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Extended stay hotels ‘the most resilient’ during Covid-19 crisis

The coronavirus crisis has changed hospitality, bringing new trends like extended stay and community hotels to the fore, experts agreed at Real Asset Media’s Hotels & Leisure Investment briefing, which took place online on REALX.Global recently.

“Our focus has always been big hotels in metropolitan areas in larger cities, but now we must adapt our strategy and opt for diversification,” said Frank Hildwein, head of hotel acquisitions and sales, Deka Immobilien. “We need more community hotels where people can work and connect with other people.”

Frank Hildwein, Head of Hotel Acquisitions and Sales, Deka Immobilien

Banks’ traditional targets have also tended to be prime assets in large cities, often a mix of business and leisure, but the crisis is accelerating a strategy re-think.

“The best opportunities lie in diversification,” said Charles Combet, vice president special property finance – hotel & PBSA properties, Aareal Bank. “Different types of hospitality, like serviced apartments, extended stay and mixed-use will be in demand. We’re now ready to enter those markets and finance diversification.”

Trends from outside the industry will affect the hospitality sector.

“There will be more hybrid hospitality forms and mixed-use community-based hotels will come into play,” said Dirk Bakker, head of EMEA hotels, Colliers International. “Tourists and locals will meet each other and it won’t be a passing trend but a structural change.”

Extended stay hotels have already proved to be very resilient during the crisis.

“We were lucky to have quite a big portfolio of extended stay hotels, because in the last 15 months they have traded at break-even or even better,” said Asli Kutlucan, chief development officer, Cycas Hospitality. “It has been a big surprise for people in the industry.”

Charles Combet, Vice President special property finance, Aareal Bank

Their appeal is set to continue as the sector adapts and changes.

“Extended stay hotels are doing well and it’s a segment that has recovered much faster than a 4-star conference hotel,” said Hildwein. “It is not so safe now to just have business hotels, because leisure hotels are doing much better. These are the lessons we have learnt and this knowledge will drive our strategy going forward.”

The question now is which are passing trends due to the pandemic and which will turn out to be permanent changes in people’s habits.

Domestic tourism is likely to receive a permanent boost from the crisis, experts agreed, but there is a question mark over business travel and conference hotels.

“There’s been a reversal of historical trends, like good hotels in city centres,” said Jochen Schaefer-Suren, CEO hotel and leisure division, Principal Real Estate Europe. “Now the focus is on secondary markets that can be reached by car and leisure destinations we’ve never heard of.”

Conferences and congresses are “unlikely to come back”, he said. “It’s not a cyclical factor that can be safely ignored, it’s a structural change.”