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LONDON-Residential developers are better equipped than hotel companies to enter the serviced apartment sector. That’s the conclusion of new research by Jones Lang LaSalle Hotels.

“The specialist knowledge of residential developers indicates they may have a natural affinity for the serviced apartment product, particularly in markets where the serviced apartment concept is still in its infancy,” said Graham Craggs, Executive Vice President, Jones Lang LaSalle Hotels.

Existing residential properties have been successfully converted into serviced apartment complexes, providing developers with higher achievable monthly rents and without compromising occupancy stability. This phenomenon is particularly common in Europe where land availability is scarce and suitable site locations harder to find.

In addition, carefully constructed serviced apartment products can be converted back to residential use as an exit strategy. This was the strategy adopted by the Sydney market as a result of over supply following the Olympic Games 2000.

“Many residential property developers in Australia and Asia have formulated their own specific serviced apartment brands, such as Medina and The Stockland Group, which have been very successful,” said Craggs.

In Europe the majority of serviced apartments are un-branded and controlled by private owner operators, typically private families or investors. ‘The European serviced apartment market is at an early point in the cycle, due to a different demand profile. European business travel takes place over a shorter time period due to the relative proximity of business communities and the introduction of hugely successful budget airlines’ added Craggs

He continued: ‘The serviced apartment product can take the form of a separate complex or be attached to the hotel, offering guests the full benefit of the hotel’s facilities, with the latter trend being dominant in Asia Pacific and Europe.

“However it is generally impractical for hotel owners to convert their hotel product to serviced apartments. Existing facilities prevent typical economies enjoyed by serviced apartments, and hotel room sizes are often too small to meet extended stay requirements. Thus the only realistic option for hotel operators is new builds, which have the added complication of securing a site and planning permission.

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