Daniel Johansson revealed details of extensive Glasgow projects along with the firm’s Dubai debut.
What does Cheval’s overall group pipeline currently look like and how has this progressed in recent years?
We currently have 12 properties open, with 675 keys (or 1,150 bedrooms) and a pipeline of three projects, adding another 370 keys (or 420 bedrooms), bringing the total number of keys to over 1,000. The pipeline consists of: a Cheval Maison opening in Dubai next year (2023), followed by our first property under our new My Locanda brand, which is due to open in Glasgow the following year (2024). This will be followed by a Cheval Maison, also in Glasgow, in 2025. As a company we are celebrating our 40th anniversary, but we have seen our growth accelerate since the announcement of Cheval Collection in 2019 and our portfolio double, largely during the pandemic.
Why did you earmark Glasgow for development?
Glasgow is a great city and has been part of our UK expansion strategy from day one but it really came into focus following our entry into Edinburgh, where we have been operating three Cheval Residences branded properties since 2020. We are launching our My Locanda brand with a property in the city, working with the owner and developer of our Edinburgh properties, who shares our vision of a great project in central Glasgow. The second project in Glasgow, a Cheval Maison, was also announced this year, with another owner/developer we love to work with. By the time we were having that discussion we were convinced that the market had a lot of potential and could easily accommodate both brands, which are quite different.
What prompted the international expansion to Dubai?
We are very ambitious when it comes to international expansion and we are fortunate enough to have secured a project in Dubai which will open in Q1 next year (2023). We believe this opening will help to build growth in the region and we are actively looking for developments. Our team in London is primed to support projects around the world, supported by our extensive international sales representation.
Which other destinations are you identifying as having the most potential for Cheval developments?
We are confident that there is potential for any of the Cheval Collection brands on a global basis however we are, for the moment, focusing on urban and resort locations in key cities and destinations across the UK, Europe and the Middle East. With 40 years of experience in operating properties in London, it makes sense to broaden our footprint in the UK, where there is also growing interest amongst developers and investors for more serviced apartment projects. Our heritage of successful operations in London underpins our track record and emphasises our understanding of what it takes to perform in highly-competitive markets.
Which brands will you be concentrating on developing in the next few years?
We are constantly tracking and analysing the different types of projects we review; newbuild, conversion, refurbishment, where they are located, and for which brand. It does vary but as a snapshot of projects that we have in discussion today it is interesting to see that we have quite an even spread across the three brands.
Luxury is proving to be very resilient against a backdrop of a higher cost of living, so we are exploring some exceptional opportunities for Cheval Residences. Cheval Maison, with its flexibility in micro locations, sizes of units and number of keys, is suitable for a wide array of projects, including those where there may be a ceiling on average daily rate for a Cheval Residence property.
Whilst we have worked on My Locanda for a number of years, we have to give this a little time to mature, given that we only launched the brand and first project earlier this year. This is likely to gain more traction after the first property opens and we have proof of concept. Branded residential is another element which I believe will feature in some of our future projects, and if you think about it – who would be better placed to give service to branded residential than someone with 40 years’ experience?
Do you prefer newbuilds or conversions for your projects?
It is no surprise that I would say we encourage both, but both do have their appeal, for different reasons. New builds are fantastic because we can influence the design from day one and really integrate everything the brand stands for (including great environmental initiatives and future proofing), however it does usually mean that a project takes much longer to come to market and start earning fees. Conversions often have a shorter turnaround time and we have had the pleasure of working with some extraordinarily characterful buildings; some of them hotels, some of them office or retail buildings.
Has the ratio of newbuilds and conversions in your pipeline changed in recent years?
We have a mix of properties, although recently we have been reviewing more conversion projects, which is linked to higher construction costs, supply chain issues and more expensive financing options for newbuilds.
Have you found it easy or difficult to attract investors for your projects of late?
If it was easy everyone would do it. There is a lot of money out there waiting to be deployed, but it is very cautious and focused on finding value-add projects which are hard to find. We are fortunate because there has never been greater interest in serviced apartments, and the more quality product that developers and operators are bringing to the market, the better it is for the sector as a whole and for all of us in it. It is a great business model and has proven resilient on so many occasions. We didn’t close during the pandemic, generally have a leaner staffing model and we are just finishing up a strong 2022 which has outperformed 2019 by some margin, on both top line and bottom line.
Have the recent volatile economic conditions, particularly in the UK, impacted your development decisions at all?
Conditions have not deterred our confidence or strategy – our model means that we have always had nimble operations, which help us find solutions, whether they are finance, payroll or energy related. We are here for the long term so we can be patient and not take rash decisions, which gives us an advantage.
What strategic direction do you see Cheval’s developments going in over the next few years?
It will be essential to continue with what we do; to choose our projects carefully, work closely with our owners, look after our staff, deliver great service and create outstanding serviced apartments. As far as locations go, the world is our oyster, as we are merely at the beginning of our international expansion and have a lot of places earmarked – which are crying out for quality serviced apartments. When we look at new project opportunities we also take a view on how it will link to another city that we are considering and what synergies we could create. For example, would the destination be part of a popular route and how can we find economy of scale and efficiencies which could eventually be built into the support we give to the properties and our owners? I can also see a move into Asia being on the cards in the next few years.