What Should I Invest in? A Serviced Apartment or a Hotel?
The increasing tenancy of serviced apartments is a testament to how viable an investment in serviced apartments can be. VAAL Real Estate Kenya has a unique service apartment offer that is all these things and more. With an on-demand location.
Investing in serviced apartments is a fairly new concept, especially in the Kenyan real estate market. This prompts us to help explain why they make such a great investment option.
With investors seeking more seamless investment opportunities, serviced apartments present a welcoming idea that holds a lot of potential.
Let’s dive a little deeper into the concept:
Serviced apartments are usually fully furnished residential apartment units that come with the added advantage of outsourced professional housekeeping. They are a hybrid of residential apartments and hotel units. They bring together the best of both worlds with the privacy and comfort of an apartment but the efficiency and convenience of a hotel.
A common question arises: “How exactly are serviced apartments different from hotels?’’
By comparing the similarities and differences, we plan to help make the distinction.
Similarities between Hotels & Serviced Apartments
- Furnishing. Both serviced apartments and hotel units come with facilities to help you with your day-to-day activities such as beds, iron boxes, electric kettles, television sets, etc. The furnishings aim to give the tenant a hassle-free stay during their rental period.
- Services. Both serviced apartments and hotels provide housekeeping for the tenants in the units. While the scope might be different it is a requirement in both types of stays
- Income generation. From an investor’s point of view, both hotels and serviced apartments are used to generate revenue. They are usually rented out for stays by tenants rather than for the investor to stay in. They charge according to daily or nightly rates, unlike other residential accommodations that may charge monthly or annually.
- Amenities. Fully furnished gyms, restaurants, game rooms, lounge areas, landscaped gardens, etc. Hotels & Serviced Apartments may offer a range of amenities to clients to elevate their experience during their stay.
While fundamentally being similar in their operational structure, there are a few differences between the two. Let’s get into it
Differences between Hotels & Serviced Apartments
- Duration of the Stay. Both hotels and serviced apartments allow for long or short-term stays depending on the needs of the tenant. Hotels allow for stays of between hours to months without restriction. For serviced apartments, however, it is common to find a stipulation on the minimum stay period. This is not mandatory for all serviced apartments though.
- Privacy. In many ways, serviced apartments offer more privacy in comparison to hotels. This is major because of the housekeeping and other service requirements of a hotel. Several times a day rooms may need to be accessed by the hotel staff to provide one service or the other to the room occupants. Serviced apartments on the other hand offer essential services to the client and often allow the maximization of the spaces in private by the tenants.
- Space within the Unit. The difference in the space provided by either a hotel or a serviced apartment is perhaps the biggest difference. Hotels usually provide a room with a small kitchenette area and bathroom and toilet. Serviced apartments provide full apartment units. From the living room area, bathrooms, toilets, kitchen, and sometimes even a study depending on a client’s preferences. Serviced apartments are basically residential units with the additional services of housekeeping.
- Services Offered. At hotels, the services offered may be quite a range depending on the specific packages that they offer, from cleaning, food, concierge, meeting facilities, and hotel transfers. Serviced apartments on the other hand allow essential services to ensure that the tenants have the autonomy to choose what they want.
What Should I Invest in? A Serviced Apartment or a Hotel?
We recommend investing in a Serviced Apartment. Here’s why:
a) Lower Cost and Risk Sharing. If you wanted to invest in any hotel around the world, ownership of specific units would rarely be an available option.
This naturally would mean that you would have to invest in the development of the project or own a chunk of the hotel. This of course is a huge investment with risks.
In a hotel investment, you would spend so much more to invest, increasing your risk portfolio, and would have a larger scope of areas to oversee such as the administration and operations of the hotel.
However, in a serviced apartment project, an investor can buy into a project i.e. just one unit or a few units, and get to enjoy an accessible investment, and great returns on investment, while sharing the risk with other investors. The scope of administration and management is also reduced, sometimes non-existent, making it a more seamless and hassle-free choice of investment.
One such development currently available is Divine Residences by CityBlue here in Kenya. The management and operation services are carried out by international hospitality brands, which means no footwork for the investors making it a hassle-free venture that brings in maximum results.
b) Return on investment. Serviced apartments attract more long-term stay clients. Both serviced apartments and hotels charge on a daily/nightly basis, which means if service apartments get longer term stays with all factors held constant i.e. the occupancy rate of specific locations, they witness a better return on investment.
c) Location. Hotels mostly pick locations based on tourist attractions. This affects the seasons where there is a fluctuation in the volume of people coming in. Serviced apartments however target a more stable market that remains constant throughout the changing seasons of the year. Most of the clientele for serviced apartments are corporate individuals looking for an easy stay throughout a specific amount of time. With business never going out of season, apartment owners get to enjoy a stable rental income throughout the year.
e) Privacy. Serviced apartments enjoy more privacy as there is restricted access for the units to the actual tenants and selected staff except within the common areas or just when they are carrying out specific housekeeping services within the development.
f) Unique Addition to Your Investment Portfolio. For serial investors, serviced apartments present a new way to invest in real estate. Over and above the unique concept of diversification means that investors can spread their risk and be part of the very first few people to reap the benefits of this new investment concept
In conclusion, serviced apartments allow investors to have their cake and eat it too. The seamless return on investment means a hassle-free journey. There is a diverse use for serviced apartments and the clientele attracted to serviced apartments have a good understanding of how private and convenient these units can be.
The increasing tenancy of serviced apartments is a testament to how viable an investment in serviced apartments can be. VAAL Real Estate Kenya has a unique service apartment offer that is all these things and more. With an on-demand location.