13 Nov 2013
Words Tim Admin

Apartments Sector Set for Future Growth

FINAL IN OUR FIVE-PART SERIES COVERING THE GROWTH OF MANAGEMENT RIGHTS With some 40 years of solid growth behind it, the serviced apartment sector has emerged as a major component of Australia’s accommodation industry. It now represents over a quarter of total room supply. That’s good news for many segments of our community – for travelers, for the vast numbers employed in the sector, for unit buyers investing in properties, and for the management rights businesses that support them. Queensland alone has an estimated 3000-plus management rights schemes in operation. The serviced apartment sector has reportedly accounted for almost 70% of all new room supply over the past decade. And, as we touched on in our last edition, Australian Bureau of Statistics (ABS) figures show that decade (2001 – 2011) also saw the number of room nights sold in serviced apartments grow by 72%. Based on earnings, serviced apartments now command 26% of the accommodation market, level with motels (26%) and fast closing in on hotels (46%). According to IBISWorld, the estimated value of the sector in Australia is now $8 billion and growing. Earlier this year, a review by industry analysts Atchison Consultants forecast the serviced apartment sector, in terms of returns, would outperform the hotel sector over the next three years. “It is a trend we have been predicting for many years,” said Resort Brokers managing director Ian Crooks. “We warned back in 2005 that management rights, a model directly accountable to unit owners, had revolutionised the way resort properties operated and that traditional hoteliers would need to adapt. “At the time, Outrigger Hotels & Resorts had successfully broken into the Australian accommodation market by buying management rights to established buildings in Surfers Paradise. “Now we are seeing a new wave of change. The purchase earlier this year by Accor of the Mirvac Group’s hotel interests in Australia and New Zealand is a prime example of the dramatic reshaping of the industry in our region.” A telling sign of the times was noted in July at the 2012 ANZPHIC (Australian, New Zealand and Pacific Hotel Industry Conference. Melbourne-based Quest Serviced Apartments, founded in 1988 by Paul Constantinou with one property in Fitzroy, was presented with the ‘Innovators Award’. The award was the first of its kind, specifically recognising the success of the Quest business model in the accommodation industry. “The model caters for the extended stay business traveller with flexible, spacious and comfortable serviced apartment accommodation, delivers sustainable rent to developers and landlords, meets the requirements of financiers and provides profitable businesses for franchisees,” the Accommodation Association of Australia reported. The sector is benefiting significantly from increasing numbers of business travellers to Australia and corporate travel within Australia. Eight new Quest Serviced Apartment properties are opening in the 2012-13 financial year. Surfers Paradise-based Mantra, which also has a significant share of the serviced apartments sector, is chasing the lucrative business travel market too with its plan to open a number of new Peppers-branded CBD properties in capital cities. But the strength of the management rights industry is also intrinsically linked to leisure travel, as well as to the ever-growing trend toward apartment living as a permanent residential choice. Strata apartments represent the most popular form of tourist accommodation in Australia’s major tourist destinations. And they are increasingly the popular choice for downsizing baby-boomers seeking low-maintenance, leisure-focused lifestyle in prime locations with lock-and-leave security and convenience. In both these market segments – tourism and permanent letting – we see a solid outlook for management rights. Tourism-driven management rights buyers are looking for prime location and room to grow the business and add value. Permanent residential complex buyers see merit in the lifestyle and security these businesses afford. Resort Brokers’ optimism for the sector is evident in its growing team of dedicated sales consultants. Four sales people are now very active in the Brisbane area two new consultants have recently been added on the Gold Coast. “Our sales on the Gold Coast doubled this year and the outlook is very positive,” Mr Crooks said. “We hail the growth in the serviced apartments sector led by the likes of Quest. Raising awareness about and demand for the advantages of choosing apartment-style accommodation will provide flow-on benefits at every level of the industry. “But we must also stress management rights is still very much a mums and dads business,” Mr Crooks said. “Individuals, partnerships and family operations provide the most direct and personal service to unit owners. They have built this industry and they remain at its core.” To catch up on previous articles in this series, go to http://resortbrokers.com.au/informer-archive.htm