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The serviced apartment industry is under mounting pressure, as surging overheads and a slow recovery post-pandemic continue to impact profitability and sector growth. Industry expert Simon Calder, keynote speaker at the upcoming Association of Serviced Apartment Providers (ASAP) conference - which res:harmonics is proud to sponsor - expresses that the hospitality industry has ‘endured its greatest challenge in modern history’ over the past five years.
Ahead of this industry-leading conference, with res:harmonics’ CEO and founder, Giles Horwitch-Smith, and Business Development Manager, Charlie Olpin, in attendance on Thursday, 28th November, we’ve analysed the industry challenges and growth opportunities for the year ahead.
Challenges and opportunities on the horizon
In the aftermath of the pandemic, the serviced apartment industry faces challenges driven by rising costs from almost every direction – including increased utility costs, furniture prices, and white goods. In some regions, gas prices increased 129% last year, while electricity prices were up by 67%, according to The 2024 Global Serviced Apartment Industry Report (GSAIR).
These inflationary pressures not only impact profit margins but are reflected in rising serviced apartment rates. Since 2022, the industry has experienced slower year-on-year KPI growth, with RevPar (Revenue per Available Room) in London drifting into negative territory between Q4 2023 and Q1 2024.
However, it’s not all doom and gloom. Deloitte reports that the European serviced apartment sector showed “superior economic resilience to the hotel industry during the pandemic” and London is expected to overtake Paris in becoming Europe’s largest serviced apartment market, with industry data by Savills projecting a 21% increase in supply by 2028 (based on the committed pipeline).
It also reported that profit levels for serviced apartments can still be 10-20% higher than hotels, attracting greater investment; an example of this appetite for investment can be seen from Staycity Group, who acquired a site in London’s Nine Elms in July 2024 and are planning on injecting £70 million of investment into developing a leaseback arrangement.
Embracing flex to align with emerging customer segments
Finding itself in an increasingly saturated marketplace, the serviced apartment industry competes not only with traditional hotel brands but with the booming vacation rental sector. Platforms like Airbnb have normalised alternative short-stay options, offering flexible, cost-efficient accommodations.
Serviced apartment operators can differentiate themselves by emphasising their unique value proposition—offering more space, privacy, and a second home-like experience that hotels often lack while maintaining a professional, regulated environment distinct from vacation rentals. This has been attracting new customer segments, such as leisure clients and families, marking a shift away from the traditional corporate guest type. Deloitte found that leisure customers now account for 51% of guest types in serviced apartments, marginally outperforming corporate customers at 49%.
Serviced apartment operators have also seen increased demand from digital nomads, a segment which has increased by an astonishing 131% post-pandemic. Influencing the design and amenities with serviced apartments, nomads expect to have coworking facilities in their accommodation, with some guests also favouring apartments with leisure amenities. Gemma Williams (Supplier Network Manager, Corporate Housing, Sirva), urges operators to consider the cost implications of these new shared spaces, especially if guests may have access to similar facilities nearby.
Shared amenities are commonplace in hybrid living models, such as coliving spaces (also popular with nomads) and purpose-built student accommodation (PBSA). Blurring hybrid models with serviced apartments has been identified as an opportunity that can absorb potential future market shocks. Savills advises operators to ‘tap into extended stay demand as it has the potential to enhance overall returns and mitigate the effects of low-demand periods for other segments and vice versa.’
After all, flexibility is key. Giles Horwitch-Smith explains this strategy:
“Serviced apartment operators running different lengths of short to medium stays can maximise occupancy throughout the year, increasing operating income by several percentage points depending on location and seasonality. At the same time, adapting apartment rates to seasonal demand continues to be a simple strategy for maximising profits from existing units.
“Serviced apartment operators can adapt to modern guest expectations by offering adaptable shared spaces. With this approach, they can enhance the living experience for guests across different lifestyles and differentiate themselves from the challenger vacation rentals market.
“With hybrid working and the way businesses - and guests - are looking to utilise space, especially those in busy city centres, operators need to be flexible with their models and join the fast-growing trend of attribute-based renting of space in their serviced apartment properties.”
PropTech facilitating flexible stays
Serviced apartment operators can handle the complexities associated with hybrid living models by using a property management system that can manage varying stay lengths and contractual and financial terms.
Serviced apartment software, like res:harmonics, offers automation of many repetitive tasks traditionally undertaken by front-of-house staff, leaving operators to take on higher-level team members with more multi-faceted responsibilities - this automation and increased efficiency can help operators overcome current hospitality sector challenges around labour shortages.
Giles Horwitch-Smith explains that using revenue management tools in a PMS, “can help operators optimise pricing across different segments (hotel guests, business users, and long-term renters), using data-driven pricing models to adjust rates in real-time based on demand for different types of spaces (hotel rooms, office space, or extended stays).”
A reporting system integrated within their property management software enables “operators to use historical data to forecast demand for different types of spaces (e.g., short-term vs. long-term stays) and adjust pricing or service offerings accordingly,” advises Giles.
Connecting at ASAP
As Calder says: “The Serviced Living sector has not only survived the pandemic – it has grown and matured.” With the serviced apartment sector tapping into the demand from emerging segments like digital nomads and long-stay guests, leveraging flexible and hybrid living models, and embracing innovative PropTech solutions, operators can navigate market volatility while maximising revenue.
The future of serviced apartments looks bright, and we can’t wait to learn more about the wider market trends at the ASAP conference. Connect with our team there, and join Giles as he opens the post-conference drinks reception.
In the meantime, request a demo to find out how our serviced apartment software can automate and scale up your operations, or download the Ultimate Guide to Serviced Apartment PMS to learn more about how property management software supports serviced apartments.
