Serviced accommodation is growing in popularity among investors, and properties based in the UK are proving to be highly lucrative. The country regularly attracts up to 40 million visitors every year from overseas, and domestic tourism became more popular than ever in 2020 due to global lockdowns and international travel restrictions. This has led to a boom in the sector.
If you’re wondering what serviced accommodation is, these properties are essentially short-term rentals that offer guests a more luxurious, homely stay than a hotel room can. The idea is to have a high-turnover of temporary tenants who are willing to pay premium rates in exchange for modern accommodation with a touch of style that meets their needs.
With a large influx of guests paying a significant amount of money for a short stay, investors in this property sector can see a high return on their initial output. According to JLL, serviced accommodation apartments could bring in yields between 6-9%.
Serviced accommodation is growing in popularity, and it is worth having a greater understanding of this asset class. Below, we have detailed everything you need to know about serviced accommodation in the UK.
Who Rents Serviced Accommodation?
Serviced accommodation properties generally appeal to two core groups: professionals who are visiting the city on business & tourists who want to be in reasonable distance from landmarks, beauty spots and local amenities.
Keeping these guests in mind, it’s important that your property caters to their needs. You should provide business professionals with a suitable space where they can work. By adding a dedicated workstation to your property, you are showing the clientele that you understand what it is they’re looking for, and they are more likely to rent from you than another provider in the area.
Include a spacious desk, office chair, printer, storage space for documents and high speed internet as part of your offering to improve customer satisfaction. This can then lead to repeat bookings and favourable online reviews.
Regardless of whether your property is aimed at professionals or tourists, it’s vital that serviced accommodation provides homely touches. This can include:
- High-end furniture
- A quality mattress
- A smart TV
- A fully equipped kitchen
The more comforts you provide potential guests, the more likely it is they will book a stay at your property. It’s important to remember that if guests were simply looking for basic essentials, they would book a hotel room. Serviced accommodation is meant to go above and beyond to create the homely atmosphere guests are paying for.
Where are the Best Locations?
The key areas for serviced accommodation properties are metropolitan city centres. This is because central locations typically have strong business ties and receive a lot of footfall from visiting tourists.
In particular, Manchester and Liverpool are two key areas in the UK where investors can see higher returns. Comparatively low property prices — which can be reduced even further when investors join during the off-plan stage — are providing excellent value for money, and high demand for quality accommodation means you can ask guests to pay a premium rate.
With their rich histories, vibrant social scenes, world famous football teams and links to important global businesses and industries, Manchester and Liverpool see a significant amount of visitors each year, making them highly lucrative areas for investment.
It is also worth noting that serviced accommodation in metropolitan locations are within easy reach of property management companies who can run the day-to-day operations of your rental property. If you are an overseas investor, or an investor looking for a hands-off opportunity, a central location works highly in your favour.
Serviced accommodation in the UK can also work well if you purchase just outside of the city centre. This way, you may be able to purchase a property at a lower price while still attracting the core demographic. However, your property needs to be close to good transport links and your guests will need to know their way around the area for it to be appealing.
Popular seaside towns, heritage sites and places of natural beauty often have a strong tourist trade, but you’ll find these areas will only be in high demand during peak seasons. For a consistent and reliable stream of guests, we would recommend focusing on city centre opportunities to maximise your returns.
What are the Advantages to Serviced Accommodation?
There are many fantastic reasons why you should invest in serviced accommodation. This asset class offers you unique benefits such as:
- Higher rental yields: Guests are always willing to pay extra for comfort and luxury.
- Consistent maintenance: A property manager will spend a lot of time at your accommodation to meet guests and ensure everything is set for new arrivals. This provides them with ample opportunities to inspect the property.
- High quality tenants: As serviced accommodation is rented out to professionals and tourists who are paying premium rates, your guests will feel more inclined to take better care of your property and furnishings.
- Tax differences: Traditional rental properties are taxed as investments in the UK, but serviced accommodation and holiday lets are considered businesses. Because of this, you can benefit from favourable income tax treatments such as lower mortgage rates and capital allowances.
- An easy exit strategy: If you follow our advice and stick to city centre opportunities, you’ll find it much easier to sell your property if you need to release the capital in your investment, as central locations are always coveted.
Investing in UK Serviced Accommodation
As a property investment opportunity, serviced accommodation has many unique advantages. You could see a significant return on your investment, and properties that tick the right boxes will always be in high demand.
At Treo Investments, we make investing in this asset class as easy as possible. We will source the most promising opportunities and handle every aspect of the purchase for you, which also includes furnishing your property and finding a quality management company to run the day-to-day business operations.
To discover more about serviced accommodation in the UK, reach out to a member of the Treo Investments team for a detailed discussion.