What are aparthotels, and when did they first appear? What is the difference between a hotel and an apartment hotel? How interesting is this format of accommodation for tourists and digital nomads, and what is it for investors? Maria Onuchina, CEO of the hotel operator 25/7, told us about all this.

— What is an apartment hotel, and what does it include?

— Aparthotel is a format of a hotel for combined rentals depending on market conditions and seasonality. In order to provide the owners with greater efficiency from the invested funds, the management company mixes different variants of room rent over a period of time.

The most striking example of a similar approach is the airline fare policy, which regulates the price of tickets and promotional offers depending on demand, time of booking, and other factors.

Each operator's offer is individual and depends on the conception of the project, its popularity, and its target audience. For example, in addition to apartments with a standard level of hotel equipment, there may be proposals of higher comfort, where you can count on extra beds, space for work and leisure, richer equipment, spacious bathrooms, etc.

— When did this format originate?

— The first project in the field of apartment hotels is considered to be Jack Deborah's project in Kansas, USA. In the 1970s, his project, The Residence Inn, was announced as a new type of hotel and offered a “home away from home.”

Initially, the project was intended for long-term rentals (from a few months), but over time it became clear that this format of apartments with hotel service is much more interesting for a period of a week or even less. The Residence Inn was launched under the slogan “As close to home as we can make it,” and the advertising contrasted a man watching TV in a hotel room with a man roasting marshmallows in the fireplace.

 


— How is the apartment hotel format developing in different countries? Where are they most popular?

— Aparthotels as comfortable apartments of different sizes with obligatory hotel service, are a very popular phenomenon in the U.S., UAE, Canada, and many other countries. This housing format is used both as a hotel, where you can stay for the duration of the trip, and as permanent housing (apartments are usually available for purchase in the property). The second option is often chosen by those who like to live in comfortable conditions similar to those at home but with hotel service.

— Who is the target audience of apartment hotels?

— Apart from tourists and those who come on business trips, apartment hotels are settled by students, migrants, digital nomads, and entrepreneurs who value their time.

— In general, this format is loved by the Millennial generation, which is not afraid of being alone and becoming independent earlier. They don't want to buy a house, so they aren't tied to one place. And apartments are a service that allows you to live in comfort and not be distracted by everyday routine, and this is the most frequent reason for preferring this format of housing.

— What unique aspects of lodging and reservations apply to apartment hotels? What do guests need to know?

— In aparthotels, reservations are made in the same way as in conventional hotels, and you can stay from one night. Some aparthotels may regulate rental terms (such as designating a minimum rental period), and some may allow rentals with an open checkout date. It's almost a masthead service nowadays to manage apartments through a mobile app. 

— What are the benefits of apartment hotels? And what, conversely, are the disadvantages?

— The advantage for the tourist is the presence of hotel service, and the room looks like an apartment: all the necessary conveniences are right in the room. The cost of living in such a project may be higher than renting an apartment, but it is justified by the possibility of using the entire infrastructure of the territory: sports areas, entertainment areas, co-working, community, dry cleaning, laundry, concierge service, and others.

Aparthotel projects are often investment projects (rooms may belong to different owners, but the project is managed by a single hotel operator according to unified standards). This does not affect the quality of service—guests usually have no idea that the project has multiple owners. A well-thought-out location (developed infrastructure, convenient transport interchange, walking distance to the subway) is very important for the investor, the owner of the units, as it directly affects the occupancy rate.

Apartments are the safest investment in terms of income. For example, during COVID-19, when all the hotels were closed or sold, apartments had high occupancy rates and returns for investors because they combined the possibility of long-term and short-term stays.

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— How much money can be invested in such projects?

— The entry threshold depends on many factors—on the hotel operator, location, dedeveloper, and so on. In our apart-hotel “25/7 Zanevsky,” the entrance threshold starts at 7 million rubles (about $85 thousand) for a standard category room without taking into consideration discounts and installments. Many people consider the purchase of apartments through leverage, that is, as a passive investment. Moreover, some homebuilders started to provide guaranteed-profitability programs. The programs reduce investor risks at the point when the project starts operating.

— What do investors get when buying real estate in apart-hotels? What is the benefit, and how can one calculate it?

— Firstly, it is worth analyzing the available options: whether it will be necessary to take out a mortgage and how much personal time there is for this business. Some people find it more convenient and profitable to do business through the management company so as not to distract from their main work, and others do the renting themselves. After that, it's worth considering the options and choosing from them what's suitable.

Again, each individual project has its own conditions, which are formed based on all the same details: hotel operator, developer, class, and so on.

— How much can I earn on average from such investments?

— In 2022, there was a noticeable trend on the part of management companies to make more realistic promises on aparthotel yield programs. The average promised yield on the market in 2021 was 8-10%, down from 17-20% in previous periods. This year, it is hovering around 5%.

Investing in concrete square meters is still the most reliable tool. Moreover, it reduces inflation risks and protects money from depreciation. At the same time, no qualifications and certificates are required, as in the case of investing on the stock exchange.