Rising energy costs challenge serviced apartment operators

Concerns around energy costs are considered to be one of the biggest challengs for those running serviced apartments businesses, according to a recent survey.

The survey by Savills and the Association of Serviced Apartment Providers (ASAP) finds that over three quarters (77 per cent) of operators listed rising energy costs as the biggest challenge for them over the next three years.

This also remains the top worry for operators, compared to six months ago, while staff costs (71 per cent) and cost of living (68 per cent) headwinds have eased marginally.

The operators surveyed represent a collective stock of over 36,000 serviced apartment units in the UK.

The findings also show that 71 per cent of respondents remain optimistic about the prospects of their business over the next 12 months, a figure down slightly on the 77 per cent in September 2022 but outperforming the long-term average (60 per cent).

Additionally, in line with recent survey results, leisure guests continue to account for a higher share of demand compared to previous years.

Operators are expecting 42 per cent of demand to come from either leisure or an equal mix of leisure and corporate guests over the next six to 12 months, up on the 35 per cent share reported pre-Covid in June 2019.

Marie Hickey, commercial research director, at Savills says: “Since the closing of our last survey in September we can see that operators concerns around energy costs, staff costs and how the cost of living will impact business remain the top headwinds facing the sector.

“However, operators remain confident around navigating these challenges and as international tourists return to the UK in greater numbers, this will provide a welcome boost to operators in attractive tourist destinations.”

James Foice, ASAP CEO, says: “We are so grateful to members of the sector for sharing both their optimism and their concerns, which we can then represent to policy makers and investors in the sector.

“It is good to hear that operators are still optimistic about the future, and that staffing costs and the cost of living crisis have retreated slightly as major issues of concern.

“The top challenge of rising energy prices has been predicted to ease later this year, which also brings hope; as does the continuing increase in leisure guests which offers another route to market while business travel continues to recover.”