Serviced apartments
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1.1 This class is split between Rating Valuation Units (RVUs) and the National Valuation Unit (NVU) with RVU’s will be responsible for single units and smaller complexes. The largest complexes operating in the manner of hotels or lodges will be dealt with by the NVU. Responsibility for effective co-ordination lies with both RVUs and the NVU.
1.2 Special category code 722 and primary description code CH1 should be used for all types of serviced apartments, large and small, with the description overwritten Serviced Apartment(s) as required, the appropriate suffix letter will be G (Aparthotels should continue to adopt special category code 138 S).
2.1 As a class, serviced apartments (SA) have grown out of demand for more self-contained living accommodation, from regular hotel users. The market is usually aimed at regular business users requiring high quality accommodation, for the short term, but who would prefer to have more independence than checking into a hotel. The accommodation in many cases is cheaper than the equivalent hotel accommodation.
2.2 They will be fully serviced in terms of services, cleaning and provision of utilities. The fees will be inclusive of taxation. Booking accommodation will be similar to booking a hotel room and in the largest properties there will be a reception desk where the complex operates as an hotel albeit letting apartments rather than bedrooms. In occasional instances there may be ancillary bar or restaurant facilities and breakfast may be supplied as part of an inclusive rate for an apartment. The larger properties operating in this manner are often known as aparthotels.
2.3 SA are most commonly found in the larger towns and cities where the focus is on business use with some weekend break use but are also to be found in some towns in tourist areas where the focus is use by tourists and holiday makers.
3.1 Statutory Background
3.2 The statutory background to the rateability of self-contained self-catering accommodation applies equally to serviced apartments. The background to this is itemised in detail in the Rating Manual: Section 5a: Valuation of all property classes: Holiday accommodation (self-catering) Part 5 Legal Framework.
4.1 As in any valuation for rating the first and fundamental step is to establish and identify the hereditament. From case law a number of broad rules can be discerned particularly now from the judgement of the Supreme Court in Woolway (VO) v Mazars. [2015] RA 373. With serviced apartments, however, the problem can be difficult, where some units are short stay and some are long stay. It is vital where a mixture exists that the correct identification is made. This may result in individual apartments being separately assessed in circumstances where the relevant units are not contiguous. The Mazars decision needs to be considered in line with The Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018 where if conditions of contiguity are met two or more hereditaments occupied or owned by the same person are to be treated as one hereditament for rating purposes.
5.1 Each apartment type should be measured to NIA in accordance with the VOA Code of Measuring Practice for England and Wales. The area of bedrooms should include that of any en-suite bath- or shower-room. Details should be taken of the standard of fittings, general level of fittings and fit-out, services supplied by the operator and any ancillary facilities to the apartments.
5.2 If a brochure exists, this should be obtained together with tariff details and occupancy rates, if available.
6.1 There is unlikely to be any direct rental information available for the specific use. In this absence of direct evidence consideration should be given to the nature of the occupation. SA bear a strong resemblance to self-catering holiday accommodation, in many cases the terms are interchangeable. It is therefore appropriate for single SA and small complexes to have regard to the valuation advice set out in Rating Manual: Section 5a: holiday accommodation - self catering and the relevant practice notes.
6.2 For larger complexes which operate much as lodges or budget hotels – aparthotels – it will be appropriate to have regard to the guidance on these types of hotels set out in Rating Manual: Section 5a: hotels and the relevant practice notes. For comparison purposes the DBU factors to be adopted will be set out below:
6.3 If a particular property or complex does not fit into the above categories then accounts should be obtained for the three years preceding the valuation date and a full receipts and expenditure valuation carried out
| En-suite | DBU |
|---|---|
| a) studio - bed sitting type with kitchenette | 1.5 |
| b) one bed - with sitting area / kitchenette | 2 |
| c) two bed - with sitting area / kitchenette | 3 |
| d) one bed - with sitting area / kitchenette | 4 |
1. Market appraisal
1.1 The demand for serviced apartments is largely driven by the numbers of domestic and international tourists and business travellers. Hence occupancy and turnover are heavily influenced by factors which impact on decisions to travel to and within the United Kingdom (UK).
1.2 The 12 months leading up to antecedent valuation date (AVD), 1 April 2021, were dominated by the COVID19 pandemic. However, this market appraisal reflects the whole period since April 2015.
1.3 Following the previous AVD (1 April 2015), and prior to the COVID19 pandemic, the hospitality industry generally experienced favourable market conditions. The increase in ‘staycations’ experienced during the 2009-2010 downturn was maintained, aided by exchange rate movements. This made the UK a cheaper destination for travellers from Europe and the USA, whilst at the same time making foreign holidays more expensive for UK residents.
1.4 Published analyses show that for the calendar years 2015 – 2019 annual occupancy rates generally remained high whilst achieved room rates increased, resulting in increased revenue per available room (RevPar).
1.5 Throughout this period there was an increase in supply as new serviced apartments and hotels opened, predominantly in London and the major cities.
1.6 In recent years, prior to the pandemic, demand is outstripping supply, with an increasing number of operators seeking expansion, predominately in major cities. Extended stay and serviced apartment popularity continued to gain momentum, as an increasingly mobile workforce sought additional space and amenities.
1.7 The COVID19 pandemic had a major impact on hotels and serviced apartments in the period leading up to AVD (1 April 2021). Details of the various restrictions implemented by statute in response to the pandemic, and of the vaccination rollout, can be found online. In February 2021 the UK Government published its Roadmap out of lockdown for England which set out four steps to relax restrictions. Step 1 had already taken place by the AVD, although hotels and serviced apartments were still allowed to open only for restricted categories of guests, e.g., key workers, people quarantining, people attending funerals etc.
1.8 The later three stages of the Roadmap for England included
- the opening of outdoor hospitality and self-contained accommodation, including serviced apartments if self-contained, and outdoor dining (Step 2, no earlier than 12 April)
- the opening of remaining accommodation types including hotels, subject to social distancing measures (Step 3, no earlier than 17 May)
- the removal of remaining restrictions on openings/events (Step 4, no earlier than 21 June)
1.9 Subsequent to 1 April 2021 Steps 2 and 3 took place as planned, but Step 4 was delayed four weeks to 19 July.
1.10 International travel was prohibited at the AVD, except for a small number of permitted reasons. Holidays abroad were not allowed. As part of the February Roadmap announcement the government referred to a review of global travel, to report on 12 April, possibly for inclusion at Step 3. At AVD the outcome of this review was unknown. At the AVD international arrivals from certain countries had to quarantine in hotels near airports at their own cost.
1.11 The situation in Wales, both leading up to and after the AVD, was similar although not identical.
1.12 As trading conditions were very restricted for most of the period from mid-March 2020 to 31 March 2021, various reports show large decreases in occupancy rates, achieved room rates and revenue per available room (RevPAR) compared to 2019.
1.13 Reports show that this performance varied significantly between locations and types of hotel, with London hotels performing particularly poorly. Generally regional cities performed
less well than more rural locations and those focused on domestic leisure business. Once allowed to open, hotels in rural and tourist locations benefitted from the increase in ‘staycations’ through summer and early autumn 2020.
1.14 It was also reported that accommodation types with more private space and the facility to cook and eat separately, such as serviced apartments, showed smaller declines in occupancy rates and achieved room rates than more traditional hotels.
1.15 Various reports and commentary on the hotel industry published in late-2020 and early-2021 set out views on the likely recovery of the sector in the context of what was known at the time, including the UK Government Roadmap for England which (as noted above) specified dates as the earliest for which each stage of the lifting of restrictions would happen. At AVD these included the following expectations:
- domestic leisure business would recover first
- domestic business and smaller meetings and events would recover more slowly than leisure
- large conferences and events would also recover more slowly
- inbound (international) leisure and business would be slower to recover than domestic leisure in particular, disadvantaging cities such as London heavily reliant on inbound tourists, business and large events
- self-contained accommodation such as serviced apartments would continue to do relatively well compared to forms of accommodation with lots of shared facilities
- some costs might increase.
2. Changes from the last practice note
2.1 There are no significant changes to the broad principles followed for the 2017 rating list whereby reference to serviced apartments was made in the hotels and holiday accommodation (self-catering) practice notes. Serviced apartments have been allocated a new Special Category (SCat) code - 722 G.
3. Ratepayer discussions
3.1 At the time of writing the VOA is having discussions with the rating advisor to the main hospitality industry trade body regarding chain operated hotels and serviced apartments.
4. Valuation scheme
4.1 Single serviced apartments and smaller complexes
4.1.1 Serviced apartments bear a strong resemblance to self-catering holiday accommodation, in many cases the terms are interchangeable. It is therefore appropriate for single serviced apartments and small complexes to have regard to the valuation advice set out in Rating Manual: Section 5a: holiday accommodation - self catering and the relevant practice note.
4.2 Larger complexes
4.2.1 For larger complexes i.e. those with 5 or more apartments which operate much as lodges or hotels – aparthotels – valuers should have regard to the guidance set out in Rating Manual: Section 5a: hotels and the relevant practice note. This involves applying a single percentage (from the scheme) to the total fair maintainable trade (FMT) to arrive at the rateable value (RV).
4.2.2 For larger complexes valuers should adopt the lodge / aparthotel scale set out within the hotels practice note.
4.2.3 Where there is sufficient rental evidence on larger complexes a scheme can be derived and used as a basis for valuation.