Hospitality: investing in serviced apartments

With high occupancy rates and strong growth potential, serviced apartments are redefining the boundaries between the hospitality and residential sectors, emerging as one of the most interesting investment opportunities in today's market.

The evolution of social habits and dynamics surrounding travel and work is profoundly reshaping the real estate landscape, fostering the growth of hybrid and flexible asset classes. Within this context, the Hospitality sector is experiencing a true revolution, propelled by emerging market demands and rapidly changing consumption models.

One of the most significant innovations is the rise of serviced apartments—an "alternative" accommodation model that is rapidly gaining popularity in the luxury segment. With approximately 3 million serviced apartment units across Europe (source: Deloitte), this model effectively caters to a broad range of guests, and it’s becoming a strategic choice for real estate investors seeking lucrative opportunities.

What are serviced apartments?

Serviced apartments are a real estate asset class that sits between residential properties and hotels. These accommodations offer the comfort and privacy of a private residence, while also providing the premium services typically found in hotels. Aimed primarily at a middle-to-high-end clientele, serviced apartments are distinguished by their flexibility: they can be rented for both short-term stays and extended durations.

The apartments feature spacious, meticulously maintained interiors, thoughtfully furnished in line with the latest design trends. Each unit typically includes a living area, one or more bedrooms, and a fully equipped kitchen, providing guests with the freedom to enjoy a truly independent stay. Additional services, such as a dedicated concierge, daily housekeeping, or laundry service complete the offering.

One of the key strengths of serviced apartments is their prime location. Typically found in strategic city-center areas, they offer convenient access to offices, essential services, and popular tourist attractions. Many are also part of residential complexes that feature exclusive amenities such as gyms, swimming pools, and co-working spaces, ensuring a stay centered on maximum comfort and convenience.

The demand

The combination of style, practicality, and comprehensive services makes serviced apartments an ideal choice for a wide range of guests. Not only tourists looking for comfortable spaces to feel at home, but also business travelers who value a more personalized and inviting atmosphere, along with functional spaces where they can work.

Families also find serviced apartments to be a perfect solution for stays that meet specific needs, such as medical treatments, family events, or other particular requirements. Unlike traditional hotel rooms, these accommodations provide more space and the flexibility to maintain daily routines, which is particularly beneficial for families with young children.

The sector’s key figures in Italy

A recent study by Deloitte offers a detailed analysis of the serviced apartments sector in Italy, examining both the current landscape and future prospects. The report reveals that there are approximately 280,000 serviced apartment units across the country. For 2024, the occupancy rate is projected to be around 80%, while the average daily rate (ADR) per unit is expected to reach 267 euros per night.

The overall turnover of the sector in Italy is 2.4 billion euros, representing a 7% market share in Europe. While this percentage places Italy behind Spain, France, Greece, and the United Kingdom, the growth potential in our country remains significant.

Many hotel groups have already begun investing in the serviced apartment segment, diversifying their portfolios and expanding their presence in major Italian cities. Notable examples include Starhotels with the Duomo Luxury Apartments by Rosa Grand Milano, and Rocco Forte Hotels with its "Rocco Forte House." Marriott Bonvoy is set to launch its first Apartments by Marriott Bonvoy in 2025 in Courmayeur, while the Dutch group Sircle Collection plans to open approximately seventy serviced apartments in Milan’s iconic Velasca Tower.

Outlook

Deloitte's analysis reveals that Italy is regarded as the most attractive European destination for investment in the serviced apartments sector. 60% of investors surveyed plan to include serviced apartments in their portfolios, with clear intentions to enter the Italian market within the next 2-3 years. Meanwhile, the remaining 40% of respondents are not dismissing the possibility of future investments in this segment, highlighting a growing interest and widespread confidence in the potential of Italy’s market.

This enthusiasm is expected to drive significant growth, with projections indicating that approximately 350 new units per operator will be developed over the next three years, contributing to a substantial increase in the available supply across Italy. . At the same time, the sector's revenue is anticipated to rise by an average of 15%, further highlighting the enduring appeal and attractiveness of the Italian market.

Where to invest

Large cities are undoubtedly the most strategic locations for investing in serviced apartments, given their capacity to attract both local and international visitors. Milan, in particular, stands out as a prime example. The city, already renowned for hosting major events like Milan Fashion Week and the Salone del Mobile, is poised for significant growth in demand, especially in anticipation of the 2026 Winter Olympics. This global event will draw millions of visitors and professionals from around the world.

It is important to direct investments towards central locations with a high concentration of services or near business districts. Additionally, proximity to hospitals and healthcare facilities should be prioritized, as these areas tend to attract a distinct clientele, including patients, their families, and medical professionals traveling for business.

From a tourism perspective, art cities are a top choice. However, seaside and mountain resorts are increasingly emerging as attractive markets for serviced apartments, especially those with excellent infrastructure, including access to airports and train stations.

The serviced apartment market between sustainability and AI

In a market increasingly driven by sustainable and responsible investments, serviced apartments are emerging as a strategic asset class capable of aligning with investors’ ESG goals.

These accommodations often provide a more eco-friendly alternative to traditional hotels, as they encourage longer stays, which helps reduce the carbon footprint associated with frequent travel in the fast-paced tourism industry. Furthermore, many properties are embracing sustainable management practices, such as incorporating smart technologies to monitor and optimize resource consumption.

Speaking of smart technologies, artificial intelligence (AI) can be applied in various ways within serviced apartments. According to data from Deloitte, approximately a third of operators have already adopted AI-driven solutions, and this adoption rate is expected to rise in the coming years.

One of the most impactful applications of AI is its ability to collect and analyze guest data, enabling the anticipation of their needs, personalization of services, and optimization of comfort and energy efficiency. For example, AI can automatically adjust temperature and lighting to suit individual preferences. Additionally, AI streamlines operational processes, for instance it can automate check-ins and check-outs, which boosts efficiency and enhances the overall customer experience.