The property industry is continuously evolving, offering investors diverse opportunities to make lucrative returns. One such opportunity is serviced accommodation, an alternative to traditional rentals. As more landlords look towards diversifying their investment portfolios, we will explore why serviced accommodation could offer a more lucrative return.
1. Serviced accommodation attracts higher paying guests
Serviced accommodation mainly targets business travellers and tourists who are willing to pay extra for access to quality services, such as concierge, housekeeping, and fully equipped kitchens. These guests are willing to pay more for comfort and convenience, which translates to higher rental yields. In contrast, traditional rentals tend to attract long-term tenants who typically pay rent below the market rate.
2. Flexibility in pricing
Unlike traditional rentals, serviced accommodation offers landlords a more flexible pricing model that allows them to adjust prices according to market trends. For instance, landlords can charge seasonal rates or adjust prices according to the demand for services and amenities. This flexibility is crucial in maximizing profits, especially in the hospitality industry, where prices fluctuate significantly.
3. Reduced vacancy rates
Serviced accommodation typically attracts short-term guests who stay for a few weeks or months, resulting in reduced vacancy rates. In contrast, traditional rentals attract long-term tenants, resulting in extended vacancy periods between tenants. Reduced vacancy rates ensure that landlords continue to generate income, even during off-seasons when demand for traditional rentals is typically low.
4. Reduced operating expenses
Serviced accommodation typically includes services such as cleaning, laundry, and maintenance, reducing operating expenses for landlords. Traditional rentals, on the other hand, require landlords to take on these expenses, reducing their net profits. Furthermore, since serviced accommodation operates more like a hospitality business, revenues can be further maximized through cross-selling of services such as airport transfers and meals.
5. Increased asset value
Serviced accommodation typically offers upscale amenities and services, which contributes to increasing the asset's overall value. It is not uncommon for serviced accommodation to be located in top-tier neighbourhoods, further increasing the asset's value. In contrast, traditional rental properties tend to require regular updates and maintenance to maintain their value.
Conclusion:
In conclusion, investors looking to maximize their returns should consider serviced accommodation as an alternative to traditional rentals. The flexible pricing model, reduced vacancy rates, reduced operating expenses, and increased asset value all contribute to higher rental yields. Although serviced accommodation may require more effort than traditional rentals, the potential for higher profits makes it worth considering. Moreover, serviced accommodation is an excellent option for property owners who want to diversify their portfolio and tap into the hospitality industry.
Comments