What’s The Difference Between A Short Term Stay and a Corporate Let?
In the fourth in our series on serviced accommodation, Paul and Rob are looking at the difference between a short-term stay and a corporate let. They will also be looking at why some companies prefer serviced flats to hotels and at the occupancy levels that investors can expect to achieve from this kind of property.
Short Term Stays and Corporate Lets - Transcript
Rob: It's Rob from Property Investments UK, and in today's video we're going to be looking at what the difference is between a short-term stay - terminology you might have heard - and a corporate let, specifically when it comes to serviced accommodation and apartments.
So there's a couple of different terminologies around service accommodation, what type of tenant profile to focus on, a short-term stay might be more considered like a holiday let type stay, whereas a serviced accommodation might be considered like what you see in a hotel or that type of model, so it's probably quite important, I guess, to distinguish what you guys look at as a corporate let.
What is a Corporate Let?
... Obviously today's video we're at a nice city centre apartment. Do you call that a serviced apartment? Do you call it short-term stay type accommodation? What type of tenant do you suggest would go with that?
Paul: Our aim ... the fundamental difference between I think what the general public will see as a short-term or corporate let, is short term is seen as if you look online at Air BnB et cetera, booking.com.
And you're looking for somewhere for you and your partner or you and your friends to stop for a weekend, Manchester City Centre, that's what I'd consider a short term let.
Rob: More like a holiday type, or-
Paul: Yeah. Just self-contained and gives you the amenities and facilities, better than a hotel, but you're all together. So, a two bedroom apartment, whatever may it be. You can get 4 people in there, rather than paying for two hotel rooms.
With a corporate let, it's very different. This is very much attractive towards relocation and relocation experts, so now companies are very willing to search further afield-
Rob: For the right staff?
Paul: For the right staff, yeah.
I'm sure a lot of the people watching this will have been in the same position, I have as well. They will then, if they relocate from another country, for example, they're a family, they usually put up you somewhere for 6 months to allow them to look for somewhere to see how the job goes.
Rob: Yeah, it just gives them a base, I guess.
Paul: Yeah, and that's a corporate level contract. If they're on 3 months contracts, they're coming down, they may be living in London, for example, but are working in one of the new headquarters in Manchester. So during the wait, rather than a hotel, they can have less expensive, arguably, a 1 bedroom or 2 bedroom apartment, so that way they can cook themselves, look after themselves, do their own laundry, have guests over, do whatever they want to. Home from home.
And what will happen with those is that the companies that employ those will actually just contract out the apartment. That could be 1 month, 3 months, 6 months, 12 months on some occasions.
Now, ideally, that's what we look for. But, our model allows us the flexibility as well to say, "Well okay, we want long term lets, but let's not alienate the short term let."
If we've got a month void period with an appointment booked out, we have got the access to other places like booking.com or Airbnb.
We can create extra revenue if someone wants to come for a weekend. We'll do all the bedding. They'll never be the stag dos and the hens or anything like that, that way your apartment won't be in danger.
We have the flexibility of that, so in a perfect world, you want 100% contract out, full thing. But in the real world, we probably mix between 80/20, but we will try and fill up some voids.
Rob: It gives you the best of both worlds in the respect of if you've got the period of time where that contractor or company says, "For the next 3 months we don't need it, or it's not gonna ... our contract is only 6 months for this particular year."
You still need to look at other options-
Paul: Yeah, absolutely, yeah.
Rob: to try to get 100% or close to as you can.
Paul: And ironically, the difference with hotels is someone can argue and say, "Well, I can find a hotel for 3 nights for the same price as an apartment." Fine, if that's what you want, I get that. But, with service accommodation, the price goes down the longer you book.
For the hotels, check for yourself, the price goes up.
Rob: Yeah, it crosses over to - Take Manchester, for example, there are events in the cities, so prices will go up. Or it's a particular time of year, Christmas, the prices are gonna go up.
Rob: Whereas with serviced, if you're crossing a longer time frame, you don't probably tend to have those same fluctuations, or?
Paul: There will be certain events, in Manchester, or any other place that can command a higher price.
Where potentially over 2 nights you could earn the same in 1 week. Now, we and our clients always want to make sure that we're getting the best of both worlds unless ... because this one's only going to be in there for 2 days, great, it's fewer heat numbers and all that sort of thing.
But potentially revenue can be a lot higher.
Rob: So there's a balance between that long-term and stay and the short term let.
Paul: Yeah. And have the option to do it as well.
Rob It's always a professional type tenant profile, it's not like, as you said, the stag dos and the hens and things like that.
Paul: Yeah, no, absolutely. You've got plenty of events. Manchester, in particular, there might be boxing or conferences, et cetera.
Weirdly enough, there's not a lot of great hotels around and you can command a good rate. People have used them themselves, people who have stopped in Manchester, and you can command a high rate for the high-quality apartment in a good area.
Rob: With the service model, and I know we've had some contact with your clients for this. When they've looked at what they perceive as short-term stays, a negative thought that they might consider is that it might only be occupied for 6 months of the year, even over a 12-month time frame.
But the occupancy levels are still quite high on the service model, it's not like with a tenant, you can say, "All right, they're gonna be in there for 12 months." 12 months AST.
With serviced accommodation, you can still get kind of 80-90% occupancy levels.
Paul: We kind of run around 90.8% We can't say we're gonna guarantee that for every year, an entire year. But I think that's where we come back to one of the previous videos, is that it's in our interest to make sure we explore all options.
If we've got 6 months, then we will try and find something. We don't just say, "Well, we're limited to a relocation or a contract or whatever."
We will say, "Well, that's what we're want to look for." Ideally, we will get as long a contract as possible, but whatever happens, we will search every avenue to make sure that we can make sure this apartment is occupied.
Rob: Yeah, perfect. Hopefully, it gives you some context to what a service apartment is, or corporate let, ultimately a tenant profile that's compared to a short-term stay and how that works with occupancy level as well.
So, it's not gonna just be, cause it's maybe a 3 month or a 6-month contract, there are still other options to get full, or as close to full occupancy you can throughout the year. I hope that helps.