Contents

EMERGING ACCOMMODATION SEGMENTS 1  

INTRODUCTION 1  

HOTEL ALTERNATIVES 3  

CAPSULE / POD HOTELS 28  

HOSTELS 37  

STUDENT ACCOMMODATION 48  

TEMPORARY ACCOMMODATION 55  

SECOND HOME OWNERSHIP 60  

VACATION OWNERSHIP / TIMESHARE 60  

SHORT-TERM RENTAL MARKET 70  

CARE GIVING 76  

SENIOR LIVING 76  

HOSPITAL ACCOMMODATION 85  

ALTERNATIVE HOLIDAY ACCOMMODATION PROVIDERS 87  

HOLIDAY PARKS / CARAVAN PARKS / CAMPING 87  

CRUISE INDUSTRY 96  

DEMAND 102  

THE SHARED ECONOMY 102  

THE MILLENNIALS 111  

1

Emerging accommodation segments

INTRODUCTION This report investigates the range of alternative accommodation sources to hotels that are increasingly competing for the same guests, real estate and investment funds.

It takes a look at sectors from second-home ownership to capsule hotels, hostels and serviced apartments, and websites such as Airbnb and Housetrip.

Reading this report will enable hospitality professionals and investors to make informed decisions based on a fact that might at first appear surprising – that while these sectors initially seem very different, they actually share many factors in common.

First is their ability to provide a serviced place to stay for the guest: many compete with one another for the same guests. Another factor is that many are competing for the same real estate opportunities and some compete against each other for investment funds.

The report also demonstrates how specific guest demand is being better catered for by more focused products, such as hostels for the traveller market and serviced apartments for families.

For ease of reference this eclectic range of sectors has been grouped under several headings:

Hotel Alternatives: These include serviced apartments, capsule hotels, hostels, student accommodation and temporary accommodation.

Second Home Ownership: The spectrum of holiday home ownership ranges from timeshare resorts to fractional ownership, and private residence clubs which provide longer accommodation periods of several weeks of ownership, and condo-hotels, which allow the owner more usage and a share of the rental revenue. It also includes the growing market sector of urban short-term private rental.

Care Giving: Senior living and Hospital accommodation come under this heading.

Alternative holiday accommodation providers: Cruises, as an alternative to resort hotels. These can be either at sea or river cruises. Holiday parks, such as Center Parcs, an alternative to hotels for a family week-end away. Caravans parks – similar to holiday parks but with more basic facilities, aimed at family market. Camping is often provided together with caravan parks and as an add-on to holiday parks as well. The report also looks at the concept of glamping.

A key threat to the hotel industry from these alternative providers is principally in the area of investment as each of these sectors, while many are still in their infancy at present, can potentially draw investment funds from the hotel industry, as each becomes an established asset class in its own right.

3

HOTEL ALTERNATIVES

Serviced accommodation Serviced apartments are a hybrid of two different asset classes: the residential apartment sector and the hotel market. Their aim is to fill the gap between a short hotel stay and longer-term rental accommodation.

The concept is well established in the US and Asia Pacific, and, despite still being a relatively unfamiliar concept to both investors and customers in Europe, the industry is growing and is now becoming an acceptable accommodation option.

One of the keys to its success is being able to generate a higher gross operating profit and net operating income than the average hotel. This is achieved through lower guest turnover because the length of stay is longer than that of regular hotels and lower operational costs are achieved by providing fewer and less frequent services1.

While there is no official definition, the term ‘serviced apartment’ encompasses the three sub-categories: aparthotels, branded residences and corporate housing.

Categories of serviced apartments

Aparthotels/Extended Stay hotels These extended stay hotels are mainly studios, one bedroom or two bedroom apartments usually found in urban locations, ranging in standard from budget to deluxe. All are fully furnished and include:

• Ensuite bathrooms • Fitted kitchen or kitchenette • Lounge/dining area sometimes including a sofa bed or pull-down bed • Working area, desk, office chair, internet access and direct telephone line

The hotel services usually available from extended stay hotels include:

• Reception desks – some manned 24hrs, others on limited hours. • Daily or weekly cleaning and laundry service.

There are typically no restaurants, bars or lounge areas, although the level of services is generally higher than those hybrid aparthotels, which are usually a leisure- or resort-based product, and also come in standards of accommodations and range of services from budget to deluxe2.

Key players Regardless of being considered a relatively new sector, there has been significant movement in Europe in the aparthotel sector over the past ten years. Multiple new, large international brands have entered the

1  HVS,  Here  to  Stay  –  An  Overview  of  the  European  Serviced  Apartment  Sector,  July  2013  2  The  Global  Serviced  Apartments  Industry  Report  2013/14,  4th  Edition  

4

market, such as Residence Inn by Marriott (2011) and Staybridge (2012); there have also been a number of re-brandings, such as Suitehotel to Suite Novotel.

For the purpose of this report the focus will be on the key players in Europe.

Hotel brands

Adagio • A joint venture with Accor and Pierre & Vacances. • The company acquired 100% of France’s second largest operator, Citéa, in 2011 and is now the largest

player in France. • At mid-2015, the brand had 100 aparthotels with 11,000 apartments in ten countries. • Aparthotels Adagio, offers modern, spacious apartments with a fully equipped kitchen, as well as hotel

services in urban locations for extended stays, based on tiered pricing from fourth night onwards. • First established in 2007, the brand provides three product ranges: Adagio; contemporary midscale

aparthotels in Europe’s leading cities, and Adagio Access; economy range, functional aparthotels, which are only located in France and Adagio Premium, its luxury product.

• Its development strategy is firmly focused on international expansion. Among the 50 or so projects the company is currently working on, it has identified 30 international sites. Its target is to have 150 aparthotels in place in 12 countries by 20163.

• Has started to franchise its concept, aiming to have 30% of its stock as franchises within three years. A master franchise agreement has been signed with Accor in Brazil which will enable Adagio to set up a network of 40 establishments.

Staybridge Suites • IHG’s extended stay brand was established in 1998. • 219 hotels (23,866 rooms) with 111 projects under development4. In Europe, the brand has six hotels

(877 rooms) with three hotels in the pipeline. (Figures as of September, 2015) • IHG was the first major hotel company to launch an extended stay brand in the UK. In 2012, the first

property in London opened in Europe's largest shopping centre, Westfield Stratford City, ahead of the London 2012 Olympic Games.

• Hotel amenities include: three suite types (studio, one-bedroom and two-bedroom/two-bath) with fully equipped kitchens and a highly functional work area separate from living areas. Staybridge Suites hotels offer free Wireless Anywhere, a complimentary daily hot breakfast, The Social evening reception three days a week, a 24-hour business centre, fitness room and laundry room, all of which are complimentary for guests.

Suite Novotel • Suite Novotel is AccorHotel’s mid-market brand. • At mid-2015, the brand had 32 suitehotels with 3,942 suites in ten countries. • The brand was originally known as Suitehotel, but was rebranded in 2010 to take advantage of Novotel’s

well-established marketing and distribution network.

3  http://www.adagio-­‐city.com/uploads/press/presskitpro2013172031521276355.pdf  4  http://www.ihgplc.com/files/pdf/factsheets/factsheet_staybridge.pdf  

13

Marriott Executive Apartments • Has apartments in five European locations – Belgium, Czech Republic, Hungary and the UK and also

one in Kazakhstan. • Marriott also owned the ExecuStay brand which it sold to Oakwood in 2012.

Challenges In the corporate housing sector, particularly in the US, driven by the economic and US housing crisis, demand for apartments has increased dramatically whilst new supply has dried up due to the construction industry coming to a virtual standstill.

Securing inventory has become more challenging, with operators charging premiums of 10%+ on short-term leases. Some properties have declined to work with corporate housing providers or accept short-term leases.

There has been continued pressure on rental rates within EMEA, Asia Pacific and the Americas, with destinations such as London, Beijing, Shanghai, New York and Washington D.C. seeing substantial rises in the rents being quoted.

Availability is particularly limited in the BRIC markets such as Delhi, Mumbai, and Bangalore and across Brazil for apartments with more than two bedrooms/bathrooms. Meanwhile, new build that is taking place lies in popular urban destinations where demand is driving up prices. Seasonality and major events such as the Olympic Games also affect corporate housing in terms of pricing and availability.

Benefits of serviced apartments over hotels For business users in particular, serviced apartments offer tangible, quantifiable benefits over traditional hotels. These are as follows:

• Cost – for stays of a week or more, serviced apartments can be significantly cheaper than hotels because their costs are lower and extras such as room service, hotel restaurants and bars do not apply in the serviced apartment model. Many corporates will measure these savings as ‘total cost of stay’ including car parking, wifi, food, beverage etc.

• Environment – a secure, home-like environment whilst away on business, especially for long periods, makes the traveller more relaxed and, potentially, more productive. This can been seen as part of a corporate’s statutory Duty of Care to their employees.

• Cooking – although hotel rooms are often equipped with microwaves and coffee makers, apartments are usually equipped with fully functioning kitchens, enabling the traveller to cook or entertain and the company to control food budgets.

• Personalised – serviced apartments allow guests to customise the service they require, e.g., laundry, cleaning and so on.

Supply

Global supply The serviced apartment sector has expanded significantly over the last 30 years, although the rate of that expansion has varied from region to region, city to city and from year to year. However, the impact of the recession and difficulties faced by developers when raising finance have seen the overall supply of extended stay apartments decline over 2013/14.

14

In 2011, research for The Global Serviced Apartments Industry Report put the number of extended stay apartment units globally at 599,187 in 8,362 locations, increasing inventory by 34% and locations served by 17.5% over 2010 levels. In 2013/14, the updated report estimated that there were 655,911 units in 8,802 locations, by 2015/16 this had reached 748,437 units in 9,875 locations. However the picture in individual regions, or even destinations, inevitably varies.

The US continues to be the biggest markets for serviced apartments accounting for 59.6% of the world’s extended stay (excluding corporate housing) units and 61.2% of all locations.

Table 1: Global supply of serviced apartments 2015/16

Region Leading operators Locations Apartments Africa Of which Protea Hotels (Marriott Hotels & Resorts) 29 2,320 Courtyard Apartments (South Africa) 6 451 Executive Apartments & Hotels 6 253 Village and Life 6 221 Others 55 5,557

Total 102 8,802 Asia Pacific Of which Somerset (The Ascott Ltd) 49 9,031 Other serviced residences (The Ascott Ltd) 58 4,612 Ascott The Residence 23 4,789 Citadines (The Ascott Ltd) 27 4,378 Oakwood 27 4,014 Others 367 46,033

Total 551 72,857 Australasia Of which Mantra Group 113 11,622 Quest Serviced Apartments 148 8,251 Mercure/Grand Mercure 41 4,367 Oaks Apartments 48 5,896 Others 723 29,033

Total 1,073 59,169 Central & South America

Othon Suites (Brazil) 15 2,434 Mercure 17 1,682 Oasis Collection 11 800 LOI Suites (Argentina/Brazil) 6 400 Others 37 1,583

Total 86 6,899 Europe Maeva (Pierre et Vacances) 177 13,193 Adagio & Adagio Access 88 10,175 Pierre et Vacances 80 9,059

28

CAPSULE / POD HOTELS

Concept The capsule/pod hotel is increasing in popularity. Tokyo was famously the launch location for the first capsule hotel, which in 1979 provided small sleeping spaces measuring just 2x1 x 1.25 metres, too small to stand up in, and stacked one on top of another.

Originally, located in and around international airports, transit hotels are micro rooms or nightly rental pods that provide minimally sized accommodation, with most offerings typically under 200 square feet. For the purpose of the report, the terms capsule, pod and transit are used interchangeably.

In recent years, the concept of transit hotels has expanded outside of Asia to other major international cities in Europe and Americas, with recent pod hotels opening in London and New York.

Main characteristics include:

• Limited room size • Unique luxury design • High-tech gadget features characterize all pod hotels, whether located in an airport or urban setting. • Majority of pod hotel designs have a futuristic style and offer multiple innovative, technologically

advanced amenities – features not found in a traditional hotel such as free wifi and automated self-check-in33.

Luxury qualities are accomplished by sacrificing space for price. Pod hotels can be an excellent alternative in locations where traditional hotels cannot be built, such as in airports and in the heart of major urban cities, where land available for development is limited and expensive, and high density projects are permitted. Transit hotels offer guests cheaper rates while simultaneously allowing owners to minimise costs by limiting the amenities offered.

While the capsule phenomenon itself has not gained much traction outside Japan, others have taken up the compact challenge, though generally they all offer a room guests can stand up in. Operator Yotel has made a virtue of its small rooms. At its airport locations, they are called “cabins” and likened to something that might be found on a cruise liner, measuring just 7 or 10 square metres for singles or doubles, respectively.

Yotel still calls the rooms in its Manhattan hotel cabins, albeit they are a little larger at 17 square metres each. Upcoming European brand citizenM has squeezed its room footprint down to 14 square metres, and Marriott’s new Moxy is built around a 17-square-metre room; while Whitbread’s Hub rooms, developed for urban sites in the UK, absorb just under 12 square metres of floor space.

Within capsule/pod hotels, there are two main variations:

Urban pod hotels: these are located in urban cities and provide a cheaper alternative to traditional hotels by trading a smaller space for a lower price. Many of these pod hotels only provide the minimal amenities and communal bathrooms in tight spaces to cut down on costs such as labour.

33  http://www.4hoteliers.com/features/article/7859  

29

These pod hotels attract younger travellers who do not want to sacrifice design for price, as well as middle-aged travellers on a tighter budget. Because of their environment/ surroundings, these properties focus on accessibility and proximity to increase convenience.

An ideal development location would be close to lively city centres that contain business, nightlife, restaurants, and entertainment. Additionally, these locations should be well connected by public transportation and be close enough in proximity to main points of interest that are within walking distance.

Airport pod hotels: are located right next to the airport and are aimed at travellers who need a place to take a quick nap or shower before connecting to their next flight, so are often rented by the hour.

Some of these airport pod hotels, such as Yotel, were actually inspired by first-class flights on regular airplanes. Although there are differences between countries, amenities, and services offered, it is clear that the pod hotel is a trend that is gaining popularity.

Properties at airport locations target travellers dealing with the inconveniences of modern air travel, thus the features are created to make their stay more comfortable while dealing with travel hassle. Yotel’s airport hotel pods can be booked in 4-hour blocks, allowing travellers with semi-short layovers to grab a quick nap in a comfortable, yet convenient, environment.

Offering 4-hour blocks allows Yotel to turn more beds within a 24-hour period. These room rates are offered at a lower rate than overnight rates. Because these hotels are directly connected or in close proximity to the airport terminals, travellers can use an automated check-in system within the terminals for convenience. Airport pod hotels usually have a small food outlet and may contain a bar.

citizenM, Amsterdam Airport, has a 24-hour food outlet called canteenM. Airport pod hotels are characterized by their convenience to the exact location of arrival and departure by air for their guests.

Table 5: Examples of airport pod hotels

Airport Hotel Product

Amsterdam Schiphol citizenM • Has 230 rooms • 4 mins walk from Arrivals Hall 4 • 24-hr food outlet - canteenM

Amsterdam Schiphol Yotel • located in the 'airside' or 'transit' area of the main terminal

• 'Cabins' are bookable by the hour with check-in and check-out times totally flexible

Sheremetyevo Airport Moscow Sleepbox • offers single and double pod rooms available by the hour

London Heathrow Yotel • Cabins, let in 4-hr blocks • Direct terminal access

London Gatwick Yotel • Cabins, let in 4-hr blocks • Direct terminal access

Narita Airport, Tokyo Nine Hours • 129 beds • Access to showers, wifi, storage lockers and a shared

lounge Munich Airport NapCab • Sleeping cabins with beds and desks, charged by the

minute

Malpensa Milan Moxy • Located at Terminal Two • 152 rooms

Source: McKenney Research

36

brands do, with USPs which don’t rely on an infinite supply of talented local chefs or mixologists. It looks as though the Davids may be serious contenders against some of the existing Goliaths.

Source: Hotel Analyst Perspective, issue 7, April 2014

37

HOSTELS

Concept In the early 20th century, hostels emerged as a budget-friendly alternative to the traditional hotel, offering inexpensive accommodation to young travellers at the expense of decreased amenities.

However, modern hostels no longer solely attract the budget-conscious traveller. They also appeal to those seeking an interactive, socially driven accommodation experience by offering amenities such as extensive public space, group events, vibrant design and high-tech capabilities.

Hostels can be defined as a type of budget accommodation where typically guests rent a bed in a dormitory and share facilities, although there are more emerging that offer individual accommodation. However, since hostels are shared accommodation, there is less privacy for guests, which may be one reason why they are particularly favoured by teenagers and young adults rather than older travellers.

Hostels also appeal to the younger generation because they offer value for money, as well as a range of accommodation options, from dormitories of up to 20 beds, to single and double rooms with ensuite bathrooms. Another major attraction offered by hostels is the opportunity for social encounters with like-minded travellers from around the world.

Hostels encourage social interaction between guests and most provide common areas for them to mingle and socialise. Many also stage events or offer local tours to enhance their attractiveness to the nomadic bands of young adults who constitute their core customer base. Hostels are also generally located closer to city centres than comparably priced hotels, tend to have a more casual atmosphere than hotels and often promote adventure travel.

The European hostel sector has undergone significant changes and segmentation over the last couple of decades. The hostel sector is growing across Europe, as a new generation of travellers are prepared to share accommodation, in return for a great urban location. Many hostel offerings are now far from the basic youth hostel, providing a degree of luxury that elevates the accommodation into competition with good budget hotels. The generation that makes up the many hostels’ clientele are prepared to share rooms with friends, affording them greater disposable income to spend on having a good time.

Supply Traditionally present in Europe and Asia, hostels are today gaining traction in other regions among both travellers and institutional investors.

With regards to Europe, the hostel market is well developed in countries such as Germany, but in the UK, it is thought to be under-served.

The market in Europe typically consists of owner-operated backpacker businesses, strong regional companies often with operational links to university accommodation like the Smart City brand, national charitable organisations, like the Youth Hostels Association (YHA), and large branded operators developed from existing scale businesses including Generator and St Christopher.

Further consolidation of this sector means that branded supply is set to expand, similar to that seen in the hotel sector.

40

Established in April 2011 as a joint venture between the Moorfield Funds and the Safeland Group, the Company then listed on AIM in May 2014, to widen the shareholder base and raise new equity to support expansion of its operations

The Group’s strategy is to expand the business by the acquisition and development of further properties and create a branded hostel group known for providing safe and stylish, but relatively inexpensive accommodation45.

The company opened its first hostel in London in 2012. It subsequently added a unit in York in 2015, followed by a second London opening. In July 2015, the company agreed a EUR9m deal to buy a property in Milan. Then August 2015 saw it acquired the Smart City Hostel in Edinburgh for GBP14.9m.

AIM listed Safestay hopes to grow by around four properties a year, with the customer base being not just traditional backpackers but families and young adults too.

The Student Hotel: Owned by student accommodation provider, City Living, the company operates seven hotels (2,750 rooms) in Amsterdam, Rotterdam, The Hague, Barcelona, and Paris and in 2015, the company acquired a building in Florence, which will open in 2017 with 390 rooms.

Recently the company closed a round of funding of EUR100m with APG, the asset manager for the Dutch pension fund, ABP and last year, Parella Weinberg Real Estate Fund II LP invested EUR150m in the company

The company aims to reach 10,000 rooms by 2020 through a programme of acquisitions in Italy, Germany, France, Spain, the UK and Scandinavia. The Student Hostel is looking to invest more than EUR600m in the next three to five years46.

St Christopher’s Inns: Owned by Bed & Bars Group, the company is looking to expand aggressively. They have 17 hostels in the chain and the latest development was a 600 bed site in Barcelona.

Wombats City Hostels: Owned by Sascha Dimitriewicz and Marcus Praschinger, the company currently has six hostels in Berlin, Budapest, Munich and Vienna.

Youth Hostel Association: Based in the UK, with equivalents in other European countries. YHA is a charity with a clear mission: to inspire all, especially young people, to broaden their horizons gaining knowledge and independence through new experiences of adventure and discovery.

Runs a network of 200 Youth Hostels, bunkhouses and camping barns, in rural, coastal and city locations throughout England and Wales.

Demand Backpacking used to be a niche market, but it is no longer. Youth travel (defined by the UN World Tourism Organisation (UNWTO) as under 26 years old) now makes up more than 20% of the international travel market. Growth in the sector is rapid, due to reduced travel costs, globalisation, increased prosperity and a cultural shift between generations.

45  https://www.safestay.com/pdfs/acquisition-­‐milan.pdf  46  http://www.staywyse.org/2015/10/08/the-­‐student-­‐hotel-­‐kicks-­‐off-­‐european-­‐expansion-­‐in-­‐florence/  

46

as happened with hotels, Savills predict operators might adopt an op-co/prop-co model in order to realise the value of their freehold estate. Then this is where the institutional investors may become active52.

INDUSTRY INSIGHT by Chris Bown: the better hostels now offer a genuine alternative to budget hotels. They offer similar ensuite sleeping accommodation, but have generously proportioned and fitted out lounge spaces with free wifi that invite like-minded souls to hang out and mingle with fellow travellers, should they so wish. That’s not just attractive to Millennials, it is attractive for lone business travellers, too.

It’s curious that an offer originally set out for backpackers who were happy on bunkbeds, has now morphed into a sort of budget hotel – albeit one with decent common areas and bars; budget lifestyle perhaps. The promise of a decent night’s sleep, plus some lovely space to hang out in, and meet fellow travellers if you wish.

Right now, this seems like a well-kept secret. There may be potentially lots of Travelodge and Premier Inn customers who would be happy with this alternative, if only the “hostel” branding was better understood. Genuinely decent, free wifi in an atmospheric lobby or lounge is an attractive offering for many – and once the realisation that a majority of hostel rooms are ensuite dawns, what’s not to like?

The flipside is that, to make the investment work, such hostel operations need to be huge. And finding sites that can deliver more than 500 rooms in a city centre, is a challenge; as is funding such developments. There is also the challenge of delivering the right mix of rooms. But the hostel model appears to be coping with demand from groups, couples and singles alike.

Additional comment by Andrew Sangster: hostels are now in that space once inhabited by hotels: exotic and high-yielding but on the cusp of becoming more accessible to a wider group of investors.

The hope is that this drives down the cost of capital for incumbents. But this also brings the challenge of new entrants with a number of hotel groups rumoured to be circling the sector. Top of most lists is Accor.

But if the French giant, Europe’s biggest hotelier, was keen, it seems strange that it unloaded its interest in one of the largest backpacker groups in Australasia earlier in 2015.

[ ….]

The reality for the hostel segment is likely to be more complicated than simply replicating the trajectory of hotels. For a start, the hostel market is never going to be as big as hotels. But hostels can offer an attractive play to the right sort of institutional investor, namely one prepared to his or her homework. Witness the involvement of Investco.

And the Investco investment into Generator suggests a good way forward for hostels: tap into institutions already playing with and understanding what operational assets are. With hybrid products like Meininger already creating noise, anticipate more activity in this burgeoning sector.

Hotel Analyst Perspective, issue 41, November 2015

52  Savills,  European  Tourist  Hostel  Report,  Autumn  2013  

47

50

In the summer, CLV offers its UK villages for accommodation under its own brand, Summer Stays UK.

Downing Students Owned by Downing, the company has over GBP500m of mixed-use schemes under active development, and around one million square feet of commercial buildings under its ownership and management. Downing is one of the leading property groups in the North West of the UK.

Its strategy has always been to maintain a careful balance of projects in different markets and across both the public and private sector.

Downing Students operates nine buildings in six UK locations – Glasgow, Exeter, Newcastle (2), Leeds, Liverpool (2), Cambridge and London.

Liberty Living Liberty Living manages student accommodation for its 100% investor, Canada Pension Plan Investment Board (CPPIB). It works in conjunction with universities and other representative bodies to provide modern and affordable accommodation to the growing student population in the UK.

CPPIB acquired 100% of the Liberty Living brand from the Brandeaux Student Accommodation Fund. As part of the transaction, CPPIB also acquired 100% of the Liberty Living management platform, Liberty Living Management Two Ltd., thereby creating a single, integrated company under the Liberty Living brand. The total consideration paid for the portfolio and management platform was approximately GBP1.1 bn54.

In August 2015, Liberty Living acquired a portfolio of five student accommodation residences with a total of 2,153 beds in five major university cities from Student Castle for a consideration of GBP330 mn. Student Castle has a pipeline of developments in York, Cambridge, Durham, Oxford, Bath & Glasgow55.

Commencing activity in 1999, Liberty Living manages approximately 17,000 beds in 17 cities across the country including, Aberdeen. Bedford, Birmingham, Cardiff, Coventry, Gillingham, Glasgow, Leeds, Leicester, Liverpool, London, Manchester, Newcastle, Preston, Sheffield, Southampton and Stoke.

Prodigy Living Prodigy Living is the student accommodation brand of Greystar Europe Holdings Limited. Greystar is a US based firm in the multifamily real estate sector. It currently has operations in 15 cities in the UK.

Greystar Real Estate Partners acquired Nido London’s high-end student accommodation portfolio, for a total purchase price of approximately GBP600 million in March 2015.

The portfolio – comprising three premium student housing assets in London’s King’s Cross, Notting Hill and Spitalfields total 2,375 beds, containing a mixture of cluster flats and large studio apartments. The portfolio has been finished to a very high specification and includes high quality communal areas, such as dining facilities, well-equipped gyms, cinema and karaoke rooms, bars and dedicated study areas.

Investors in Nido London included the Coral Student Portfolio advised by CBRE, a financial institution, a number of overseas private stakeholders advised by Curzon Land, and Round Hill Capital.

54  http://www.libertyliving.co.uk/news/canada-­‐pension-­‐plan-­‐investment-­‐board-­‐enters-­‐uk-­‐student-­‐accommodation-­‐sector-­‐through-­‐acquisition-­‐of-­‐liberty-­‐living  55  http://www.libertyliving.co.uk/news/cppib-­‐liberty-­‐living-­‐acquires-­‐five-­‐residences-­‐from-­‐the-­‐student-­‐castle-­‐portfolio  

53

The major driver for the development of PBSA is a demand for overseas students. Therefore the need for UK universities to maintain their global competitiveness will drive the further development of high quality accommodation as part of the overall student package59.

Sentiment in the sector is very strong, with more equity than product. Knight Franks projects transactions demonstrating a focus on core university markets and current generation specific60.

GCP Student Living plc was the first student accommodation REIT in the UK. The Company targets a 5.5% annualized income yield growing in line with inflation, alongside a total return of between 8% and 10%. The target will be achieved by investing in modern, purpose-built private student accommodation and teaching facilities, which is contracted to a diversified portfolio of direct let tenants and Higher Education Institutions (HEIs).

The company is listed on the London Stock Exchange and has a market cap of GBP118.4m61.

There has been an increasing trend for PBSA to be provided in landmark trophy buildings. The rising investor confidence in student accommodation (and Higher Education) has also been demonstrated in the height of student accommodation developments. These include Sky Plaza in Leeds, Liberty Living in Manchester and Prodigy Spitalfields in London.

The tallest student accommodation schemes in the UK are the physical manifestation of investor support for the sector. Their elegant construction and iconic design demonstrate how mature this sector’s investment market has become62.

Challenges & Opportunities Investment in student accommodation provision is set to increase: As previously discussed, investment in student accommodation is a mature market with good rate of return. As such, it will always be in competition with other accommodation providers such as hotels, hostels, etc. for sources of funding and development projects.

Distribution channels: Obviously the advent of online bookings has helped to drive this market forward, as this is the principle method for universities offering their accommodation services.

Adding value: Interest in the student property sector has been driven by an understanding of the structural imbalance combined with recognition that there are opportunities for adding value to the sector. Areas where new entrants are specifically looking to add value include rebranding. There is an observation that the UK student accommodation sector falls behind the more sophisticated approach taken in other sectors, such as hotels, and in other regions, such as the US.

In the student accommodation sector, the brand segmentation is unsophisticated and the student accommodation brands have a very low level of recognition by students. The natural evolution for the student accommodation sector is for an increasing trend to focus on brand and market segmentation.

59  Knight  Frank  Student  Property  2014  60  Knight  Frank  Student  Property  2014  61  http://www.gcpuk.com/site/gcpu/templates/generalsection.aspx?pageid=221&cc=gb  62  Knight  Frank  Student  Property  2014  

58

- - - - - A/C

- - - - - TV/wifi

- - - - - Lounge

- Reception Reception Reception Reception -

- Social space Social space Social space Social space -

- - - Breakfast Breakfast - Shared facilities Shared facilities Shared facilities Shared facilities En suite En suite

Room rate per night (GBP)

45-98 132-380 250-610 300-600 800 1,000-1,667

Source: Edison Investment Research

As with many of the alternative accommodation sectors, gathering useful data can be difficult but the following facts may give some indications of the potential size of the events market in UK and Europe:

• Estimates suggest there are between 300 and 500 large scale music festivals and up to 10,000 smaller festivals taking place per year in Europe. (ChooseFest.com)

• UK event market has 1,000 annual events of three days or more. Special one-off events such as the Commonwealth Games and Ryder Cup took place in 2014, and the Rugby World Cup in 2015.

• According to the Festival Awards Market Report 2013, confidence is returning to the market – although the levels vary by region. Southern Europe’s market continues to find it difficult to grow owing to its constrained economies. However, Germany and the Benelux countries are showing solid performance. Northern Europe is a mixed bag, but there are certainly good signs in the nascent Latvian scene, while the -Nordics – a mature market – is looking stronger than in previous years.

INDUSTRY INSIGHT: In the International Music Festival Trends survey by music festival travel platform, Festicket, a survey of over 2,700 festival goers from all around the world, findings showed that not only do festival goers want to go abroad, but they want the whole process to be as easy as possible. In 2013, 60% of people bought their festival essentials – travel, accommodation, ticket – separately, but in 2014, 95% of them will aim to buy everything in one go.

Increasingly, it seems, festival folk want more comfort – such as hotels, hostels and apartments as well as luxury camping options. The survey found that in 2013 8% of people stayed in a luxury hotel, but in 2014 80% of people are planning to travel in style and stay in a luxury hotel.

Also worth noting is that festival goers all over the world really do view their musical pilgrimages as a proper holiday, with 60% saying that they extended their trip to make the most of the destination.

Unsurprisingly, Croatia was the most popular destination last year for all festival goers, with more than 20% of people heading there compared to other places like Germany (19%) and the Netherlands (12%).

http://www.festivalinsights.com/2014/02/travelling-festival-fans-want-luxury-study/

Investment Little investment from traditional funding sources such as private equity, the vast majority of temporary accommodation providers are small, independent businesses, with the exception of Snoozebox, which listed on AIM in 2012.

63

The collection of 44 Club-affiliated resorts worldwide includes Hilton developed and managed resorts. Hilton Grand Vacations has four properties in Europe – four in Scotland and one each in Italy and Portugal.

MacDonald Hotels & Resorts This UK hotel operator entered the timeshare industry through the acquisition of Barratt International Resorts, in a deal completed in 1997, which had been one of Europe’s largest combined timeshare owners and operators. The group has a total of 11 resorts, with four in Scotland, one in the south of England, one in Snowdonia in Wales, four in Spain and one in Portugal. Although hotel operations are MacDonald’s core business, the company stresses the benefits of the synergy of the mixed-use model. The company sells fixed week inventory in perpetuity as well as operating a points-based Vacation Club. It also operates fractional ownership properties in Spain and Portugal.

MacDonald Hotels & Resorts can also be booked by non-owners via the company website.

Marriott Vacation Worldwide Marriott Vacations Worldwide Corporation is a leading global pure-play vacation ownership company. In late 2011, Marriott Vacations Worldwide was established as an independent, public company focusing primarily on vacation ownership experiences. The company operates the Marriott brands under license after being spun off from Marriott International in 2012. The company licences the following three brands:

• Marriott Vacation Club is a global leader in the vacation ownership industry. There are more than 50 Marriott Vacation Club properties throughout the US, Caribbean, Europe and Asia offering vacations to more than 413,000 ‘Owner’ families and featuring 1-, 2- and 3-bedroom villas.

• The Ritz-Carlton Destination Club fractional ownership offering is designed for those with an affinity to travel to a specific Club location on a recurring basis. Deeded ownership at a Ritz-Carlton Destination Club property allows Club Members and their guests to use an allocated number of days per interest. Members may also use a portion of their time at other Club locations in accordance with reservation procedures. Furthermore, Club Members have an opportunity to reserve supplemental time as space allows.

• Grand Residences by Marriott provides second home options through fractional real estate offerings.

Club Meliá Club Meliá was created with the goal of becoming a global branded leader in the vacation membership industry. Members have the security of the Meliá Hotels International name. Club Meliá opened its Orlando corporate offices in 2004 with just three properties. By 2006, the company had 15 international member resort locations, plus a host of additional high demand destinations for members to use as part of their internal exchange options.

Club Meliá and the Leisure Real Estate division are part of Spain-based Meliá Hotels International.

Vistana Signature Experiences Interval Leisure Group (ILG) acquired Vistana from Starwood Hotels & Resorts Worldwide in October 2015. This merger, which will follow the completion of the spinoff of Vistana from Starwood, which was announced in early 2015, has a total value to Starwood of USD1.5bn.

Vistana is a leading developer, marketer and manager of 22 high-end vacation ownership resorts with more than 220,000 owners. As a result of the merger, the combined company will have a more diverse portfolio and a strengthened position as leader in the vacation ownership industry with a portfolio of circa 200 managed resorts encompassing over 500,000 owners.

64

The merger will bolster ILG’s vacation ownership portfolio by adding worldwide exclusive rights to use the Sheraton and Westin brands in vacation ownership, and have access to the Starwood Preferred Guest programme69.

Demand The existence of points programmes run by companies such as RCI and II actually help to stimulate demand for the timeshare product.

The key factors driving growth of the global vacation ownership industry include:

• rising number of HNWI and employed population • growing demand for leisure and recreation • increasing internet penetration • ameliorating global economic conditions • improved international tourism in the US

At present, the global vacation ownership industry is recovering at a fast pace and both demand and supply factors are poised to observe substantial growth in the years to come. However, as the trend suggests, supply is growing relatively slower in comparison with demand. Increase in factors like occupancy rates, average daily rate (ADR), and revenue per available room (RevPAR) have made significant contribution to the growth of the industry.

Investment Individual: Initially timeshare properties were marketed as investments. Timeshares are not in fact investments and timeshare should not be bought with the expectation of reselling for a profit. While one might buy a timeshare property to make an investment in a lifestyle, few timeshares appreciate—only the ones in choice locations during specific seasons.

69  www.hotelnewsresource.com/article86277.  Retrieved  29/10/2015  

68

While new models such as fractional sales, private residence clubs and other derivatives are still very much in their infancy in Europe, this nevertheless appears to be where there is greatest interest and where growth is happening.

However, these newer models are likely by their nature to always represent a minority of sales since they tend to be niche, more exclusive properties which cater to a small group at the upper end of the income bracket.

Timeshare Rentals: The secondary market for timeshares consists of rentals and resales initiated by the owner. Resale transactions involve the owner permanently transferring his or her deed or right to their timeshare to another party. Rental involves the owner temporarily transferring all or part of their week or interval to another party, without the transfer of ownership. This typically takes the form of an owner renting one week to a traveller who uses it as one would use a hotel or other vacation rental. Either transaction can be accomplished entirely by the owner, with the assistance of a third party, or a broker.

Timeshare rentals are timeshares that owners rent to other individuals, rather than use for themselves. Timeshare rentals are nothing new, yet most travellers are unfamiliar with them.

There are many websites offering timeshares for rent.

INDUSTRY INSIGHT: Prior to the current downturn, the timeshare industry was keen to put forward the idea that it was recession proof. Attend any timeshare event and consultants would dazzle you with graphs pointing to the top right corner of the screen, in contrast to the wobbly lines put up to represent the fortunes of the hotel sector. The crash has put an end to such nonsense (at least for the time being).

Timeshare has always been a great product if you wanted to buy your holidays in advance and have a degree of certainty about where you were going and how much you were spending.

Unfortunately, the habits and circumstances of consumers shifted away from it. Instead, many timeshare developers leapt onto the residential property investment bandwagon (if they were ever off it).

The opportunity to buy an advance holiday became the chance to "earn money while others slept" to borrow from the late and unlamented GuestInvest. The condo hotel racket was a particular blight in the US and while no mainstream hotel operator was particularly embroiled, the risk of contagion was enough to persuade most hoteliers to rethink their strategies.

Until the crash, it had seemed a perfect way to fund resort development. Timeshare buyers would fund the development of the resort which in turn was guaranteed a steady stream of management fees in servicing the owners of the timeshare units.

But the big problem was that most buyers would be disappointed. The units they bought, while possibly reasonable value as advance holidays, proved bad value as real estate investments.

The involvement of the big names in hospitality helped improve things. Firstly, by providing a guarantee that cowboy practices would not be tolerated, and secondly, by improving the basic economics of the business model.

On the latter point, the main advantage was in the reduced selling costs. A typical timeshare development spends about half of what it charges punters on marketing and sales. For the biggest and strongest brand names, such as Disney, these costs came down to about 25%.

69

But the crash in residential values in the US has torpedoed the prospects of most timeshare development in the world's biggest market. And the drying up of mortgage finance pretty much ended prospects outside the US as well.

There is no doubt that the second home market will eventually recover and with it opportunities for timeshare, fractional and its myriad offshoots. In some cases, some niche players in the market would argue that the opportunities have never gone away.

But the synergy that was there three to four years ago between hotel operators and timeshare has gone away, probably for good. Marriott is making a sensible call.

Source: Hotel Analyst Perspective, issue 22, July 2012

71

wide variety of locations that we have always called ‘retreat property’. Resorts, recreation and destination real estate is nearly always a discretionary purchase, made when economic conditions have created spare cash in the hands of second home-buying households. Buoyant while the good times roll, these markets do often suffer disproportionately during economic downturns because unnecessary spending, such as that on second homes and holiday homes, is inevitably always the first to be cut back during a recession. Add to this mix the fact that some resorts saw high levels of development during the boom years, and we see that, in these places, prices have been further suppressed by oversupply. All this means that there can be considerable buying opportunities for those wishing to catch the upswing. Already, we have seen some Alpine markets and European and Caribbean resort markets start to recover in 2013 and 2014. In some cases, trading is taking place where none was before and in others prices are beginning to rise. There are strong signs that the recovery which started in cities in 2009 is now rolling out to the hinterlands and boltholes inhabited during weekends and vacations by equity-rich homeowners72.

A study by Savills into prime residential retreats found the following:

• Prime residential retreats, reliant on international second home buyers, were hard-hit in the global economic downturn. Prices fell by more than a third in some markets, but held up better than ‘mainstream’ leisure destinations.

• 2013 marked a turning point – with an improving global economic outlook and a ‘bottoming out’ of some local markets came renewed appetite for leisure property purchase, and transaction levels are beginning to recover.

• Truly prime markets in strong economies led the way. Ski apartments in Switzerland, ‘turnkey’ prime resort property in the Caribbean, and small, high-yielding apartments in Venice all performed particularly strongly last year.

• British and US buyers are returning as the economic environment improves at home. Scandinavians have offset a decline in Italian and French buyers, who are now net-vendors. Russians continue to be a driving force at the very top of the prime retreat markets.

• ‘Golden visas’ and incentives have been introduced in some markets as a key pillar in economic recovery, some of which are extremely generous. Portugal has been successful in attracting significant Chinese investment in this manner.

• The Chinese have been high-profile investors in vineyards in France and South Africa, but real estate purchases by this group has been to date an investment, rather than leisure play. Savills foresee growth to come.

• For longer term investors the more fully discounted markets provide value and will see longer term uplift as supply rebalances. The markets of the Eastern Med and South Africa pose opportunities here.

• Savills anticipate that many residential retreats will continue to see price growth. Some will see a return to their former peaks by 2019.

72  Savills,  Spotlight:  Prime  Residential  Retreats,  April  2014  

74

These attempts to prove the economic benefit to hosts and their cities is the wrong way to go about it. The IRS or HM Revenue & Customs do not, as a rule, have many tears to spare for rising costs of living or the energy bills of freelancers. They care about missing out on tax.

Likewise, those who go through the effort of renting their homes out legally must provide gas safety certificates and those who operate hotels must provide illuminated exit signs. Urban planners would also point out that those who were using Airbnb to help pay the mortgage could suffer further down the line when the reduction in residential property pushes up house prices.

Airbnb is likely to look rather different - and probably much less advantageously-priced - this time next year.

Source: Hotel Analyst Perspective, issue 4, February 2014

Taxes France: The popularity of acquiring non-hotel holiday accommodation in countries such as France has matured due to favourable tax treatments available. The growth of companies such as Pierre & Vacances has been built on these tax breaks.

Several schemes are used:

• The Non-Professional Furnished Letting, a French buy-to-let scheme, which is a financial incentive to encourage investors make buy-to-let investments in France. With a French buy-to-let scheme you can deduct from your rental income all charges relating to your French-based investment and therefore collect rent net of tax and social security contributions.

• A buy-to-let investment in a tourist residence also allows reimbursement of VAT, set at 20% of the value of the property (for a new investment).

In the UK, taxes on holiday lets are significantly different to buy-to-let, for example.

Blurring lines between sectors: The line between luxury hotel, serviced apartment and private flat becomes ever closer. The cost of renting a room in prime central London, for example, has hit record highs across the hotel, serviced apartment and lettings market, providing new opportunities for investors.

In the report Sleeping in London by Mayfair estate agents, Wetherell, it states that a key trend in the London market is how the hotel room/suite, serviced apartment and private rented apartment markets are becoming increasingly similar, offering identical products and becoming extremely interconnected.

Increasingly, West End apartments are being rented fully furnished, with stylish brand new interior designs and landlords taking inspiration from the hotel sector. In 2014, 79% of apartments rented in Mayfair had been furnished, up from 74% in 2013 and just 56% in 2009. Similarly, serviced apartments are increasingly offering house-keeping and leisure facilities very similar to hotels.

Likewise, the largest hotel suites now also offer in-room dining, entertainment and outside terrace space and basic kitchenette facilities. The majority of 5-star hotels now offer ‘signature suites’ which, like apartments, are interior designed by renowned designers with bespoke fittings, furniture and works of art. Examples include ‘The Apartment’ a 3,068 square foot apartment style suite at The Connaught and the Royal Suite at Claridges.

Hotel room/suite rates and private apartment rental values also rise and fall in line with each other. During the global recession of 2007 and 2009, London hotel rental values fell by 14% whilst the private rented, furnished apartment market dropped by 20%. Similarly, since the 2009 recovery, Mayfair apartment rental

75

values have risen by 33%, echoed by the 25% rise for both London hotel rates and Mayfair serviced apartment rates since 200875.

Despite this current geographic imbalance, serviced apartments and apartment rentals are gaining traction globally as travellers continually look for accommodation that contains basic necessities, while also offering a sense of personal space in a comfortable atmosphere76.

Undermining hotels?: Thanks to the new distribution channels via the internet, the urban short-term rentals market is in competition with both hotels and the serviced apartment sector, as all of the products can be marketed together on the same website.

The short-term rental of private accommodation is said to undermine legitimate hotels. For example, Airbnb has seen more than 11 million guests stay on the platform since being launched in 2007. Airbnb said that more than a million guests each from the UK and France have booked stays through its platform. Meanwhile, more than a million guests have stayed at places listed on Airbnb in both Italy and Spain. It’s likely that those guests and stays overlapped quite a bit — according to the company, more than 80% of European guests staying with Airbnb travelled to other destinations within Europe77. A large percentage of these guests would probably otherwise have spent time in hotels of one sort or another.

However, this should not worry mainstream hotel operators, since peer-to-peer booking sites mainly appeal to leisure travellers, while the more lucrative business traveller will remain loyal to the hotel.

It is true that while the success of companies such as Airbnb have raised the profile of the holiday rental market, it is a market that has always existed and it is the distribution channels that have improved with websites that now encourage transparency between guest and owner.

Potential for growth: Further growth of specialist online intermediary rental companies and the increasing presence in the market of the established OTAs (Online Travel Agents) should help to feed growing demand. There is also a huge untapped supply of unused rental accommodation in the second homes market, because owners are unwilling or unable to let, even though many properties are left vacant for much of the year.

Medium-term Lets: Although short-term lets are lucrative, they can be risky. So the solution may be medium-term lets of one or two months. Some websites offering this type of let are springing up. For example, FlatClub was set up to find rentals for business travellers, students and interns. Anyone can use the site to find accommodation, but the landlords can choose to let only to employees of companies or students attending top universities. The site is for landlords who don’t want the inconvenience of a high turnover of tenants but want to make more money than they would get from standard six- or 12-month contracts78.

75  Wetherell,  Sleeping  in  London,  2014  76  E&Y,  Global  Hospitality  Insights:  Top  thoughts  for  2014  77  http://techcrunch.com/2014/03/20/airbnb-­‐big-­‐in-­‐europe/  78  The  Evening  Standard,  Homes  &  Property:  Letting  On,  October  2014  

80

• The number of over-60s is predicted to grow from 10m today to 17m by 2033, highlighting the need for more retirement housing. Just 1% of Britons live in retirement housing compared with 17% in the US and 13% in Austria.

• It is estimated that the UK needs to build about 250,000 homes a year to cope with the population growth, but new-builds in England alone fell by 11% to below 100,000 in 2012. Part of the housing solution, it is clear, has to be the building of appropriate retirement properties81.

Investment There is a surge of institutional investment in British care homes. In 2014 a US hedge fund bought 27 care homes. The North American investors are pouring billions of dollars into British care homes for the elderly, particularly in the wealthier southeast, where the number of self-paying customers seeking hotel-style residences is expected to grow.

Pension funds and insurers including Aviva and Legal & General are also buying, as are Asian and Middle Eastern investors. Institutions are also funding new developments. In 2015 NHP was acquired by Formation Capital in partnership with global investor Safanad, Court Cavendish and the management team of HC-One for GBP477m , but the sale of the year was Gracewell for an unconfirmed, but allegedly impressive multiple, another leading care home group falling to a US REIT.

Perhaps the most significant movement in early 2015 has been in the investment market as UK institutions continue to see long-term, index linked income, consequently moving yields significantly, particularly on Care UK and charitable covenants which are now trading between 5% and 6%, a yield shift of c.50 bps. Given the supply demand dynamics of institutional grade assets, Knight Frank expect to see further hardening of yields82.

At almost 10%, Knight Frank, the property consultancy group, puts the yield offered by care homes at the top of the list of returns from property in the health sector. GP’s surgeries – which have long been attractive for their safe and steady NHS-backed rental flows – are near the bottom, at about 5%83.

Around 80% of deals in the UK’s GBP15.1bn-a-year care home market during the past two years have involved an overseas investor, according to Julian Evans, head of healthcare at Knight Frank.

At the distressed end of the market, hedge funds are also moving in. The transactions that have taken place in the state-funded market have been driven by the banks’ need to unload toxic debt at the same time as investors want to diversify their existing portfolios away from retailing. This means that plenty of money is available to invest in healthcare.

This includes large financial services organisations, which are targeting the care home sector for investment. Legal & General, for example, bought the freeholds of 13 homes operated by Methodist Homes from Prestbury Investments for just over GBP70m in 2014.

Nevertheless, the market remains sharply polarised with most investors interested in high-quality care homes in wealthy areas, where residents pay for themselves. Leonid Shapiro, managing partner at

81  The  Guardian,  Retirement  homes  shortage  is  the  next  housing  crisis,  October  2013.  Retrieved  24/11/2014  82  http://www.knightfrank.co.uk/resources/commercial/brochure/healthcare-­‐market-­‐overview-­‐spring-­‐2015-­‐web.pdf  83  http://www.telegraph.co.uk/finance/personalfinance/investing/11050610/Latest-­‐buy-­‐to-­‐let-­‐craze-­‐buying-­‐rooms-­‐in-­‐care-­‐homes.html  

83

There is a sudden profusion of care home investment schemes chasing savers’ cash. They are being marketed by developers who claim private investors can buy rooms in newly built homes for as small an initial outlay as GBP35,000.

Putting down GBP70,000 would buy you a unit outright, and entitle you to the promised annual GBP7,000 return right away. Or you could invest GBP35,000 and waive returns in the early years as part of what the developer calls its “deferred payment plan”.

There is a promise by the developer to buy back the rooms from investors after 10 years at 125% of the purchase price, so that’s GBP87,500.

Too good to be true? Quite possibly. These sorts of unitised property investments, such as rooms or suites in blocks of student accommodation, or single rooms within a hotel, have a patchy record. Some have flopped badly. Investors discover they cannot sell, because there is no secondary market for piecemeal rooms in a block; or that they are lumbered with onerous management contracts which wipe out some or all the returns. The properties might never even get off the ground.

The sort of promotion being used with these schemes – the “hands free” opportunity and so on – might in itself sound a warning bell.

But with all of those caveats, it’s an area attracting huge interest. As I’ve written here before, buy-to-let is becoming more specialised as the yields on the more everyday types of property investment – the two-bed urban flats let to professionals, for instance – dry up. In turn, landlords are converting family homes into bedsits and letting them more cheaply to multiple tenants, or targeting student accommodation – where again the yields are higher89.

US REITs are coming: With their domestic markets saturated, US real estate investment trusts (REITs) have been seeking new opportunities for their cash and higher yields.

The UK care home market – which is expected to grow rapidly as the number of people aged over 65 is expected to rise from 10.6 million in 2010 to 16.1 million in Britain in 2035 – has proved particularly attractive for US REITs.

They have been drawn by the long 25-30-year leases in the sector, compared with the six year average for traditional core commercial sectors. Yields in healthcare also tend to be higher – about 7% in the UK compared to 3% in the US.

Matthew Flower, head of healthcare at Zolfo Cooper, the restructuring specialists, said that the investment by US REITs could eventually transform care for the elderly in Britain, as American style retirement villages and five-star hotel type accommodation grow in popularity.

“The US REITs understand that the demographics are in their favour and are positioning themselves for the future demand in Britain,” he says. “They are interested in investing in the types of assets that are more common in the US, such as high-spec properties and retirement villages, but although we see the latter as a growing market in Britain, it may take time for consumers to fully adapt.”

Recent deals include Health Care REIT’s GBP140m purchase of 14 Avery Healthcare care homes; Griffin American Healthcare REIT buying 44 elderly care homes from Caring Homes for just under GBP300m; and Ohio-based Health Care REIT purchase of the UK operations of Sunrise Senior Living and its five luxury care homes for GBP154m.

89  http://www.telegraph.co.uk/finance/personalfinance/investing/11050610/Latest-­‐buy-­‐to-­‐let-­‐craze-­‐buying-­‐rooms-­‐in-­‐care-­‐homes.html  

85

HOSPITAL ACCOMMODATION

Concept Some hospitals manage a range of accommodation for staff, visitors, relatives and outpatients to the hospital.

Many provide accommodation blocks for staff and some hospitals – the larger ones or those as recognised centres of excellence – may offer accommodation to patients and their families.

For example, if the team caring for a patient feels that they do not need to stay on a ward during their treatment, but that they still need to be nearby in case of needing medical attention, they may refer the patient to accommodation provided by the hospital.

This sector is deemed an alternative accommodation provider as previously patients and their families would have stayed in local hotels, whereas now they can stay in purpose-built accommodation for their recuperation period. Some developments have been equipped with specialist facilities needed by patients – wet rooms, hospital beds etc.

This sector obviously overlaps with care homes as well, as some elderly patients may stay in care homes whilst they recover from operations or procedures.

Supply Examples of hospital accommodation on offer in the UK:

• Guy’s and St Thomas’ have several properties set aside for this purpose. • Great Ormond Street Hospital offers two types of accommodation: patient accommodation is located in

the Patient Hotel in Weston House. This provides accommodation for a child and their parents/carers before their admission to GOSH for an inpatient stay, day case procedure or after their discharge. Priority is given to families who live outside of London. Family accommodation: the hospital has family accommodation in various locations in and near the hospital. GOSH guarantees accommodation for one parent only.

• University College London Hospitals: There are two options – The Cotton Rooms and Paul’s House. All patient accommodation is arranged by a patient’s clinical team. The Cotton Rooms, a new patient hotel, is available for patients who need ongoing hospital treatment but are well enough to not need a hospital bed overnight.

• Paul’s House provides a ‘home from home’ for children and young people and their families coping with cancer. It is run by the UK’s leading cancer charity for children and young people, CLIC Sargent.

• Papworth Hospital - For friends and relatives who wish to stay nearby, the hospital offers rooms in a fully equipped, shared house which is within a few minutes’ walk, in the centre of Papworth Everard village.

• Addenbrooks Hospital – Short-term and overnight accommodation is available on the campus for visitors.

Ownership – by charities and NHS Trusts

Investment Either by NHS or private individuals.

94

segmentation. The customer base consists of different groups that must be satisfied: couples, young and older generations, families with young children, people over 50 years, families with children in school, or even groups and mini-groups. Each of these segments has different needs whether on the period of stay, on the type of facilities or accommodation available, or the infrastructures, the activities and the entertainment proposed,” explained Ludovic Pierru, Director France, of the tour operator Vacansoleil, who created his own campsites chain in 2003 and has now three four-star establishments in France. Campsite facilities have begun to diversify their offerings to offer tailored products for each customer profile in order to better respond to market demand.

Holiday-taking patterns: Both the caravan sales and rental markets are buoyant for quality holiday parks. People are booking more breaks last minute and there is a growing trend of families taking more short breaks rather than one long holiday. It’s the same picture with holiday home sales; people are looking to get away at weekends and for shorter mid-week breaks.

Also changes in consumption habits, the rise in power of internet in the tourism sector and the economic downturn that motivates households to preserve their purchasing power, the camping sector has, for some time, been developing a greater dependence on last minute sales. The trend has pushed the camping facilities, to implement yield management policies similar to those found in hotels.

Impact of last-minute bookings: The rise of online reservation centres and the growing trend of last minute bookings are a real challenge for the camping sector. The latter is causing companies difficulties as they are unable to provide funding to invest in its upgrading online booking platforms. Companies are often faced with the phenomenon of OTAs and integrated campsites groups creating a falling prices with last minute deals. This reinforces the decline in turnover and weighs upon investments in the sector.

This could lead to the sector may enter into a downward spiral in investments. The price decline driven by a slight imbalance between demand and supply, the significance Internet is taking in the purchasing process and increases in VAT, is slowing investments in the infrastructures. It consequently affects the quality of accommodation, causing prices to shrink.

Glamping - changing the face of camping? The glamping phenomenon, or boutique camping as it is also becoming known, has inspired a new generation of holidaymakers looking to combine a grass roots camping experience with a few home comforts thrown in for good measure.

Made popular by celebrity fans and fuelled by the UK's staycationers, an increasing number of switched-on park owners are cashing in on the glamping concept; offering luxury camping accommodation options alongside their existing caravans and lodges.

But even this upmarket version, which acquired a certain social cachet in the early noughties and might have been thought to be more recession-proof, has seen something of a setback. The "bunting and bedlinen" alternative, derided by purists for its lack of authenticity, has been enjoyed by just 3% of the population in the past three years, a disappointment to an industry that was hoping to see growth fuelled by a burgeoning middle class.

The news may make glum reading for cash-strapped farmers who have opened "glampsites" in an attempt to make some easy cash. Others to have moved into the glamping arena include attractions such as Leeds Castle and some National Trust properties.