In 2003, having built a small student housing business in his native Scotland, Charlie MacGregor, then in his late 20s, moved to the Netherlands to do the same there.
By 2012, armed with backing from Carlyle, the private equity group, he had found a new operating model: to keep costs down, he licensed buildings as hotels, rather than residential units; he created high-end interiors, emphasising amenities and large communal spaces; then he rented rooms out to students for long stays, while keeping some back for visiting parents — which generated a handy auxiliary income.
One day, he met a 60-year-old sales rep in the lobby of one of his Amsterdam buildings, where she was staying as a hotel guest. A regular business traveller, she said she kept returning for the atmosphere, explains MacGregor, who is now 49.
“It takes my age away, she told me,” he recalls. “I realised we had all these corporate travellers coming for the communal vibe generated by students walking around with a beer, playing ping pong, or hanging out doing handstands in the gym.
“We had disrupted student housing; now we realised hotels were also in need of disruption.”
By 2014, MacGregor’s business, The Student Hotel (TSH), had expanded to Barcelona and Madrid, and was pioneering a new model of hybrid hospitality. The next move was adding co-working spaces, he explains. “I thought: we have thousands of rooms; how hard can it be to rent out tables and chairs?”
To the already novel mix of students, parents, and business travellers, this added local corporates, freelancers and entrepreneurs — bringing yet another social dimension and, McGregor believes, tying the buildings closer into their local communities.
TSH’s business model fared well even during the pandemic. Empty hotel rooms were filled by students keen to swap lonely lockdowns and remote studying in atomised flats across the city for facilities, co-working spaces, and the company of their peers. Universities even rented event spaces in TSH buildings to hold their classes.
And, packed with amenities, designed for longer stays and providing social opportunities through diverse users, TSH’s model was well positioned for the shift in business and personal travel in the wake of pandemic restrictions.
“Hybrid working is blurring the lines between corporate and leisure travel,” notes Abhishek Jaiswal, partner and head of real estate M&A at Deloitte in London. “People are travelling less for work and staying longer. Individuals can work remotely during weekdays from hotels or extend their leisure trips beyond just the weekend. Hotels and resorts are catering for that in how they design the spaces in rooms and lobbies.”
TSH’s model has proved a good match for investors’ changing appetites for real estate, too. Having seen the sector transformed by Covid and by higher borrowing costs, many investors are keen to protect themselves against future economic shocks, according to Richard Dawes, director of Savills’ UK and Europe Hotel Capital Markets team.
“Buildings that can ‘flex’ to changing market conditions — as TSH’s did during the pandemic — build in diversification for investors. If demand for student accommodation falls off in a city, but demand for hotel rooms increases, TSH can flex, protecting the asset and business,” he explains.
Big-ticket mixed-use developments like these also suit investors’ appetite for cutting internal costs, because they reduce the number of deals investors need to get involved with to deploy large sums of money.
In 2022 GIC, Singapore’s sovereign wealth fund and APG, a Netherlands-based pension provider, took an undisclosed stake in TSH, backing a strategy to grow the portfolio, eventually, to 50 hotels — double the 25 it owned at that time — and valuing the business at $2.1bn.
Such an expansion will mean taking advantage of current discounts in Europe’s office market to pick up cheap buildings that TSH can repurpose, and it has two deals currently under negotiation in Edinburgh and London.
$2.1bnValuation of The Social Hub after 2022 investment
How quickly these can be brought online, and whether the expansion will proceed as envisaged, is unclear. The larger buildings that would suit TSH’s mixed use are rarer than those needed to support a simple student or hotel business, alone.
“Given the blended concept is more nascent, often it can take projects longer to secure planning,” adds Dawes, who notes local authorities are more familiar with traditional mono-use solutions. “This could result in slower growth and somewhat increased development costs.”
But precisely what the next reinvention of TSH will look like is still taking shape. There has been a rebranding, including a new name: The Social Hub. There has also been a promise of more focus on social impact, including community programmes, a new talent foundation, educational courses, and closer ties between students and the co-working tenants who may employ them.
“We will double down on community,” MacGregor says.
“Student accommodation has reached its peak, there’s a limit to how many ping pong buildings you can [fit], and hotel customers focused on loyalty rewards are a dying breed,” he adds. “The next generation of consumers want to give back and be part of something that is purpose-driven, bigger than themselves, and plays a role in the local community.”
