Cracking the serviced accommodation market takes a brave heart, not to mention considerable resources. However, having built up a considerable brand presence on the other side of the world, Quest Apartment Hotels is making it easier for franchisees to own and run their own aparthotels business here in the UK.
Born from founder Paul Constantinou’s extensive experience in the hospitality and hotel-management space, Quest Apartment Hotels began life in Melbourne in 1998 – albeit in a rather different form. “The first Quest wasn’t a franchise: it was basically a partnership between him and a developer,” says Andrew Weisz, director of UK development at Quest. “So the developer was developing out a site with Paul as the operator.” The next few aparthotels were run on the same basis, until Constantinou began to realise if he began to bring on board other stakeholders there was a broader opportunity he could capitalise upon. “He saw there was a gap in the marketplace for extended stay corporate travel, a gap which our style of accommodation met,” says Weisz. “But after opening three or four businesses, Paul realised he couldn’t run that volume by himself so he started to franchise.”
However, as Constantinou developed Quest’s franchise model, he adopted a radically different model to other brands working in the space. “It’s not like the typical hospitality franchise you have here in the UK where basically someone owns the building, they appoint managers or the brand as a manager and pay a franchise fee,” Weisz says. “We sign up the developer on the basis that it will be a Quest, which gives the developer their spending – say £10m, £20m or £30m – for developing an asset and the franchisee manages it but with the support of the Quest brand sitting behind it.” A massive benefit of this system is that it doesn’t restrict entrance into the hospitality sector purely to those with an extensive property portfolio or many assets to leverage. “If you wanted to run your own aparthotel, no one’s going to invest that sort of capital unless you’ve got a very strong balance sheet,” says Weisz. “We give them a path where other paths to owning a business of that scale don’t really exist.”
Perhaps one of the biggest endorsements of the model Constantinou had hit upon was that many of his initial franchisees were his own members of staff. “We had a lot of people at Quest corporate offices sign up for a deal; a lot of the first businesses were owned by ex-corporate employees,” Weisz says. “They worked in the business so they knew the benefits of owning the franchise.” However, once its pool of initial franchisees hit ten, Quest decided the foundations were in place for significant growth and it started to actively court prospective franchisees through the franchise press and by holding seminars. And this helped validate Constantinou’s vision of effectively democratising ownership of aparthotel businesses. “It’s proven to be really successful because you get people who are not just from a hospitality background: you get people who have worked as accountants, bankers or school teachers,” says Weisz. “There are myriad franchisees from different backgrounds out there.”
And this is something Quest has actively leaned into: one of the things that really sets it apart from the competition is how the simplicity of the model lends itself to those who may not have as much industry-specific knowledge. “In, say, a beverage franchise, there are a lot of moving parts,” Weisz says. “Whereas with Quest’s model, the franchisee can focus on actually running their business, rather than all of the moving parts.” Thanks to technology platforms like the global distribution system, booking engines and relationships with online travel agents and direct booking channels, franchisees can focus on running their businesses, rather than getting bogged down with the nuts and bolts. “And because it is a full-format franchise system, we also have accounting platforms and field support managers that are there to provide additional support,” says Weisz.
However, franchisees still receive comprehensive training and guidance, beginning even before they sign on the dotted line. “It starts off with their initial expression of interest: they’re introduced to their franchise-recruitment manager before progressing all the way up to meet the CEO,” Weisz says. “And once they are approved for a franchise, then we start advising them what franchise opportunities we have available.” Once their offer to buy the franchise has been accepted, franchisees are moved into the Quest academy, where they are trained on the ins and outs of running the business. “That includes classroom training, onsite training in an existing Quest franchise business and they also get training on-site at their own aparthotel property location prior to and post-opening,” says Weisz.
Thanks to its diverse portfolio of franchisees and comprehensive training package, Quest quickly came to dominate in its domestic market: over the course of 30 years it came to add 127 sites around Australia. However, Constantinou wasn’t content with stopping there. “Paul never intended Quest to just be an Australian model: it was always intended to grow overseas,” he says. After entering New Zealand in 1998 and adding 35 sites, it was time for Quest to find a new international location and one country stood out as the obvious choice. “We selected the UK predominantly because Australia is part of the Commonwealth so the legislation around leasing property is very similar,” he says. “There’s a lot of synergy between the two locations.”
But the regulatory resemblance between the two countries didn’t mean there haven’t been some cultural differences that Quest has had to acclimatise to. “The apartments are a little bit smaller than they are in Australia,” says Weisz. “That’s just a regional difference: people are used to a bit more space in Australia than they are here.” But Britons’ willingness to embrace cosier accommodation isn’t the only factor that Quest has had to get used to. Another cultural quirk Quest has had to take into account in the British market is the relative scarcity of aparthotels. While Australia’s biggest provider has some 10,000 aparthotels to its name, its largest British counterpart only has around 1,200. “That’s extremely small when you consider the Australian population is 23 million and in the UK it’s 65 million,” Weisz explains. “There isn’t the market depth and knowledge of aparthotels that there is in Australia so one of the most challenging things is educating people about them.”
Despite this, Quest has already made a considerable impact in the UK: at the beginning of November it attracted plenty of column inches in the property pages when it announced that it had signed its first site in Liverpool, an ambitious £10m development in the city centre. And there’s more where that came from. “We are targeting major regional cities and we’re in discussion over a number of sites,” Weisz says. “To give you an outline, the areas we’re looking at are Birmingham, Bristol, Manchester, Leeds, Glasgow and Edinburgh.” As you can probably tell, Quest’s focus is on regional cities to begin with, although Weisz does reveal that, in spite of central London’s high property prices, the brand does have some specific boroughs in its sights. “Stratford there’s already a couple of examples up there, Croydon we think there’s opportunities, obviously Heathrow,” he says. “But London in general is a tougher market.”
And Quest isn’t just restricting its horizons to the British market: there are plenty of places on the continent crying out for its services. “No one wants to take on old office space but it needs to be converted and repositioned as an asset for the next 25 years,” says Weisz. “That’s not just true of the UK: it’s happening throughout Europe.” Fortunately, Quest has an ally in this: in July this year international serviced-residence provider The Ascott bought a majority stake in Quest, offering up some valuable brand partnership opportunities. “They already have an existing brand Citadines, which now has 42 properties predominantly in France,” Weisz says. “Its presence there provides us a stepping stone to get into Europe, as well as enabling us to leverage their “market knowledge of the continent.”
Without a doubt, Quest has some bold plans for its future. “You can talk about it for as long as you like but eventually you’ve got to make the leap,” concludes Weisz. “We’re taking the chance.””