The comprehensive guide to investing in serviced accommodation plus 10 step starter list 

When you envision the ideal blend between a lavish hotel experience and the warm comforts of home, you are thinking of serviced accommodation. But what exactly is it, and what isn’t? Picture a space designed for rest and everyday living, where hotel-like services come standard. From the lively streets of London to the tranquil corners of the Cotswolds, serviced accommodations are versatile by nature, catering to a wide range of visitors. But, aside from the obvious appeal to travellers, the serviced accommodation market has the draw of a lucrative business alternative.
Let’s explore serviced accommodation from an investor’s perspective because these aren’t just magnets for the selective business traveller or the holidaying family but golden opportunities in the rental market. This guide takes you through the manifold aspects of serviced accommodation, comparing their profitability with another investment favourite – HMOs.

What is serviced accommodation?

Serviced accommodation refers to fully furnished properties available without fixed lease contracts and for both short-term and “long-term” stays. What makes these properties so appealing is their hotel-like amenities, offering niceties such as housekeeping, Wi-Fi, and security. However, they also satisfy the craving for more space. These spaces will typically come with separate living and sleeping areas, making them a first option for those seeking the comforts of home while travelling.
Serviced accommodation is the industry’s answer to a growing demand for more flexible and homely alternatives. But the benefits aren’t exclusively for the temporary occupants; as the market expands, the potential opportunities and financial benefits for investors shouldn’t be overlooked.

The different types of serviced accommodation

We’re all familiar with Airbnb-style rentals. Yet, the serviced accommodation sector in the UK offers a broader spectrum than just this model. Let’s look at these alternatives through the lens of services and conditions that give them a competitive edge in the market:

• Serviced apartments: Besides their tailored amenities, what typically sets these fully furnished apartments apart is the proximity to urban centres. Serviced apartments will include in-depth facilities ranging from well-equipped kitchens to Wi-Fi, offering the promise of a productive and relaxing stay.
• Aparthotels: Picture an exquisite fusion of homely comforts with hotel-esque services, such as a 24-hour reception. The best of both worlds. Also referred to as suits, aparthotels’ key feature is that they masterly blend the liberty of a serviced apartment and the conveniences of a hotel.
• Corporate housing: These properties are tailored with the globetrotting business professionals in mind. Corporate housing provides the solution for extended stays or relocations -on a temporary basis. Beyond just amenities, these fully furnished properties often extend services to include support with local registrations or community introductions, seizing the market opportunity from two angles: individuals and companies.

Essential inclusions of a serviced let

In the serviced accommodation market, your investment isn’t just about the brick and mortar; it’s about the experience you offer:

• A homey setup: furnished interiors are equipped with the essentials a business traveller would expect from home, from sofas and refrigerators to the coffee machine
• Meticulous housekeeping: regular maintenance, ensuring a pristine environment. This can include cleaning or laundry services
• Connectivity and safety: Wi-Fi, communication lines, and comprehensive security measures
• Location: strategically placed properties offering easy access to key city zones and attractions

For landlords and investors eyeing the serviced let market, an aparthotel or serviced apartment isn’t just about furnishing the property; these buildings are meant to echo the sentiment of ‘home’ while calling forth the advantages of a hotel. You can learn more about landlord responsibilities here.

 

Why consider investing in serviced accommodation? Let’s explore the pros and cons

The pros

• Financial rewards: your ROI can be substantial with the potential for higher rents than long-term lets
• Booming sector: as people recognise the advantages of serviced accommodations, demand is on the rise
• Tech advancements: platforms like Airbnb streamline the process of listing and managing your properties
• Favourable regulations: short-term lettings offer broader rights and flexibility to landlords
• Tax benefits: potential savings and benefits compared to traditional buy-to-lets.

The cons

• Higher initial investment: furnishing and equipping the property requires substantial capital
• Maintenance overhead: regular housekeeping and inclusive utilities mean recurring costs
• Navigating restrictions: from leasehold limitations to local regulations, the administration requires careful navigation

 

Serviced accommodation vs HMOs: which reigns supreme?

HMOs (houses in multiple occupation) are properties rented out to at least three people forming more than one household. The allure of HMOs lies in the potential for higher rental yields. For instance, a single property can be rented to multiple tenants, ensuring a steady income stream even if one room is vacant.
While serviced accommodations offer flexibility, HMOs provide consistency. With long-term tenants, landlords can often anticipate stable monthly incomes. However, they come with their own challenges, such as stricter regulations, tenant management, and maintenance of communal areas.
For investors seeking a dynamic model adaptable to market changes, serviced accommodations offer the ideal combination of opportunity and flexibility. But if consistency and long-term stable yields appeal more, then the HMO model is worth considering. Your choice should reflect your investment goals, risk appetite, and market foresight.

 

Serviced accommodation vs buy-to-let: which investment path shines brightest?

Buy-to-let (BTL) properties have long been the cornerstone of the property investment world. In this strategy, investors buy properties solely to rent them out, typically on long-term leases. The stability of BTL investments arises from prolonged tenancy agreements and predictable monthly incomes.
Contrastingly, with their short-term rental models, serviced accommodations offer flexibility and the potential for high returns during peak seasons. Yet, they demand frequent management, given the consistent tenant turnover.
While BTL offers the comfort of traditional property investment with steady incomes, serviced accommodations present an opportunity for dynamic returns, albeit with increased management demands.
Buy-to-let is a strong contender for those who value stability and minimal hands-on management. However, for investors willing to navigate the ebbs and flows of the short-term rental market, serviced accommodations might be the goldmine they’re looking for.
Ultimately, it boils down to one’s investment goals, desired involvement levels, and vision for future market trends.
 

How to invest in serviced accommodation

Investing in serviced accommodation can be lucrative if approached with due diligence and a clear strategy. Here are some essential steps to guide you in this promising market:

1. Research and analysis:

• Understand the local market dynamics. Which areas are in demand? What are the seasonal trends?
• Keep an eye on local developments or events that could increase the demand for short-term stays, such as conferences, festivals, or infrastructure projects.

2. Budgeting and financing:

• Start with a clear budget. Account for the property cost, furnishing, initial marketing, and contingency for unforeseen expenses.
• Explore mortgage options tailored for serviced accommodations or holiday lets.

3. Selecting the right property:

• Consider the property’s location, size, and accessibility to local attractions and transport. The potential of a property goes beyond its current state, don’t overlook the potential of one-of-a-kind accommodations.
• Think about the demographics of your target audience. For business travellers, proximity to business hubs would be essential, while being close to attractions might be more crucial for tourists.

4.  Quality furnishings:

• Furnish the property to the standard of your intended market segment. High-quality furnishings can justify a higher rental price and generate positive reviews, resulting in repeat bookings.
• Consider engaging with the HMO Architect team; the advice of a professional interior designer who understands the serviced accommodation market can translate into marketable opportunities.

5. Licensing and compliance:

• Ensure you have all the necessary licenses to operate serviced accommodation in your chosen area.
• Be aware of local regulations regarding short-term lets and ensure full compliance (find out more on regulations concerning short-term lets in England)

6. Marketing and promotion:

• List your property on popular platforms like Airbnb, Vrbo, Expedia, and Booking.com.
• Consider professional photography for your listings. Good photos can significantly increase booking rates.
• Regularly review and adjust your pricing based on demand, local events, and seasonality.

7. Management:

• Decide if you’ll manage the property yourself or engage with a property management company. Consider factors like guest communication, check-ins, and maintenance.
• Use property management software to streamline bookings, customer communication, and maintenance tasks.

8. Customer experience:

• Aim to provide an exceptional experience for your guests. This includes cleanliness, amenities, and quick responses to queries or issues.
• Regularly collect and act on feedback to continuously improve your offering.

9. Networking:

• Connect with other serviced accommodation operators. They can offer insights, advice, and even referrals.
• Join associations or groups that cater to the serviced accommodation sector to stay updated with the latest trends and regulations.

10. Review and adjust:

• The property market is constantly evolving. You’ll want to stay on top of what’s changing so you can review and boost your strategy accordingly. Adjust pricing, marketing tactics, and furnishings based on feedback and market demand.

By following these steps and ensuring that every decision prioritises guest experience as well as profitability, your investment in serviced accommodation can yield substantial returns.

 

Final thoughts: is investing in the serviced accommodation business worth it?

Investing in serviced accommodation can be a lucrative prospect. The potential is vast, from substantial financial rewards to navigating a booming sector. However, like every business venture, it comes with particular challenges, from overhead costs to navigating property regulations.
With a clear strategy, thorough market research, and a keen eye on consumer demand, investors can transform these challenges into stepping stones for success. Here at HMO Architect, we’re on a mission to make your investment journey enlightening and robustly profitable. Dive deeper with our team and unlock the true potential of your investment.

Ready to kickstart your serviced accommodation project?

Taking a dive into the depth of serviced accommodation investment can seem daunting. However, your journey can be smooth and rewarding with the appropriate guidance. The HMO Architect team is here to provide you with the expertise and support you need.
Whether you’re just starting or looking to expand your existing property portfolio, our seasoned experts can offer valuable insights tailored to your unique needs. Let’s bring your vision to life!
Book a complimentary call with us today to discuss your serviced accommodation aspirations. We’re eager to hear about your project and help you make it a resounding success.