London-based Cheval is currently undergoing a reinvention, transforming itself from Cheval Residences to Cheval Collection as it seeks to begin an international expansion.
Now including the newly created Cheval Maison, the serviced apartments company is adding new brands to its portfolio as it seeks to woo new investors.
Speaking to Breaking Travel News in London, George Westwell, chief executive of the company, explains he is happy with the position of Cheval in the capital and now wants to replicate that success around the world.
“We have established Cheval as the leading five-star serviced apartment company in London,” he explains.
“We now have people who have stayed with us, either individuals of high-net worth, or those from within the hospitality business, who were asking to take the product overseas.
“This has been the case in the Middle East, Europe and the United States.
“This idea was strengthened by Reviewprobe, a US-based company who work with Cornell University to offer software that reads online comments from 250 sources, who told us Cheval ranked number one globally.
“We thought that we were obviously doing something right and started to discuss how we could grow the brand.
“That is the process that we have now started.”
On a practical level, Cheval is now divided into an operating and a property company, with the former owning real estate and the latter seeking to maximise revenue and expand the brand around the world.
With the new structure in place, the development of Cheval Maison will take the company into new sectors.
Well-suited to both business travel and short- and long-term leisure breaks, Cheval hopes the new imprint will offer a four-star experience in exciting global destinations.
“We have recognised that not every location, or every owner, can support a five-star brand,” continues Westwell.
“In answer to this we have developed two further brands, including Cheval Maison, a good four-star brand, with a similar feel to the existing Cheval Collection.
“However, the finishes might be slightly lower cost, while the size of the apartments will also be smaller.
“Then the third brand, which does have a name that we have ratified internally and are preparing to release publicly, will be more of a lifestyle offering.
“There will again be smaller apartment sizes, but bigger community areas.
“All of this, therefore, gives us, when we are talking to owners or developers, three options, but all backed by the Cheval brand.”
Cheval currently offers a total of 512 apartments, ranging from open plan one-bedroom layouts to grand penthouses, all situated across London.
Each of the residences, which all have their own individual style, offers a dedicated concierge service to support any guests’ needs, from making personal travel arrangements and taking care of laundry to organising a personal chef to come in and cook in the apartments’ fully equipped kitchens.
With such a strong brand, any expansion will be slow in order to maintain standards.
“We are close to revealing the first partner in Europe for the a Cheval Maison – it will be located in a major European city, with just under 200 units.
“There is also a second European property that we are close to announcing.
“The third brand, we are still evolving, and we will begin talking to partners soon.
“In total, we are working on around 15 or 16 different projects, but in this game, we obviously do not expect those all to come to fruition.
“Initially, for the first three-to-five years, if we could build up a pipeline of two management agreements per year that would be in line with our ambitions,” Westwell enthuses.
The decision to look internationally has been facilitated by changing perceptions of the serviced apartment sector, with investors now more open to involvement.
“There is still some resistance to the idea of long-stay apartments among investors, but this is changing rapidly,” explains Westwell.
“At our industry conference in December, I was listening to a banker explain that three years ago, investors were not interested, but that has now changed.
“The investment community has now come around to the opportunities, following things like the Brookfield acquisition of SACO – the largest deal in this marketplace, valued at £430 million.
“Being Brookfield, one of the largest property developers in the world, people have sat up and thought, crikey, if they are doing it, then this must be the place to be.
“That pendulum has swung and now there is much greater interest.”
The financials also make sense during a turbulent time, Westwell explains.
“People have become more aware of the profitability of the serviced apartment sector,” he continues.
“For example, we have no food and beverage, which tends to be the largest drain on profitability in hotels.
“At the same time, in cities like London, developers can have what we call C1 and C3, a mixture of residential and hotel accommodation in the same block.
“For example, at our Three Keys property down by the Tower of London, we have 97 C1s, in which you can stay for one night, but you pay VAT and business rates.
“But we also have 62 C3s, which are residential, where you do not pay VAT, but you do pay council tax and you have to stay a minimum of 90 nights.
“The latter, if we were to sell them, which we do not plan to do, they would be valued at the market price, while the C1s are valued at a multiple of the EBITDAR, which is similar to hotels.
“So, we allow investors to have that balance, along with retail at the bottom, and to de-risk the project.
“Everything is cyclical, so if the C1s are not doing well, the C3 might well be.
“Long stay apartments therefore offer short-term cash gain, which is better than hotels, as well as long-term, significant, capital gains, when located in cities like London.”
With huge potential for growth, Cheval is also aware of the need to cultivate demand to fill new properties, with sales in new international markets likely to be key to its plans.
Westwell adds: “We are well connected, we have sales representation in the United States, in Australia, a reservation team that is open 365 days a year, including Christmas day, speaking 11 languages.
“We do have a direct sales team, and an online engine, which we have just redesigned and are seeing significant growth from.
“But we do also use online travel agents.
“There needs to be some context here though: when online travel agents first came onto the market a few years ago, people were using the channel to sell distressed inventory.
“But we find that, because of the reach an online travel agent will give us, we can tap new markets - that said, this is less than 12 per cent of our sales.
“We also talk to estate agents, travelling around the county three times a year to meet with the relevant partners and keep our presence there.
“They are also a good source of business for us.
“There might be somebody looking for a house in a specific area, but before they make a purchase, they wish to live close by – somebody with an insurance claim perhaps.
“There are obviously corporates and then serviced apartment booking agents, of whom there are quite a few.
“We use many platforms to try and drive the business.”
Cheval is continually investing in its products, from soft refurbishments to larger renovations, and is committed to investing in new technology as it comes onto the market.
Last summer, the company launched its new website featuring the world’s first booking engine powered by artificial intelligence, Allora.
Since the launch of the new website, Cheval has seen a 35 per cent uplift in traffic.
However, Westwell issues a note of caution.
“On artificial intelligence the jury is still out – it is still very early days,” he explains.
“A lot of data is collected, but in silos, and it is a matter of utilising it proactively.
“The opportunity with artificial intelligence will be showing us why people are staying, when, and then responding to that.
“For example, if somebody browses the website, looking at four penthouses for 12 months, and then does not book, there is nothing we can currently do to capture that and respond.
“In the future, we will be able to see that and develop ways to react, to those enquiries we did not know about.
“But we are not looking to lose the human element – any building is only as good as the staff on the inside.
“Getting people with the right skillset and attitude is key for us,” he concludes.
Cheval Collection is a hospitality company specialising in high quality serviced apartments worldwide. T
The collection includes the Cheval Residences and Cheval Maison brands, as well as Cheval Partnership Sales, a one-stop service helping Cheval’s clients book serviced apartments in cities around the world.
Find out more on the official website.