From a niche market to a full segment of the hospitality industry, the short story of serviced apartment is still on the move. With resilient results during the financial crisis, the future appears very promising, especially as big corporations are developing their concepts and marketing strategies.
Serviced apartments, corporate housing, extended stay, aparthotels are some of the various terms used to classify this fast-growing, self-contained lodging sector. Indeed, each of these separate labels justify a market position, whilst each brand and property, no matter where they position themselves, is unique. So how then do they differ?Over the past 11 years, I have been very privileged to work for a company whose guest list would not look out of place at the United Nations. All creeds, colours and faiths living under one roof without trouble or strife. Can I be so bold as to say that serviced accommodation as a lifestyle choice is the answer to World Peace? You decide…”“To understand the difference we must consider the sector as a spectrum or continuum. Extended stay and aparthotels sit more towards the hotel spectrum, whilst serviced apartments closer to residential. Differences then appear in the services and amenities provided,” Director, Cycas Hospitality, owning company of EMEA’s first Staybridge Suites, John Wagner told HTR Magazine.Available facilities, floor plans, location, character, minimum stay requirements and booking lead times are some of the underlying particularities. These are then fundamental attributes dictating how each property is managed and sold, i.e. distribution channels. “With branded extended stay hotels, there is access to a large central reservation system, global sales connection and Internet platform, as well as extensive brand member networks. All of these work as an automatic driver of demand,” added Wagner Aparthotels are also now more readily available on Global Distribution Systems (GDS), increasing their presence, booking channels and availability to TMC’s. Working with a GDS is manageable for this specific end of the sector, as their product is a lot closer to hotels, namely in terms of booking lead time, average length-of-stay (anywhere from transits of one night to one week stays) and having greater inventory. “At Amadeus we are constantly integrating new types of hotel properties based on the demands of our clients and to meet the distribution needs of hoteliers globally. Currently almost 900 aparthotel type properties in approximately 70 countries can be booked on Amadeus. These types of properties are mainly integrated through a targeted approach based on the demands of specific travel agencies and travellers,” stated Head of Hotel Distribution, Amadeus IT Group, Hugo Ehrnreich. Meanwhile, serviced apartments and corporate housing rely a lot more on traditional booking channels, driven by the company’s own direct sales and marketing (including website), as well as global agents and representatives. There is also greater emphasis on negotiations, as well as on flexibility and personalised sales, meanwhile room inventory is not as large and therefore flexible as aparthotels.Value-for-money lodging Either way, both ends of this apartment spectrum are offering a serious alternative to both traditional hotels and residential properties. As awareness grows, and as business and leisure travellers/residence begin to experience the benefits, both for short- and long-term stays, apartment concepts will continue to experience rapid expansion here in the UK and Europe, as it did in the US. “There is a clear indication that TMCs, which traditionally have chosen hotels for their accommodation programmes, are starting to include serviced apartments in their offerings and it is up to the serviced apartment operators and agents like ourselves to demonstrate to them that serviced apartments are a viable alternative to hotel accommodation and will save their clients’ money as well,” said Managing Director, The Apartment Service, Charles McCrow. “Awareness is still a key issue and many companies do not fully understand the sector or how it works. This is a gradual process but one with high results as converts stay with the concept once they understand it and find that it fits in with their corporate travel policies/ requirements.”Serviced apartments and aparthotels offer the comfort, privacy and flexibility of a self-catering property, combined with added benefits of many hotel-type services, such as maid service, room service, concierge/reception, as well as in-room amenities, i.e. towels, bathroom products, Internet, entertainment units and fully equipped kitchen. Location is also a fundamental advantage, usually centrally located, close to attractions/main areas and near good transport connections. Resilient Performance for Serviced Apartments Budget was no doubt the key word in 2009, a year marked by spending cut-backs. Booking windows also shortened significantly. Overall, demand for lodging in the UK contracted. However, serviced apartments and aparthotels generally still posted good results. “Based purely on indicators, I would say that we have outperformed the traditional hotel market, even though our length of stay has dropped significantly,” remarked Group Marketing Director, Think, Stewart Moore. “We saw some great figures last year. Occupancy and RevPAR increased around 14%, as compared with 2008. Unfortunately, our ADR dropped by around 10% over the year; however, this was not entirely due to the economy. We offered some significantly discounted rates for our phased released new buildings, but in our mature stock, we managed to hold our rates or increase our rates for the year,” added Moore.According to the Association of Serviced Apartment Providers (ASAP), occupancy rate (OR) among its own member sample held up rather well. Average yearly OR for London reached 86%, an encouraging two point increase over 2008. Q4 2009 was particularly strong and fuelled much of the year’s resilience, with OR averaging 90% compared to 81% during the corresponding period in 2008. For the rest of the UK, OR for 2009 reached 72%, representing a one point increase over 2008. Again, Q4 proved to drive this positive performance, as the economy stabilised and began to show signs of improvement.To confront this expected downturn and stagnation in OR, suppliers dropped rates to stimulate extra demand and fill rooms. In terms of Average Weekly Rate (AWR), London serviced apartments reached £843 in 2009, an almost 5% drop over the £887 achieved in 2008. In the rest of the UK, AWR totalled £538 in 2009, representing an 8.3% decrease compared to £587 in 2008. Considering conditions, these promising figures, together with the general flexibility of serviced apartments with inventories allowed this sector to survive much of the economic mayhem.“From a London centric perspective in November 2008 we reduced our inventory slightly more than in previous years to ensure that we managed our potential drop in demand more effectively. We also used this opportunity to churn poor quality units that did not meet our brand standards, this helped us to enjoy 2009 with slightly less inventory but a better grade and with newer and ‘greener’ units. During the last quarter of 2009, we experienced phenomenal growth in London, with a strong increase in demand – we are excited by the growth and all round positive message for the sector,” said VP Sales & Marketing, BridgeStreet Worldwide Serviced Apartments EMEA, Jo Layton. “From a Regional perspective all markets continue to perform better than we first anticipated in 2008 for 2009 – this is especially true for Manchester, Leeds and Heathrow – these are extremely competitive markets that see continuous new supply entering the market on an annual basis. Liverpool is still in its first year ramp up with many new strong hotel brands openings in the market.” added Layton.Promising future for Apartment sector Recent signs indicate a move in the right direction, with occupancy slightly better than the same time 12 months earlier. Slight improvements in the economy have help sustain this, as has the affordable rate of sterling, fuelling demand for short breaks and shopping expeditions, particularly from European countries.“In terms of the future, I think that we will see a larger number of overseas leisure visitors actively choosing serviced apartments, this will be mirrored by a rise in domestic leisure business. In this respect, I imagine that we will begin to emulate the more mature Australasian and North American markets,” continued Moore.Despite the slowdown in development, hurt by the financial downturn, as well as recent challenges in sustaining performance levels, the serviced apartment and aparthotel sectors in the UK are still very young. Indeed they have much room to grow.“There is a terrific opportunity with ample development opportunities throughout the UK and Europe. Take the budget and economy segment. Once introduced, it grew to prominence at a very fast pace. The same will occur with the serviced apartment segment. Major cities will be the primary focus for development of this segment, due to the concentration of multinational companies – the main demand drivers,” assured Wagner. “It is a function of time for these segments to grow here, as new hotel facilities are introduced and begin creating greater awareness of this type of product; its all about awareness and terminology,” concluded Wagner.Service Apartments Never Tasted So Sweet : Serviced apartments are fast becoming a preferred option for leisure and business travelers alike, especially in key gateway cities. Business Development Manager, Cheval Group of Serviced Apartments – Gloucester Park Apartments, Emma Stroud speaks to HTR Magazine about how her product sits in the UK’s sector. “If I had a pound for every time I heard the phrase “how much?” or, “that’s too expensive”, I would not be sitting here writing this article, I would be lying on a sun soaked beach with a frozen margarita in one hand and a juicy novel in the other.When I first started with The Cheval Group of Serviced Apartments in the summer of 1999, I was unaware of the prices I would be expected to rent apartments for, with a 90 day ‘minimum stay’ tag attached. I was slightly apprehensive and almost embarrassed. It’s one thing quoting £150/night for a hotel, but £1350/week + vat for a 2 bedroom apartment in 1999 was scary, especially when the commitment was 13 weeks!Those days are long gone and my conviction to the value, not just in how serviced apartments have benefited the hospitality and property industries parse, but also in the true value-for-money that it brings to consumers; business, leisure and diplomatic alike.In the eleven years that I have been working within this sector, I have seen serviced apartments within the UK develop from a Central London niche to an industry that leads not just Europe, but certainly makes its mark around the world.At Cheval, we have met and shown our product to top level executives of global hotel brands; apart-hotel and corporate housing companies from the US, Far East and European countries all wanting to know ‘how we do it’ at the top end of the market in the UK.“Luxury Apartment!” How many times have I read that phrase and wondered “what is a “luxury apartment?” Just browse online, and it appears to be anything from a studio bed-sit in Earls Court London to a 4-bedroom penthouse overlooking Hyde Park. So, how do we ensure our market is perceived and understood in an accurate and realistic manner?In 2007, Visit Britain launched an industry specific grading system. Whilst not compulsory, it does provide clear guidance to those considering using apartments as an alternative to hotels possibly for the first time (Quality in Tourism). The Association of Serviced Apartment Providers (ASAP) in the UK stipulates that all members must be assessed by the ‘Quality in Tourism’ scheme on an annual basis. To those within the industry that are not members of ASAP it is not obligatory. However, without structure there is only anarchy and so apartment providers need to look at the bigger picture and long term benefit of the assessment scheme.In Central London a typical one bedroom apartment can range in size from 50 m² to 80 m² at an average rate of £1,500 per week for a 4-star apartment. When comparing this to a standard room in a 4-star hotel of approximately 25 m² in size, with an average nightly rate of £210 it is very easy to see how popularity has driven demand to a point where over 540 new apartments became available in the UK during 2009.Quite a gamble, some might say when taking into account the global economic crisis of the last 18 months. I believe it reflects the commitment and belief in the stability of our market place for the long term; while providing more choice to the consumer and more competition between providers which in turn should keep both standards and quality of service at it’s best.I am a true believer in “you get what you pay for”. However on the other side of the coin, “if you don’t ask you don’t get”. During the summer months I experience the annual bun fight when it comes to overseas visitors procuring apartments of their choice. Remember, once it’s gone its gone! Booking or wait-listing is essential I believe no less than 4 months in advance. Some guests book or reserve apartments a year ahead. It’s a little mean, but I can’t help chuckle at those expecting to find a 3 bedroom apartment in Kensington in July with two weeks notice; harsh but fair.
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