The 6 most important statistics from our first 3 months running Serviced Apartments

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Almost exactly 3 months ago, our first Serviced Apartment went live on the major booking platforms (AirBnB, Booking(dot)com etc). Since then we’ve tracked all of the important performance statistics to see what’s worked well and what hasn’t, and here they are, for your reading pleasure!

Project Background

To give you a quick background on the project, we bought this building as a part tenanted (ground floor), part vacant (1st floor) commercial building, and converted the first floor into a 2 bedroom apartment as well as converted the loft into a 1 bedroom apartment.

In total, we paid £90,000 for the vacant space and spent £180,000 on the renovations and all associated costs, so our total spend for the two apartments was around £270,000.

They’re now worth around £310,000, so we only created £40,000 in value/equity (a pretty measly 13%) but this is an area we expect to see reasonable capital appreciation, and they were bought with the income potential in mind rather than the uplift in value.

You can see more details of this project over on the #IPIBarbershop hashtag on Instagram.

 

1) Total Occupancy Rates

It’s early days for these apartments, so I’m not saying that what we see now is a true reflection of what we’ll see long term, but it’s a useful benchmark to see what’s achievable in the first few months and to compare our results to going forwards.

Across the two apartments we have had a total combined occupancy rate of 71%, or 172 nights out of the 240 available.

We’re pretty pleased with this as we originally set our goal to hit 70% as an average, so to get to this level so quickly is reassuring. What we need to keep in mind however is that seasonal changes may impact this one way or another, so what we see over the summer won’t necessarily reflect what we see in the other seasons.

Split between the two apartments, the 2 bedroom apartment achieved an average occupancy of 65%, and the one bedroom achieved an average of 77%.

 

We initially thought the two bedroom would be more appealing, as an alternative to hotels for small groups travelling together or for families, but actually the one bedroom is outperforming it (at least from an occupancy point of view – see Revenue section below).

2) AirBnB vs Booking.com

Something we really had no idea about was where the majority of our bookings would come from. What’s quickly become clear however is that one massively outperforms the other!

A massive 76% of all of our bookings have come from AirBnB.

Booking.com isn’t even close, with only 17% of the total.

There’s no technical reason for this – both properties went live on both platforms at the same time; the prices are the same (actually Booking.com works out slightly cheaper); and all of our policies are pretty much identical.

We try to treat bookings from both platforms with the same service levels, but the AirBnB platform is a lot more user friendly so perhaps there’s a slight bias to our response times there.

Overall though all I can conclude is that in our first few months, AirBnB is kicking Booking.com’s ass!

3) Cancellations

The occupancy rates I shared above account for all of our cancellations. So that 71% is the actual number of nights where we’ve had a guest stay with us.

In a perfect world with no cancellations, we would actually have had an occupancy rate of 82.5%, but alas cancellations are just part of the process.

What’s more interesting than our cancellation rate of a little under 10% though, is where those cancellations came from.

We had a total of 4 nights cancelled from AirBnB guests, and 14 nights from Booking.com. That’s a reasonable difference on its own (a roughly 80/20 split just on those nights), but when we look at it in tandem with our bookings, the different is huge.

AirBnB cancellations were a total of 4 nights out of 140 nights, giving a cancellation rate of less than 3%.

Those 14 cancelled nights from Booking.com on the other hand were from a total of only 50 nights booked, which is a massive cancellation rate of 28%.

As with the source of bookings, it’s difficult to really say why there is such a big difference, but it’s another big punch landed on Booking.com from AirBnB.

4) Our Revenue Figures

So I guess this is the interesting stuff. How much money did we actually generate from these apartments?

The 2 bed apartment is currently listed at £90 per night from Sunday-Thursday, and £110 per night on Fridays and Saturdays. There’s a slight discount for weekly bookings, and more for monthly bookings, and it seems to be working pretty well in this range.

The 1 bed started at £70 per night mid-week and £80 over the weekends, but bookings were sluggish so we quickly dropped this to the current rates of £60 and £70 per night.

I’m hoping as our number of reviews increases, we’re able to push these prices back up, but for the moment it seems to be the right level for our area.

In total then based on these figures and our occupancy rates, the 2 apartments will have generated us a little over £11,000 in bookings.

Specifically the 2 bedroom will account for £5,137 and the 1 bedroom for £5,877.

Given the pretty big difference in total nights booked (64 nights for the 2 bed, and 108 for the 1 bed) the figures aren’t that far apart. So although the two bed has had lower occupancy rates, when it is full, it’s a much better earner!

Breaking it down into monthly figures, that works out as around £1,300 per month revenue on the 1 bedrom flat, and £1,600 per month on the 2 bedroom flat, obviously significantly more than we’d expect to achieve as single lets, but there are more running costs to consider as well…

5) Our Running Costs (& Profit)

To be totally transparent, we’re not 100% confident in all of our expenses yet as some of them need to settle down a little and/or be confirmed. But we’ve got enough of an idea to give you a general sense of that all important profit figure.

The big one of course is our mortgage cost, with a product from Interbay at 4.44% for 5 years. That works out at around £430 for the 2 bed and £360 for the 1 bed.

Cleaning costs us around £35-40 per changeover, based on a 2 hour clean per flat at £12/hour, and £10 for linen in the 1 bed, and a little under £20 for the 2 bed. With an average stay of 4.5 nights and an average of 70% occupancy across the month, that’s about 5 stays per month so £200 for cleaning per flat should cover it.

Then it’s utility bills which are pretty low, at around £40-50 per flat for electricity, maybe £25 for water, and £30 for broadband which is split between the flats.

Council tax in currently unknown but should be around £110 per month per flat.

That gives us total running costs of roughly £1,300 per month, on an average revenue of £2,900, which would give us a net profit of £1,600, or £800 per flat.

We were hoping for around £1,000 per flat, so we’ve got some work to do to get us up there but I feel like it’s a reasonable start. A slight increase in occupancy rates and nightly rates should hopefully get us there, as well as encouraging some direct bookings which we haven’t looked at at all so far.

6) Systems & Involvement

One thing we were really concerned about with the addition of serviced apartments to the portfolio was how much time they’d require from us and our team to be managed effectively.

Actually it’s been no where near as bad as we thought.

Our process, now that we’ve documented it, is pretty easy to follow, and each booking probably takes less than 10 minutes of combined effort across our team.

Pre-booking enquiries are pretty infrequent, and are dealt with by us or Kathryn, our lettings manager.

Booking confirmations and check-in details are sent as specified times by our VA, who also looks after the access codes for our Yale Smart Locks.

Kathryn is on call for any issues on check-in day, which again are pretty infrequent. Every time we do get a call, we add it to the information we send out to future guests – parking, how to find the apartment, using the smart locks etc.

And our cleaners have access to our booking calendar so they pretty much look after themselves.

It’s nothing complicated (except maybe for automating the lock access codes), and it’s certainly not time consuming!

 

 

If you want even more detail about these first 3 months, then check out our latest podcast on the subject:

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