UK Property: Serviced Accommodation

DISASTER

The UK Property Market Has Seen a Surge in Serviced Accommodation as a Business Model in Recent Years.

So you’ve educated yourself via UK property investment books, property podcasts and forums.

You’ve found yourself an expat mortgage broker, been through the arduous task of getting an expat mortgage and even bought yourself a UK buy-to-let or two.

And now you want to speed up your expat property story. You’re looking for cashflow: a high-yielding asset that will hopefully appreciate over time.

HMOs is one such asset but as long-time listeners of the podcast may recall that when Covid hit, my wife and I were worried that all our eggs were in the student HMO basket.

And, finding good areas that are not already Article 4 areas is tricky to say the least, while the price of HMOs in those areas has gone up into the converted loft and through the roof so to speak…

So we decided to add some diversity to our portfolio by buying properties with a view to running as Serviced Accommodation, but which would stack as single lets on standard ASTs as a fallback option.

If you’re thinking on similar lines, I would suggest getting in before the authorities get around to introducing licensing to limit the increase of short-term rental properties with Article 4 type legislation for SA.

Hopefully, ‘Grandfather Rights’ will apply to any properties up and running as SA before such legislation is introduced.

Do I feel slightly guilty about taking a property out of the private rental sector for SA?

Yes.

But can I rely on the government to look after me and my family in our old age? 

No.

So what choice do we have? Answers on an email please at www.expatpropertystory.com

One thing to worry about with short term rentals as a business model, however, is an over-reliance on Online Travel Agents such as Airbnb and Booking.com (other OTAs are available!)

Mark Simpson’s book on how to get direct bookings is a must-have resource for SA operators

No one knows this more than Mark Simpson, the host of the Boostly podcast, and the author of three books on helping hospitality hosts thrive. 

He points out that SA businesses that failed during Covid lockdown were the ones with an over-dependence on the OTAs.

A hospitality host that relies too heavily on OTAs runs the risk of going bust as and when these platforms raise their commissions.

So those in the know understand that short term rental success is all about bypassing the Booking.coms of the world.

Mark is on a mission to help one million short term rental businesses cut down on their over-reliance on OTAs. He argues that you need to make sure that they’re working for you rather you working for them.

For example, those that say they’ve ‘got an Airbnb’ are doing Airbnb’s work for them and shooting themselves in the foot!

What we should be doing, by contrast, is only using the OTAs after we’ve taken the best dates for ourselves and let them fill in the blanks.

In Episode #80 of Expat Property Story, Managing Serviced Accommodation Agents From Abroad, I asked Mark for his top tips, tricks and tactics for driving up direct bookings.

The first hospitality hack he offered was to really focus on developing your guest avatar. Who and what is your property best suited for? Who are the people that come to your town or city or location? What are they looking for? What do they need? What would improve their stay?

“It's all about getting in front of their eyes. Making sure that your pictures, the copy that you use, the website that you have, are all speaking to your ideal guest.

“Because the biggest problem I see is people trying to appeal to everybody.”

Identifying your customer avatar is essential.

When Mark asks hosts about their target customer, he’s often frustrated by the answer:

“The most common answer specifically in the UK, and it's like tongue in cheek, but it’s, “whoever is going to give me money!” which is totally the wrong answer.

“When you appeal to everybody, you appeal to nobody. You've got to have a niche. And you've got to have a guest in mind”.

Mark suggests that if you have two different avatars, then maybe you could consider setting up two different properties, each arranged to serve their separate needs, which would be much better than trying to appeal to both.

Mark’s second pearl of wisdom was to approach your existing customers for referrals:

“As a nation, as a generation, we are always focused on new customers. If you look at it just from a common-sense point of view, the true profit is in the people that have already given you money. The people where the ‘know, like, love and trust’ factors are there.

“You can go to anybody who's done any business with you over the last 12 months, and just say, hey, we like working with you. You're awesome. Do you know anybody who is just like you, but needs help? It works time and time and time again, especially in hospitality.

“If you've got Serviced Accommodation business guests that you've honed, and you've looked after, and who have stayed with you for a couple of months, and they've left the property in a great condition, and they’ve spent a good chunk of money with you… as a business guest, the business world is very incestuous.   .

“Everybody knows everybody. Now, that guest may not be coming back to your town. But somebody else in the company may. Or they may know somebody else who's coming to your town. And if you go to them and say, “Bob, listen, do you know anybody who's coming who needs a place to stay?”

“And if they block book on the back of your referral, then we will send you x, x, x… it could be anything, it could be cold, hard cash, football tickets, a football shirt, a signed football shirt, whatever…

“If that ends up being a four or five grand booking, that £100 spend in comparison to the commission cost that you would pay from a third party is minor. And again, because it is a referral, social proof equates to 93% of all purchasing power in the world”.

Serviced Accommodation is a hospitality business more than a property business…

Now as expats, unless we have sophisticated systems in, place we will need a management agency in place once we’ve identified our target area and bought a property tom run as SA. But how do we manage the managers? This is what Mark had to say:

“Every management company should be looking to increase their direct bookings. They should be looking to increase a network that is full of contractors, companies, etc. And if you find that your management company that you're working with isn't, and they've got over 80%, that are the are an OTA then you should be putting a bit of pressure on them… giving them 30 days to actually sort it out because if not, there's a plethora of other management companies now in the UK who are actively looking to build their networks”.

So if you’re thinking about serviced accommodation as a UK property business model, make sure you go beyond the concept of ‘getting an airbnb’.

This article has only scratched the surface of how to get the most out of this potentially high yielding asset. For more information, check out Episode #80 of Expat Property Story, Managing Serviced Accommodation Agents From Abroad with Mark Simpson.