Short-term accommodation rentals are approaching pre-pandemic levels, according to a study spanning 15 urban and 12 regional markets around the world by STR, a global market data analytics company for the hospitality industry, and AirDNA, a global provider of vacation rental data and analytics.
In the short-term accommodation category, which covers apartments of two bedrooms or more, including serviced units in the aparthotels sector, revenue per available room (RevPAR) was down just 4.5% from the same time last year. For the hotel category, which includes studios and one-bedroom apartments, RevPAR was down much more, at 64.8% from last year.
“We’ve never received as many enquiries from property developers and private investors wanting to know how they can re-equip their unsold residential properties for aparthotel running, as we’re getting now,” says Rael Phillips, co-owner and director of Totalstay. The Cape Town-based aparthotel operator which reached 89.13% occupancy last month for its Latitude Aparthotel in Seapoint, is home to a collection of one-, two- and three-bedroom apartments and villas in Seapoint, Camps Bay and the Cape Town CBD, with its largest clients being Berman Brothers, Elemental, Mason Developments and 12Cape. It combines the best-practice of top hotels, with the flexibility and freedom of DIY travel.
In the months leading up to the pandemic, the accommodation industry had reached unprecedented levels of success, with annualised global hotel occupancy exceeding 66% for a record 58 consecutive months, and the US short-term rental peak-season occupancy rate growing at 2.3% annually, reaching a record high of 58.6% in 2019 from 52.6% in 2015. But, according to the study, the introduction of global travel restrictions hit hotels hard, due mainly to drastic cuts in demand in business and group-oriented travel.
The short-term rentals industry, by comparison, had just wrapped up a half-decade of nearly 300% total revenue growth prior to the pandemic, driven by travellers seeking more affordable and unique experiences. Despite growth dipping slightly in 2019, the industry remained strong. And even though performance indicators plummeted during the time of the global lockdown regulations as a result of Covid-19, the fall compared to hotels wasn’t as severe, according to the study.
“Aparthotels have shown decade-long growth because they offer far more value for money than conventional hotel accommodation,” says Phillips. It’s this steady growth, along with typical factors of an aparthotel product like greater living space, more amenities, better locations, and now enhanced social distancing and sanitisation, that may suggest why property developers and investors are seeing how the aparthotel market will offer more sustainable return on their spend.
Mason Developments, a Cape Town-based developer of high-end luxury apartments blocks including Bradwell Row, The Bradwell and The Belair in Vredehoek, and The Glengariff in Seapoint, contracted Totalstay to repurpose available stock to take advantage of this trend last year. With the market being as competitive as it is, the only way for Mason Development’s aparthotel product to differentiate itself is on price and perceived value for money – a key factor for the aparthotel industry and product – and Capon believes that with a superior product and a competitively priced offer, Mason Developments will in time attract the bookings they’re after and the business travel market relationships they need.
Phillips agrees, suggesting that a proven and experienced centralised aparthotel management infrastructure really makes the difference between how successfully a property investor is able to yield rewards and what the end result is. “When choosing an operator, investors shouldn’t overlook crucial aspects like a solid, well-run infrastructure that provides access to the best knowledge and resources; their ability to hire, train and retain excellent staff; the backing of an established, reputable aparthotel operator brand; and a flexible pricing model.”
Equally, a degree of patience and some calculated risk-taking are needed to take advantage of the aparthotel market. “The material impact the pandemic has had has much to do with the rands and cents that travellers now have available,” says Phillips. “People are wanting more value for their money, as well as safer facilities.”
As the STR and AirDNA study suggests, short-term rentals offer full-service amenities that allow for longer-term stays and became more popular as families looked for spaces to which to retreat. Resultingly, the average length of stay increased by 58% during the crisis.