The sale came as reports suggest that serviced-apartment operator Staycity was aiming for a 2022 flotation, as investors turn to this former alternative-asset class as it threatens hotels.
The Strozzi Palace was sold for an undisclosed price, at a guide price of £1.5 million and will join Mansley’s portfolio in London, Edinburgh and Inverness. Strozzi Palace has six large suites and has been TripAdvisor’s number-one rated hotel in Cheltenham since 2014.
Chris Irving, divisional director, Fleurets, which brokered the deal, said: “The Strozzi Palace sale is indicative of a new breed of accommodation coming to the marketplace and demonstrates Fleurets’ capabilities to sell unusual and profitable boutique opportunities which may not be considered traditional hotels.”
News of the deal came as Staycity told the local press in Ireland that it was planning to expand from 2,000 rooms to 15,000 by 2022, with a particular focus on Dublin, the UK and Germany, eyeing a possible IPO when it hits its target.
The serviced apartment sector in the UK saw full-year occupancy of 81 percent in 2016, according to STR and ASAP.
Thomas Emanuel, director, business development, STR, said: “Despite seeing small year-over-year declines in occupancy, ADR grew across the UK, and overall performance was steady. The UK’s serviced apartment sector recorded higher occupancy levels (81 percent) than the hotel sector (77.2 percent).”
While the current model is leased, as the sector matures, change is afoot. Speaking at a debate chaired by Healys earlier this year, Max Thorne, managing director, hospitality, JLL, told attendees that “aparthotels, serviced apartments, call them what you want, they’re rooms with four spaces—living, bedroom, kitchen and bathroom. I think we’re beginning to see an acceptance that actually it’s very similar to a hotel model and that will open up opportunities for management agreements.
“The typical model which was born out of an extended stay, guest stay for three, six months—those operators are now optimising the old management and they are absolutely competing in the hotel space.”
Looking at the M&A is the sector, Thorne added: “My view is that over the next five or 10 years we’re going to see, particularly some of the bigger brands, and some of the smaller brands, working closely together. But I think it’s probably more about consolidation of cross-sectors or bringing sectors together.
“So, conceptually, you need to consider the city has got lots of rooms in the hospitality space, including residential accommodations, hotels, serviced apartments, apart-hotels, and hostels. I would envisage seeing lots of the larger brands expanding and offering to facilitate management of those rooms in different sectors. The principle of having someone in a room with a bed, whether they’re there for one year or one night and whether they’re the demographic of a two-, three-, four,- five-star, at a platform level, with technology today that can be managed from one platform.”
While serviced apartments may be competing for investors’ attention, they have yet to capture its soul, according to Imran Hussain, director of THC/Endeavour, who told us: “On a macro level, the serviced apartment sector, whilst recently expressing some design credentials, has yet to show a true understanding of what makes a great hotel today.
"For the hotel space, names like Schrager and Starck created a design movement in the 80s, but today names like Balazs and Jones, have clearly illustrated the importance of not only creating a first-class guest experience, but also attracting interesting, creative classes to their spaces. The smart hotelier today is using public spaces as the billboard for selling their rooms experience. With events programming, servicing the community and great food and drink products, they're creating community, culture and, perhaps most notably, soul. This trick is missing from the serviced-apartment sector, and for them, it will be the game changer in coming years.”
Katherine Doggrell is an editor at Hotel Analyst, the U.K.-based news analysis service for hotel investors.