The Student Hotel has added three new sites to its portfolio, taking it to 16 properties in Europe by 2019.
The company is targeting 41 sites by 2021 and told us that it would remain committed to its owner/operator model. The group is looking to build a total portfolio worth EUR1bn by 2021. It has added new sites in Rome – taking it to three in Italy – Delft and Eindhoven – reaching four in the Netherlands – and Madrid, marking its debut in Spain.
The new announcements join Florence, Maastricht, Bologna and Berlin as properties that will open between 2017 and 2019 to bring the total number of Student Hotels in operation or in development to 16.
While the buildings are all different, they share a mix of contemporary student rooms, hotel rooms and co-living studios. The ground floors are accessible to the public and house study areas, meeting rooms, TSH Collab – co-working space for start-ups and local business – restaurant, bar, games room, gym and garage to house guest bicycles.
The company funded the acquisitions through the money invested by private equity backers APG and Aermont, with Charlie MacGregor, The Student Hotel’s CEO & founder, telling us that the group was 70% through the EUR500m it had access to.
APG announced an initial EUR100m investment in 2015, with plans to invest EUR600m in three to five years. At the time, Robert Jan Foortse, head, European Property Investments at APG Asset Management, said: “We think that the European student housing market offers a very compelling investment opportunity. The increasing international student mobility and integrated European education market requires flexible and high quality accommodation with trusted brands such as The Student Hotel to be available in leading university cities.”
The group targets large, disused buildings for its hotels. MacGregor said: “We find sites by meeting with the planning committees and the local mayor, are looking to rejuvenate buildings and build a sense of community. Our promise is that we will rejuvenate a community.
“We buy and develop ourselves and then when it’s completed we hand over to the operator [also part of the group]. We’ve done a lot of work and looked at the traditional hotel industry. Each hotel is managed as a standalone business and our infrastructure is set up to meet our targets. We have 12 development projects in five countries, so it is busy, but a gradual ramp up.
“It is getting harder to find sites because it’s getting more expensive – we like city centre locations, so it’s our own fault. We like big buildings so we’re not competing with traditional hotels, but more often it’s office or residential.
“France has been a slow one for us, there is a lack of good, big buildings, rather than in Germany and Italy and of course Paris is super expensive. We’re not on a mission to have a presence in a big city just for the sake of it.”
Looking ahead, past the 2021 target, MacGregor said: “There’s a lot to be learned from the hotel sector in terms of leases and management contracts, but when the investors look to exit it will be a case of replacing the private equity guys – the important thing is that the customer is not affected.”
The company makes much of what it can offer the community and the community offer the guest. He said: “Most hotels have a closed-door policy. With our hotel we try to have an open-door policy – even the wi-fi is free, you don’t have to buy anything. We try to play a role as a good neighbour, which means everyone gets on well – the strongest part of our hotel is the community.
“The reason why our hotel segment is going so well is that when we go into a traditional hotel there is no atmosphere. The hotel guests find it refreshing when they come in and there is a lively atmosphere and we were surprised that demand for our hotel rooms went through the roof – it’s because of that student spirit on the ground floor. We don’t need to force or create or manipulate an atmosphere.”
Students are housed for 10 months of the year, but only for one cycle. MacGregor said: “We don’t want to become a housing community or accommodation providers. The students are very much a travelling community; one year in Amsterdam, one in Rome, there’s no demand for permanent housing.”
HA Perspective [by Katherine Doggrell]: MacGregor said that he had much to learn from the hotel sector, but the current spate of new brands into the market suggests that traditional hotels are learning from this new wave of hybrids. MacGregor had recently sat on a panel with one of the people behind AccorHotels’ Jo&Joe, a brand which, should it love up to its promise, may be one of the first truly flexible offerings out there.
The attraction of The Student Hotel for investors is the guaranteed long-term occupancy, topped of with the traditional hotels business. Having a large block accounted for also cuts distribution costs – The Student Hotel gets much of its business direct. Add in the property play and, given the recent enthusiasm for Generator (despite the complexity of the portfolio dragging the sale out, somewhat) finding an exit for APG and Aermont should not prove too great a challenge if the trajectory is maintained.
Hotels realising that they are part of the wider community is a barrelling trend. This correspondent recently went to a debate on ‘the art of placemaking’, which turns out to be just that – creating a destination, not just a block of rooms. And yes, there were a number of participants nodding sagely in black polo necks and espousing the need for cheap artists’ studios in new developments. What is likely to bring this away from the fringe is AccorHotels, which has worked it in to its new three-pillars strategy. If being part of the community starts throwing off cash, hotels may start joining the Neighbourhood Watch.