Business rates is the most significant challenge facing serviced apartment operators as the sector expects to improve operational performance this year, according to new research.
The Operator Sentiment Tracker Survey, produced by the Association of Serviced Apartment Providers (ASAP) and Savills, shows that more operators are optimistic about business prospects now, compared with November 2016. However, optimism has fallen for next year, with 55% of operators significantly to slightly more optimistic, compared to 65% seven months ago.
Alongside business rates, which is proving to be the major challenge for 33.3% of operators – up from 27.5% in November, other issues of concern include safety and terrorism (22.9% of operators) and wider economic conditions and property acquisition costs (20.8%).
Other key findings from the survey include:
• Almost 36.7% of respondents reported an acceleration of their expansion plans – compared to 28.2% in November and only 13.3% in August, immediately after the EU referendum.
• Performance levels are forecast to improve with 41.7% and 36.7% of operators, respectively, expecting occupancy and average daily rate (ADR) to be up this year.
• The UK is the biggest potential source market for 64.6% of operators, compared to 50% in November. Meanwhile, Europe has decreased as the main source market to 10.4% (down from 22.5%).
James Foice, chief executive of the ASAP, said: “It’s very encouraging to see that, in spite of the challenges which operators are facing, overall optimism in the sector remains positive for 2017.”
James Bradley, associate director in the hotels team at Savills, added: “The outlook for the serviced apartment sector is fundamentally strong despite the headwinds and challenges over the past 12 months. This research illustrates strong operator demand for expansion – both in London and the UK’s leading cities – and we are seeing significant investor interest in the sector.”
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