Savills notes that stock levels of the largest operators are set to increase 39.4% before the end of 2022 amounting to over 13,000 units. Accor, Staycity and SACO are the main drivers, accounting for 60% of the pipeline, driven by their new lifestyle focussed brands including Wilde (Staycity) and Locke (SACO). The UK market continues to prove attractive, accounting for a third of the European pipeline; however, a number of the larger operators are moving into new, less established markets, such as Vienna and Warsaw.
Savills identifies a number of potential growth markets including Oslo, Stockholm, Madrid, Edinburgh and Dublin. These ‘high growth’ markets have enjoyed good growth in tourist arrivals while also having a strong GDP outlook; offering operators the opportunity to tap into both growing leisure and corporate markets. Dublin has already been receiving significant interest due to its comparatively low stock levels and growing number of overseas visitor numbers.
James Bradley, associate director in the hotels team at Savills, comments: “The extended stay market continues at the buoyant pace set over the last year as operators look to consolidate their presence in established European markets. Improving operational prospects for emerging European markets, plus pricing and availability constraints in more developed markets in the UK, France and Germany, is facilitating expansion into currently under-served European cities.”
Corporate mergers and acquisitions are becoming an increasingly legitimate way to enter the sector with Savills highlighting the Brookfield acquisition of the SACO portfolio for £430 million this year and Hua Kee taking a reported one third stake in Cycas Hospitality in 2017.
Marie Hickey, research director at Savills, adds: “It is currently difficult to gain exposure to the extended stay sector through single asset and real estate only portfolio acquisitions due to the lack of purpose built stock. As such we expect momentum in the corporate M&A sphere to continue as operators seek to bolster their European coverage. The market continues to be disparate, meaning there is still everything to play for.”
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