Investing in real estate is always relevant as it provides investors with stable passive income. In the past, investments in residential properties, particularly apartments for rental purposes, were quite popular. Gradually, a more quality-driven and profitable service has emerged, requiring less additional time and resources from the owner – the concept of apart-hotels. This format has not yet gained as much popularity in the Ukrainian market as it has in Europe, but it’s only a matter of time. One of the players in this sector is the network of apart-hotels or income-generating properties, WOL Home+Hotel, which is part of the portfolio of brands under Ribas Hotels Group.
“”When creating this format, we wanted to offer people who are looking for apartments for short-term or long-term rental an alternative option with hotel services. We aimed to ensure that guests arriving at the apart-hotel wouldn’t encounter the inconveniences often associated with renting an apartment,”” said Maria Turikova, a project manager at Ribas Hotels Group.
In the WOL project, the Ribas Hotels Group team addressed all the issues people face when renting an apartment. They started by conducting a survey among the target audience – those who rent apartments. Among the main problems they identified were:
The difficulties in finding an apartment;
Fraud on rental websites;
Negative experiences with real estate agents;
Constant repairs at the neighbors;;
Lack of household appliances;
Non-ergonomic spaces;
Poor quality of the building’s infrastructure.
All apartments are equipped identically, with the only difference being the area. For example, studios are 25 m², one-bedroom apartments are 35 m², and two-bedroom apartments are 55-65 m².
The target audience of WOL consists of young, dynamic individuals from creative industries, as well as remote workers. They are rational guests who prioritize quality and are willing to sacrifice space for it. In return, they receive certain benefits. Specifically, they can rent apartments for any duration without commissions or upfront payments. Additionally, WOL does not discriminate against guests based on the presence of pets or children. For instance, there are apartments designated for allergy sufferers where no pets are allowed, and there are also floors where guests can stay with their pets.
Key features:
The WOL concept offers three types of apartments: studios, studio + one bedroom, and studio + two bedrooms. All apartments are equipped identically, with the only difference being the area. Studios are 25 m², one-bedroom apartments are 35 m², and two-bedroom apartments are 55-65 m². They all come with the necessary furniture and household appliances for comfortable living.
As for the infrastructure of the first property in the network – WOL.121 in Odessa, one floor is dedicated to it. There, you can find a gym with a terrace where guests can practice yoga, watch sunsets, and welcome sunrises during the summer.
“Another element of the infrastructure is coworking. His presence at the WOL.121 apart-hotel did not raise any doubts, because we started designing already in the conditions of COVID-19 and knew that many were now switching to working at home. That’s why we wanted to create a space where it’s great to work and communicate,” said Maria Turikova.
Aparthotel WOL.121, due to its proximity to the sea, has rooms for both short and long stays.
Selecting locations for apart-hotels
The choice of location for a property determines the mix of apartment types within it. For instance, if an apart-hotel is built closer to the central part of the city, it will predominantly feature apartments with smaller areas. Some units may even be regular hotel rooms without a kitchen. However, short-term rentals dictate a higher ADR (Average Daily Rate). Thus, constructing a complex solely focused on long-term rentals is not appealing to developers.
For the locations of WOL apart-hotels, some recreational areas are also considered. In such cases, the focus will be on long-term rentals, as larger apartments can be sold there.
At WOL.121 apart-hotel, due to its proximity to the sea, there are rooms available for both short-term and long-term stays. “”However, this location is not popular for business activities, so we understand that from May to September, we will predominantly have guests staying for short periods, like in a hotel. From late September to April, people will mainly check in for longer stays,”” said Arthur Lupashko, the founder of the Ribas Hotels network.
The company also plans to open apart-hotels of the WOL brand in Kyiv, Nikolaev, Poltava and Lvov.
Investors will choose the format of payments – a fixed rental rate or a percentage of the total income of the object, and receive a guaranteed profit.
Income-generating business model
Regarding the business model, WOL apart-hotel will offer apartments for sale to investors. Investors will have the option to choose between two payout formats – a fixed rental rate or a percentage of the overall property income. They will receive guaranteed profits based on their chosen payout format.
This business model represents a triple alliance: a hotel operator providing its concept and services, a developer handling the construction, and investors. In this case, the win-win-win situation arises when the developer completes the complex on time, designed by Ribas Hotels Group, and after its operational launch, the latter effectively provides management services to the investors.
The market has many micro-investors seeking passive income. Purchasing apartments in an apart-hotel aligns perfectly with their goals.
In the case of WOL, the investor pays $2000-2500/m² depending on the location and receives the apartments within the specified time frame
Among the main advantages of investing in an apartment hotel:
Not tied to location. This product is appealing for investment primarily because the investor is not tied to the property’s location. Comparing it to investing in a regular apartment, which requires physical presence in that city, income-generating real estate allows the investor to focus solely on locations with higher potential returns.
Tools for remote monitoring. Now, the Ribas Hotels Group team is implementing an application for investors WOL, thanks to which it will be possible to remotely control the physical condition of the apartments. These will be photo and video reports after general cleaning, a visit log, a booking calendar and much more. And these features are available online from anywhere in the world. This is one of the most significant advantages compared to renting an apartment.
Fixed price per m2. In the European and even Georgian markets, apart-hotels or tenement houses have long been more in demand than just investing in an apartment in a new building. It is more rational to buy a finished product, because there is a fixed price for it. In the case of WOL, the investor pays $2000-2500/m² depending on the location and receives the apartment within the specified time frame.
High profitability. WOL yield will be about $15/m² and will have a payback of about 10% per annum. These figures are close to commercial real estate. If you rent an apartment on your own, then the payback will be 5%, and, accordingly, the profitability will be lowed.
“So far, we see that consumers are getting used to quality service. We assume that with the advent of such objects, the rental real estate market will transform and change for the better. And guests will more often choose apartments with a full service cycle and high-quality infrastructure,” summed up Artur Lupashko.
