A market on a great journey

The German serviced apartment market is one of the rising stars of the tourism and property industry. Current trends indicate major growth for the sector as the aparthotel and temporary accommodation market continues to evolve and respond to the business travel and relocation requirements.

Apartmentservice Germany

© SMARTments business Berlin Karlshorst, photographer: Amaury Wenger

Front cover of Relocate Ultra
This article is taken from Relocate Serviced Apartments Ultra 2018 - all the latest in Serviced Apartments news and Global Mobility trends. Access your digital copy here

The serviced apartment industry in Germany has a predicted growth of 42% by 2020. Statistics show that the country’s serviced apartment sector is growing at the second fastest rate in Europe. Furthermore, figures indicate that there is a potential of tripling the sector’s share within the hotel industry to 10% by 2030.With such healthy figures in mind, the British press has dubbed the German-serviced apartment market ‘Silicon Valley Europe’.The founder and owner of Apartmentservice, Anett Gregorius, says, “Even if the Germans are struggling to accept such a positive outlook due to the current economic climate, in the past 20 years, I have not experienced a comparable growth. In Germany, this flourishing sector is continually being tailored and adapted to suit the market.”By 2020 alone, 13,900 new units will have been created and, according to the 2018 Serviced Apartments Market Report by Apartmentservice, this will add 42% to the 33,400 units in almost 600 houses of 15 units or more that have been built to date.As with the classic German hotel industry, 63% of the properties are currently run on an individual basis and, above all, as apartment buildings, they represent the market with comparatively few units and a high degree of individuality. This sector’s share of the market will soon change due to growth and new companies vying for a percentage of the business. At the same time, however, the average length of stay fell last year to 27 nights, with long stay still dominating the segment.
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In terms of pricing policy, about 51% of the providers surveyed by Apartmentservice, implemented rate increases in 2017. The average room rate was €101, which, for the first time, exceeded the classic hotel rate in Germany. At €75, the lowest available rate also increased significantly in 2017 compared with the previous year.

Target group growth

Several trends are converging in Germany, which are the reason for the great demand and the increasing supply of serviced apartments. It is the occupational mobility that the country has been experiencing since the 1990s, making business travellers who work on a project-related basis in another city the main clientele of serviced apartments to date.In 2017, the segment generated around 14.2 million overnight stays, 2.7 million more than in the previous year – about 70% of which were business travellers. With the trend for young professionals, students or single people moving to towns and cities, there is an increased demand for bespoke temporary accommodation.In Germany, as elsewhere, serviced apartments present one of the best solutions for employees embarking on new phases in life – both for home and work.“We are no longer building a house for life,” says futurologist Onno Strathern. But because “we live longer and have many more different life phases, we also need different living spaces for the different life phases”.However, Germany has enjoyed a stable economy in most of its cities and low unemployment figures but a volatile housing market. Germany’s tourism sector also sets a new record each year – both in the leisure sector, with a strong increase in city travellers, and in the business sector, due to its importance as a conference and event destination.In view of the sum total of these trends, the serviced apartment concept is attracting new industry user groups and, due to its high yield prospects, more and more larger investors, developers and new operators. Thus, the focus is on the major cities: Munich, Berlin, Frankfurt and Hamburg, as well as some B-destinations, such as Freiburg, which are important business or university locations.“Frankfurt/Main is currently the most dynamic location in Germany with many new projects, or some still in the pipeline,” explains Anett Gregorius. The relocation of the European Central Bank, the upcoming Brexit for the designation of new, highly attractive building sites, such as those in the The Europaviertel (European quarter), have once again significantly strengthened Frankfurt as a business destination, while Munich is growing more sustainably.For years, there has been constant demand and occupancy with stable high prices despite steady apartment growth. The market is organically absorbing new properties. No other German city seems so able to generate and satisfy the demand for business and leisure in equal measure.By 2020, the sector in Munich is expected to grow by a further 2,700 units, or 51%. Meanwhile, the capital Berlin will become the focus of more attention over the next few years, especially among international serviced apartment providers due to the massive increase in apartment prices. Already, Berlin registers the highest price increase by international comparisons, according to Knight Frank’s 2018 global city residential index, with 20% rise on 2017. The upward trend is directly related to exponential growth: brand building, which includes planned roll-out and the evolution of a very professional sector.While Living Hotels, Adina Apartment Hotel, Aparthotel Adagio and Aparthotel Adagio Access, in particular, have steadily increased the share of chain operations in the sector, new, differentiated brands, such as SMARTments business, have also been added. Brands including Residence Inn (Marriott), i Live, ADAPT APARTMENTS and ipartment are again planning more than 500 units by 2020, which will also increase the market considerably.

Where is the journey leading?

More larger aparthotels are entering the market than classic serviced apartments. In the A-destinations and residential sector, for example, ever larger properties are being targeted with 580 units instead of just 150. And many are focusing on micro-apartments, i.e. units under 25sqm with either no kitchen or a very small amenity. Micro-apartments now account for the largest proportion of the range of serviced apartments and are in most demand.In addition, there are numerous mixed-use solutions, i.e. combinations of hotels, apartments and retail outlets with seamlessly integrated community areas. Vienna House, for example, will launch a mixed-use concept with the new R.evo brand in Munich in around four years’ time.One of the segment’s most important developments is the market entry and expansion of new international serviced apartment brands, such as SACO from Great Britain and the Staycity Group from Ireland.Furthermore, a pioneer of hybrid concepts, The Student Hotel, will soon be launched in Dresden and Berlin. According to a study by Catella, national and international players now view Germany as second only to Great Britain in European expansion plans.In conclusion, the serviced apartment market in Germany is experiencing a profound change adapting to new concepts while embracing the neighbourhood style, which appeals to young professionals – offering ever smaller apartments in favour of larger community areas with shared cooking, entertainment and co-working zones. As a result, accommodation is available for the target groups and length of stay from one night to six months.As in The Student Hotel, the classic business apartment guest meets the student, the city traveller or the local who works in the co-working area in the lobby.Consultants, operators and investors have to create new templates for the serviced apartment sector. For example, are kitchens still a must if (the new) long-stay guests want a shared kitchen? Have aparthotels had their day for long stays? To what extent does a serviced apartment differ from other temporary forms of living? And what do today’s guests require? Some of the answers to these questions will be provided by organiser Apartmentservice at the SO!APART, the two-day annual symposium for the German-speaking serviced apartment markets, in Leipzig, on 14 and 15 November 2018. In addition to case studies, there will be expert panel discussions on the future of the industry.“We all have to ask ourselves many questions,” says Anett Gregorius - especially with a view to the introduction of the first budget brands and new low-cost micro-apartment projects in the residential sector. “Because we are also observing that companies are increasingly limiting their budgets for accommodating their guests,” she explains. “Price sensitivity has increased noticeably in recent years, and so has the gap between the various serviced apartment offerings. More than ever, future concepts will have to be geared to the question of the length of stay desired by the majority and appropriate price-performance ratios,” concludes Anett.

About Apartmentservice and Anett Gregorius

With more than 35,000 serviced apartments in 120 destinations in Germany and worldwide, Apartmentservice has been leading the market for almost 20 years in the German-speaking regions. The business area is supplemented by strategic consulting for investors, project developers and potential operators in the service apartment sector.For details about SO!APART, visit www.so-apart.de/en. See also www.apartmentservice.de.To order the Apartmentservice Market Report 2018 Serviced Apartments visit www.apartmentservice-consulting.de.
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