"We’re the young, hungry guys with the good backing.”
Robert Godwin is optimistic about the growth of the budget-segment Room2 brand, which marries the design and feel of hotels with the convenience and flexibility of serviced apartments and aparthotels. As managing director of hotel brand — part of the London-based real estate development firm Lamington Group — Godwin is overseeing the next phase of growth, including the opening of its third asset, the 86-room, wholly owned Room2 Chiswick in West London in December.
The goal for Room2 is to have 1,000 rooms by 2022 and 5,000 rooms by 2030.
The backing of Lamington has allowed Room2 to move forward with its brand growth strategy, Godwin said. Room2 has brought in Rob Cahn, formerly the general manager at the Hotel Locke at Broken Wharf — adjacent to London’s Millennium Bridge — as head of group operations to further that growth.
Godwin said the Room2 Chiswick will define and elevate the Room2 brand once it opens later this year.
“We’ve spent 250,000 [pounds sterling ($336,000)] on [Chiswick], and it is a commercial opportunity, too,” he said. “We’re very hungry. Our performance during COVID has been strong, and we are about to take on leases.”
Godwin said while deals are getting done, there is no doubt that the pandemic has hit the hotel industry hard — even in the budget space — forcing firms such as his to protect margins and trim costs, even within a flexible cost base.
He said Room2 did face some uncertainty 12 to 18 months ago, but it kept its head above the water and now has business on the books.
“It is all we could have asked for. There is no debt, and we did not produce more shares, so we feel we are one of the better-placed, growing hotel companies now that the market is picking up,” he said.
Occupancy at Room2's two open properties in Southampton and Hammersmith has been almost 100% during parts of the summer, he said. While that will stabilize a little going into the rest of the year, by next year he expects performance will be back to normal.
Across all of 2020, the brand achieved a monthly occupancy of approximately 70%, Cahn said, which “compared favorably to the national serviced-apartment average occupancy of approximately 47%, which itself is 9% ahead of the national hotel average.”
The boom in staycations and working from home, which continued into 2021, has benefited Room2, Cahn said, with guests increasingly wanting an accommodations option that combines the best elements from Airbnb, serviced apartments and boutique hotels, as well as design that appeals equally to corporate and leisure guests.
“We’re after a different segment to have broadest market appeal," Cahn said. "Our Southampton hotel is No. 1 on TripAdvisor [in the city], which we have been working on for three years. And we feel very positive that now is a good time to invest. We are looking at a few more acquisitions, but it is very competitive and conversion cost, putting kitchenettes into existing hotels, is challenging."
Cahn said his job is to provide scale for the Room2 brand.
“Aparthotels will transform the entire industry," he said. "They have the flexibility and resilience needed against COVID. We are pitching [the brand] as beautiful, design-led aparthotels, to not be dry and rigid but to have the smell of coffee in the lobby, to have music, a good restaurant and open spaces to communicate and mix with like-minded individuals."
Room2 properties have some additional unique characteristics paired with embracing technology, Cahn said.
“Design is more thoughtful, with a history of the space. There is no reception space, but a bar, and there will be classes such as yoga and a cultural programming plan,” he said. “It appeals to today’s consumer and is more efficient, with less back of house and lots of tech that allows for efficiencies."
Home Truths
Godwin said aparthotels can lack “touch points,” which is why his company thinks of Room2 as a “hometel."
“They are not clunky, have more sensory levels, a deeper, richer experience," he said. "They are more familiar places to be. Home is a very powerful thing, and we want the combination of the best of both home and hotel.”
Regardless of the risks of traveling due to the pandemic, Godwin said there are people itching to take trips and their standard of a hotel stay has increased after spending so much time at home.
“It is a very positive time in travel. It is what we are all craving. Travel. Experience. Quality time. And having that in somewhere that is as good as your home is what guests are asking for,” Godwin said.
Godwin added there will be a Room2 brand refresh by the end of the year.
“For investors, there is a clear differentiation,” Godwin said.
When the brand reaches scale, Godwin said Room2 intends to remove its second property from its portfolio: the 15-room Room2 Hammersmith, also located in West London. Godwin added the property is not indicative of the brand.
Room2's pipeline across the U.K. has a gross development value of more than 100 million pounds sterling and includes both wholly owned and pre-leased assets in Belfast, Fulham, Liverpool and Manchester.
In January 2021, the firm completed the sale and leaseback of Room2 Southampton to a fund managed by Aberdeen Standard Investments. The deal's disposal price of 10 million pounds sterling reflects a prime net initial yield of 4.98% with a 30-year indexed linked lease in place.
In addition, Lamington Group announced a new sustainability benchmark in September, which prioritizes a “whole-life net-zero approach” in regard to carbon omissions and other criteria by 2030.
During both development and operations, the focus is to ensure assets succeed or better achieve the framework of targets outlined by Science Based Target Initiative, London Energy Transformation Initiative and United Kingdom GBC Whole Life Net Zero.
Both Room2 Hammersmith and Room2 Southampton already operate with 100% renewable energy, while the remainder of its directly managed portfolio will follow their lead by 2023, Godwin said.