Refurbishment of old buildings into aparthotels – a winning recipe for success in 2022

Will Parry, chief executive of property management company ALTIDO

Will Parry

There is a predicted rise of 20.5% for the number of short-term rentals listed in 2022 and as a way of tackling this growth, operators in the build-to-rent space are shifting their business towards short-term rental-like units and developing a new strategy that will benefit both property developers and managers for the long-term.

Through the refurbishment of old buildings, such as a run-down hotel that hasn’t been touched in 30 years or an unused office space, these unwanted buildings are brought to life to provide accommodation in locations where it is needed most.

126 Canongate, Edinburgh

Bringing style to aparthotels to respond to what short-term renters want can be done by providing modern services, whilst still retaining the history of the building. An example of this can be found in the heart of Edinburgh, where ALTIDO has worked with a property developer to rejuvenate the historical Brewer’s Rooms into a range of deluxe apartments. The Brewer’s Office, Head Brewer and The Tap Room are just a few of the rooms inside that help to preserve the past of the building while still offering plenty for the present needs of the guests.

It’s ideal to build long-term relationships with property developers who have either bought the asset or leased it for a long period. It’s a way to scale faster by onboarding multiple units in one go, and you have complete control of the calendar and the availability thereby justifying refurbishment to a high standard. This usually leads to a significant increase in the average daily rate (ADR), resulting in a profitable relationship for both.

Responding to regulations on short-term rentals

New regulations in Scotland are being brought in that allow local councils a bigger say on the number of short-term rentals in certain areas by introducing control zones. This is due in part to a large number of complaints being raised against guests staying in short-term rental accommodation. Rooms in aparthotels aren’t included in this regulation and ALTIDO has found that going down the build-to-rent route will allow guests to stay together in their own communities.

In London, those who want to use residential premises for short-term accommodation for more than 90 nights in a year must seek planning permission from their LPA. There have also been calls to bring in more regulations for short-term rentals elsewhere in England and Wales, while plenty of countries in Europe are bringing in tighter restrictions for short-term rentals. Aparthotels would not be included in these regulations, as they are not contained in traditional residential properties, and it is the refreshing of old buildings that make them an attractive prospect.

Element of risk

Being able to work with property developers means that property management companies take on very little risk. The way they work is asset-light, with the property managers jumping in to ‘steer the ship’ once it is up and running. Being able to do this helps to build relationships with key figures in the sector, successfully bringing together developers, asset owners and property managers, potentially for more projects over time. The management fee is marginal, comes with low risk and owners can be sure that their buildings will be in safe hands.

A unique aparthotel experience

When refurbishing aparthotels, the needs of guests must be carefully taken into consideration, with many now wanting contact-free check-ins and a seamless experience. Many managed aparthotels are, for the most part, unstaffed, featuring unmanned reception desks and remote access to guests’ rooms.

Customer queries still need to be considered and ALTIDO has created its own guest portal, acting essentially as a virtual concierge service that allows guests to do the standard things like checking in, and booking in a cleaner, while also allowing guests to book extras such as making a dinner reservation and booking an airport transfer.

All of these factors combine to create low operational costs, with managers not having to pay for staff or the normal services that most hotels require.

The future of build-to-rent and short-term rentals

Many property developers shy away from refurbing old buildings into short-term rentals, with fears of escalating costs and the hassle of managing tricky guests. However, regeneration of our city centres is vital and restoring old buildings is good from a sustainability perspective.

If these refurbishments of old office buildings and old hotels can be turned into profitable short-term rentals or aparthotels, then more asset owners and developers will want to enter this space. Plenty of developers are ahead of the curve and have made that jump, with the number of build-to-rent developments up 26% from 2020 compared to 2021, and it’s predicted that this growth will only continue.

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