Increasingly within the business and leisure travel sectors, more people are choosing to take up serviced accommodation instead of booking hotels. Serviced accommodation offers services similar to those offered by a hotel. However, individuals have more space, convenience and privacy, similar to what they would enjoy in their own homes. Many of these properties have larger sleeping and living areas, private cooking facilities, and access to amenities that would usually be found in hotels.
Conventionally, travel booking sites have offered serviced accommodation as an option but have just referred to such properties as ‘apartments’ or listed them as alternatives to hotel rooms. However, the serviced accommodation sector has had a profound impact on travellers, as many see such properties as cost-effective, especially in instances where people want to stay longer or travel in a large group. For such travellers, its more economical to stay in a serviced residence where amenities, housekeeping, and other utilities are included in the rental price.
As more people recognise the benefits of serviced accommodation, many aspiring and existing landlords are also considering getting into the property business by providing this service. To do this effectively, landlords require extensive knowledge of what’s required and the potential pitfalls to avoid.
Such knowledge can be gained from property experts such as Paul Smith, Touchstone Education co-founder, who have gained success in this sector. Through Touchstone Education, Mr Smith takes prospective investors through the process of establishing a serviced accommodation unit, with the information packaged as an online course.
A Landlord’s Perspective
With serviced accommodation, landlords let their properties out to guests, not tenants, for a short duration. These arrangements can be rather flexible and range from a single night to a few weeks. Rather than having a tenant occupying a property for six months or one year, the serviced accommodation route allows landlords to meet each individual’s specific need for accommodation.
While the type of property used for serviced accommodation is similar to a buy-to-let, the returns are very different. Whereas the latter will generate rent income over the length of a tenancy agreement, a serviced accommodation property can command fees per short stay or night. With consistent demand for serviced accommodation, the returns will be far greater than what rent can bring in.
Why Consider Serviced Accommodation?
Any property investor desires to increase their rental yield, something that a well-managed serviced accommodation unit can provide. However, beyond the desire for better returns, other factors are at play for landlords seeking to get into the sector:
- Tenant Debt: It’s an unfortunate reality, but many landlords encounter bad debts situations where tenants are liable for their dues but fail (or refuse) to pay. With serviced accommodation, guests make full payment before staying at the property, eliminating any chance of ending up with bad debt.
- Positive Cash Flow: With a buy-to-let, the rent is typically paid every month. Sometimes, it’s possible to end up with rent arrears for several reasons. However, with serviced accommodation, the landlord takes full payment at the point of booking confirmation, meaning that the money is available almost immediately.
- Less Stringent Regulations: Serviced accommodation units may be a solid alternative to hotel rooms, but they adhere to less stringent regulations. A hotel must meet certain regulations (fire, lighting, noise) to operate. At the same time, a serviced unit owner only has to comply with basic checks, which are relatively affordable.
- Flexibility: One of the main reasons people consider serviced accommodation is because they can turn their property – whether they’ve lived in it or previously rented it out –into a serviced accommodation unit quite easily. Naturally, there’s a process for operating these units, but once it’s done well, the returns are quite attractive.