Blackstone-Funded Edyn Aims to Glam Up Europe’s Extended-Stay Hotel Market

Extended-stay hotel brands have boomed in the U.S. and Asia during the past few years. But Europe has relatively less inventory for hotels that serve guests staying between a few nights and a few months.

Aiming to fill this gap is Edyn, a UK-based group owned by Brookfield Asset Management that runs apartment hotels with eye-catching decor. Blackstone, the world’s largest asset manager, has in the past year joined KSL Capital Partners in providing more than $350 million (£300 million) in loans via a multi-asset debt facility to help Edyn grow.

“We’re taking elements of the lifestyle hotels and merging them with serviced apartments that we mostly build from the ground up,” said Andrew Fowler, acquisitions director at Edyn.

Blackstone’s bet on Edyn is small when compared with its $6 billion takeover, along with Starwood Capital, of U.S.-based Extended Stay America, announced a year ago. But Blackstone, which has long invested in hotels, appears to be interested in extended-stay’s applicability in Europe, given the Edyn deal.

Edyn’s brands include Locke and Cove, with about a dozen properties and more than 2,000 guestrooms in the UK, Ireland, Germany, the Netherlands, and (soon) Switzerland. It plans to add about a half dozen properties in the next two to three years.

Money Talks in Extended Stay

Edyn targets a more boutique niche of the extended-stay segment. The gross operating profit for Edyn’s properties can reach the 65 percent range in strong markets, said Eric Jafari, chief development officer and group co-founder.

“A guest who stays between 7 and 28 days reduces all the costs related to churn, such as housekeeping and laundering the linens, compared with a guest staying just a couple of nights,” Jafari said.

That reality means the operator can afford to lower the rate it charges guests who stay longer because they’re effectively more profitable, while still providing “lifestyle” touches.

Edyn’s executives believe they can deliver a property that feels like a lifestyle hotel but runs at lower cost. A “less is more” aesthetic helps keeps budgets tight.

They claim its Locke brand has an average FF&E [furniture, fixtures, and equipment costs] of more than half that average at lifestyle hotels. The Locke brand keeps costs down by cutting out middlemen. It seeks bespoke pieces in volume deals direct from designers, such as Carl Hansen and Ozzio Italia.

Savviness about how to set rates for guests can also help support profitability.

“If you have good revenue management and you charge the right rate relative to the length of stay, you can get a very favorable GOP [gross operating profit] compared with lifestyle and luxury hotels,” Fowler said.

Competitors Eye Extended Stay Hotels

Other players offering apartment hotels with eclectic decor include Native, Zoku, Wilde, and Lakestar-backed Limehome.

Preparing a property for extended-stay guests is harder than it looks. Vacasa, which is hoping to convert some of its homes to stays for 30 days or longer, has discovered this.

“It might sound like you flip a switch,” said Vacasa CEO Matthew Roberts during a recent JPMorgan investor conference. “You don’t just flip a switch. There’s lots of compliance. There are legal constructs. There are landlord-tenant laws that kick in, in certain geographies.”

An Unlikely Bet on Asset Heavy

Edyn thinks it can compete better than most rival operators in boutique extended stay because it does everything under one umbrella in an asset-heavy model — sharply contrasting with industry trends toward asset-light approaches.

“The brand, the development team, the operations, the design, and so on is all done internally,” Jafari said. “That means you don’t have, for example, a landlord trying to squeeze every bit of profit out of the deal at the expense of the operator’s brand promise.”

By going asset-heavy, Edyn also will on focus on launching about a handful of hotels a year. This focused execution will help it keep costs down.

“We made a decision very early on not to work with hotel designers,” Jafari said. “We instead hunt for up-and-coming, food-and-beverage designers who have demonstrated they can create unique local spaces with big followings on tight budgets and small teams.”

Savviness about local rate trends based on truly relevant comparison properties can also help support profit.

“If you have good revenue management and you charge the right rate relative to the length of stay, you can get as high as 68 percent GOP [gross operating profit],” Fowler said.

Avoiding expensive hotel designers is another Edyn tactic.

“We made a decision very early on not to work with hotel designers,” Jafari said. “We instead hunt for up-and-coming, food-and-beverage designers who have demonstrated they can create unique local spaces with big followings on tight budgets and small teams.”

U.S. Brands May Struggle in Europe

Edyn’s leadership claim that U.S. companies — such as Marriott International — have struggled in the past 15 years to export their extended-stay brands to Europe as fast as they had hoped.

The owners, developers, and operators working on big brand projects often stumble on the customizations required to adapt to local market regulations, tastes, and pricing, the executives claimed.

“We learned the hard way in building our Locke brand that different cultures have different expectations about extended stay,” Fowler said. “In each market, it can take at least six months to learn the local regulations, for example.”

All the local quirks can imperil brands seeking to impose global brand standards, Edyn’s executives claimed.

“In Paris, it’s long-established that a 25-square-meter unit is massive,” Folwer said, giving an example. “But in the UK, corporate travelers traditionally get a 41-square-meter unit. In Milan, the minimum square footage regulatorily allowed for an apartment with a kitchen is about 28 square meters. In Zurich, we discovered that, according to local code, half of our units couldn’t have kitchens. In some markets, you have to be a derivative of a residential product, while in others, you have to be a derivative of a commercially based product. And on and on.”

Social Programming in Extended Stay

Remote workers and frequent corporate travelers often battle loneliness. Edyn aims to address this with what it calls social programming. While many lifestyle hotels talk about creating activities and experiences, Edyn says it’s easier to engage guests when they’re staying at a property for longer, as they do in extended-stay properties.

The Locke brand of properties holds weekly workshops and activities, such as wine tasting, food masterclasses, mini-concerts, collage, yoga, running, and terrarium building, that are curated by the local team. None of this programming is standard in traditional serviced apartments. Edyn’s executives believe that social programming, and perks such as free access to co-working spaces on a first-come, first-served basis, can help the brands stand out in the market and earn repeat business.

Edyn plans to open a half-dozen Locke-branded properties in the next few years. That might not sound like much, but because the group is asset-heavy and takes all the revenue, it could earn a multi-billion euro valuation within a couple of years, executives said. No wonder Blackstone has shown interest.