Ones to Watch

By Georgia Ward

The UK’s hotel sector may be experiencing slower growth this year, but other areas of the accommodation market are gaining pace. We explore the growing markets that are keeping hotels on their toes to find out why they are on an upward trajectory.

Pubs with rooms

Emma Eversham, Custard Communications

A pub offering a place to sleep as well as something to drink and eat is nothing new: traditional inns, of course, are the original hotel. Nevertheless, pubs offering bedrooms to a similar standard as hotels is a concept we’ve only witnessed in recent years, but it’s a growing market as pub operators seek out new revenue streams.

According to the ALMR (now UKHospitality) and the Christie & Co Benchmarking Report 2017, just 2.5% of pub sales were accommodation – however, growth in accommodation was much higher than in food and drink, which shows it’s an area that smart publicans are considering investing in.

Many operators, both pub groups and freehold independents, already are: Upham Pub Group, operator of pubs and inns across the South East, has put accommodation at the forefront of its business, adding new bedrooms to its existing estate where it can, and improving those it already has, to corner the market for rural retreats. It now has 161 bedrooms across its 16-strong estate.

In Dorset, Butcombe Brewery has turned 16th Century thatched property The Castle Inn – a pub near Lulworth Cove – into a ‘boutique gem’ following a widescale refurbishment. The traditional inn now offers 12 Farrow & Ball painted bedrooms with rainfall showers and Bramley toiletries in the bathrooms.

Another reason why pubs with bedrooms are reaching a par with independent hotels is because pub operators are taking this area of the business just as seriously as their hotelier counterparts. The Inn Collection Group, for example, carries out regular refurbishments of its 200+ rooms, to ensure the offer is always fresh.

There’s nothing old fashioned about the inns of the future.

Serviced apartments

George Sell, Editor, Serviced Apartment News

The serviced apartment sector is seeing a real surge of growth in the UK and Europe, largely thanks to the aparthotel concept, which has opened the market up to a greater proportion of leisure travellers alongside its traditional longer-stay corporate market.

This is partly driven by a younger breed of business traveller looking for something closer to the Airbnb experience, and the rise in ‘bleisure’ travel which is seeing business travellers combine work stays with family and relaxation time in the same destination.

Aparthotel brands, such as SACO’s Locke, Staycity’s Wilde and Lamington’s room2, are heavily design-led, with smaller units than a typical serviced apartment but greater emphasis on communal spaces and immersion within the local neighbourhood. This model is likely to see huge growth over the next five years – SACO was recently bought for £430 million by US investment giant Brookfield, by far the biggest deal in the UK serviced apartment sector to date, with the rapid roll out of the Locke brand its main priority.

Some of the major hotel groups have also started entering Europe with their extended stay brands, often as part of dual-branded developments alongside other compatible flags. These brands offer a similar guest experience to the new aparthotel brands, albeit with a more traditional design style. IHG’s Staybridge Suites has 10 properties trading in Europe, Marriott’s Residence Inn made its London debut last year, and Hyatt House is expanding steadily.

While serviced apartments don’t meet every traveller’s needs, they are increasing their reach and appeal, and can now be considered a mainstream hospitality market.

Airbnb

Emma Eversham

Unlike other emerging areas within the hotel sector, Airbnb could be regarded as unfair competition rather than a newcomer to the market.

The short lets platform has secured few fans from the hotel industry for many reasons, namely its lack of regulation, avoidance of business tax and keen pricing. Yet while it remains (as yet) unregulated, Airbnb is growing in popularity with consumers.

Figures revealed by Colliers International and Hotelschool in The Hague in June show that nights booked with Airbnb in London rose by 45% in 2017, amounting to 6.7 million overnight stays (compared to 4.62 million in 2016 and 2 million in 2015).

Aside from price, consumers like Airbnb for its flexibility, space, amenities such as kitchens, and the ability to allow them to live like a local. These are attributes that many hotels can’t offer, so arguably the platform isn’t a like-for-like competitor, but nevertheless, Airbnb is taking a large bite out of the accommodation market and will continue to do so unfairly until more regulations are introduced.

As Curious went to press, we were awaiting Airbnb’s response to calls from the European Commission to align its price transparency and terms and conditions with EU consumer rules. And around the world, authorities are clamping down on loopholes and bad practices demonstrated by some users of the site, so time will tell if Airbnb’s plane takes flight or is grounded.

Hostels

Steve Lowy, founder of Umi Hotels & Umi Digital

Say the word ‘hostel’, and images of homeless hostels or the horror movie “Hostel” may spring to mind, but times have changed considerably over the last decade or so.

The very first known youth hostel was opened in Germany in 1909 by school teacher Richard Schirrmann, and for many years this type of accommodation was associated with school groups and hikers.

Fast forward to today and hostels have transformed into urban hubs populated largely by young travellers from around the globe, where it isn’t unusual to find private rooms – many better than those found in budget hotels – with buzzy public spaces, cooking facilities and services such as yoga classes and local tours.

In the UK, hostels currently account for just 1.41% of room supply and 0.23% of the active pipeline according to property company Savills. However, their appeal to millennial travellers – accounting for around a quarter of all international travellers – means these figures are likely to rise in the near future.

Already we’ve seen the market moving in this direction: last year Queensgate Investments bought Generator Hostels from Patron Capital for $480m, while in the US the Sydell Group has invested heavily in their own luxury lifestyle brand Freehand. Other equity deals across European brands such as Meininger and A & O Hostels, have led to brands like Accor launching their own hostel brand – named Jo&Joe.

The sector is expected to gain further momentum as investors continue to see potential and brands target a wider demographic. According to figures from Phocuswright, by 2020 the hostel market is expected to grow by up to 8% year-on-year.

With increasing focus on the hostel sector, hikers, school groups and millennial travellers may still frequent them, but they’ll likely be joined by travellers of all ages, seeking a wonderful alternative to mid-range and budget hotels with a friendly vibe.

 

This article first appeared in Curious, issue one.