
Supply and Demand:
Assess the demand for serviced accommodation in the area by looking at tourist numbers, local infrastructure projects, and the presence of large employers. Research existing and planned serviced accommodation in the market to gauge competition and capacity.
Likely Achievable Rents:
Research the rental rates for similar accommodation in the local area, considering both seasonal variations and the size of the market. Understand the rental potential in relation to the location and type of property.
Restrictions on Short-Term Lets:
Check local licensing, planning, and leasehold restrictions that may impact your ability to operate serviced accommodation. Understand how these restrictions will affect your business model.
Furnishings and Equipment:
Ensure the furnishings and equipment in your serviced accommodation match the target market and the rental rates you aim to charge. Consider whether to handle furnishing in-house or use a third-party provider for professional design services and furniture packs.
Marketing and Management:
Decide whether to market and manage your accommodation independently or utilize short-term accommodation platforms like Airbnb, Vrbo, Expedia, or Booking. Evaluate the fees and commissions associated with listing through platforms or agencies.
Providing Services:
Determine how you will handle check-in, check-out, housekeeping, cleaning, and maintenance. You can choose to manage these tasks yourself or contract a serviced accommodation agency to handle them on your behalf.
Consider these important points when investing in serviced accommodation to make informed decisions that align with your target market, location, and business goals.
Types of Mortgages for Financing Serviced Accommodation
When financing serviced accommodation in the UK, you have several options to consider. One possibility is a commercial mortgage, tailored for properties used for commercial purposes like serviced apartments. However, commercial mortgages tend to have higher costs and require a larger deposit. Therefore, it’s essential to compare rates from different lenders to find the best deal.
Another option is a holiday let mortgage, designed for properties rented out on a short-term basis, which can be suitable for serviced accommodation. However, not all lenders offer holiday let mortgages, and their requirements may differ from traditional buy-to-let mortgages.
Choosing the right financing option depends on your unique circumstances and the criteria set by specific lenders. It’s advisable to consult with a mortgage advisor specializing in serviced accommodation. They can provide guidance and help you find the most suitable financing option for your specific needs.
Should you Invest in a Serviced Accommodation?
Investing in serviced accommodation can potentially provide property investors with attractive rental incomes and high yields, especially when compared to a standard buy-to-let property. However, it’s crucial to take into account the additional costs and expenses associated with this type of investment.
Before deciding whether to pursue serviced accommodation, it’s important to assess whether the model aligns with your individual investment objectives. Consider factors such as your investment goals, risk tolerance, and willingness to handle the unique challenges and responsibilities that come with operating serviced accommodation. By carefully evaluating these aspects, you can determine if investing in serviced accommodation is the right choice for you.
