Why investors are eyeing serviced apartments in Germany

Berlin over Tiergarten Park
Photo of Berlin Tiergarten Park by bluejayphoto | Getty

As consumers look for a cheaper alternative to hotels, investors are expressing increased interest in the serviced apartment sector in Germany.

The global operators are now looking to expand their apartment brands in the country, as the concept is set to grow by 40 percent by 2019.

According to a study from Horwath HTL, the demand for temporary living was “constantly increasing as the working environment changes and the number of permanent commuters spending the work-week away from home grows.”


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The pipeline for projects in the big seven cities in Germany for 2017 to 2019 indicates that the highest number of serviced apartments were planned for Munich (with 2,313 units), followed by Berlin (1,750). By 2019, 7,516 units are planned for the top seven German cities. The number of serviced apartments has grown from around 375 properties with roughly 20,000 units in 2012, almost doubling by the first quarter of 2017 580, featuring 31,600 units. The German market shows growth potential of 40 percent to 2019, according to data from Apartmentservice.

“The growing interest in serviced apartments is happening mainly from the consumer side,” Christian Ott-Sessay, managing director, Horwath HTL Germany, told HOTEL MANAGEMENT. “In this case, consumers are business guests, students or tourists. The reasons vary from changes in the job market, limited living space for students in  popular university cities to a general growth in touristic demand in Germany.”

Ott-Sessay said that additional drivers included the “economical advantage of serviced apartments - saving up to 50 percent compared to hotel costs—and the cost consciousness of international business demand”.

Svenja Brau, Consultant at Horwath HTL Germany, said that investors attending last week’s Expo Real gathering in Munich had expressed a growing interest in the sector. “The serviced apartment concept regarding residential concepts is attractive for investors as the model delivers higher returns than e.g. rental revenues,” Brau said. “The investors being interested in entering the serviced apartment market vary from institutional investors to family-businesses. But still, the market is fairly new and the coming years will show clearer tendencies.”

According to the Horwath HTL study, individual national operators dominated the German serviced apartment market, but since 2013, the presence of international chains increased through new market entries to reach a market share of about 11 percent.

Derag Livinghotels was the market leader with its number of houses in Germany (13 properties, 1,461 units), followed by Adina Apartment Hotels (seven properties with 988 units) and then Aparthotel Adagio & Adagio Access (five sites with 698 units).

Ott-Sessay said that hotel operators were enlarging the serviced apartment concept and bringing larger units and additional revenue with them. “The brand is of great importance, which can also be seen in the products that have recently entered the market. Renowned brands as Hyatt and Accor’s Adagio have recently entered or even enlarged their activities in the German serviced apartment market with their brands Hyatt House and Adagio Access. Vienna House also launched their new long-stay concept Vienna House Basecamp.”

As consumers’ tastes become ever more nuanced, operators have to respond. In a popular market like Germany, investors are likely to leap on an alternative route into the lodging market.

Katherine Doggrell is an editor at Hotel Analyst, the U.K.-based news analysis service for hotel investors.

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