The Austrian real estate market is currently in a state of turbulence, as rising interest rates and stringent lending conditions have led to a slowdown in the market and a decline in property sales.
Banks have increased lending requirements due to economic uncertainty, demanding substantial 20% personal capital investments. However, even investors with 50% private capital find it challenging to obtain loans. As property sales slow down, developers face a lack of stable cash flow to cover credit expenses, putting them in an unreliable situation.
Traditionally engaged in property sales, developers find it challenging to sustain their businesses. Even renting out properties is not a viable solution, as increased construction costs and modest rental income rarely cover high-interest rates on loans, which can currently reach up to 6%. Thus, developers are in a challenging situation where cash flow and the profitability of investments are crucial factors.
Amid these challenges, Apart-hotels emerge as a potential lifeline for Austrian real estate developers and investors. Unlike traditional models, Apart-hotels offer greater profitability through cost optimization. Furthermore, on a global scale, tourists are increasingly favouring apart-hotels, also known as residences, for their autonomy, flexibility, and sustainability.
In response to the dynamic shifts in global travel trends, industry leaders are strategically redirecting their focus towards the lucrative market of Apart-Hotels, aiming to diversify their portfolios in this rapidly expanding sector.
As of the end of 2022, Marriott International has significantly expanded its presence in the serviced apartments sector with the launch of Apartments by Marriott Bonvoy, currently spanning 16 countries, including representation in Europe with locations in London, Brussels, Budapest, and Istanbul.
In early 2024, Hilton augmented its portfolio with a new Extended-Stay Brand – LivSmart Studios by Hilton, marking its debut in the United States.
The Mandarin Oriental Hotel Group currently operates 11 Residences, including locations in Barcelona, London, and New York, with an additional 7 in various stages of development, including Madrid and Vienna in Europe.
Analyzing global trends and leveraging insights from industry leaders, it can be asserted with confidence that the Apart-hotel market in Vienna is positioned for accelerated development.
Unlike standard hotels, Apart-hotels can be more economically efficient, allowing investors to adapt to current market conditions and maximize returns on investment. Cost optimization involves reducing expenses for construction and maintenance of common areas, such as reception, spa, restaurants, conference rooms, lobby, etc., compared to conventional hotels. Typically, the check-in and stay processes for guests are fully automated, enabling a reduction in expenses for service personnel. Consequently, this results in increased profitability for investors.
In this period of uncertainty and changes in the Austrian real estate market, Apart-hotels appear not only as an option, but as a strategic tool for developers and investors. Cost optimization, adaptation to new market conditions, and increased profitability are the key advantages of this model. The market is evolving, and only those ready to adapt will survive and thrive in the future.
