Serviced apartments: Going from strength to strength
As serviced apartment stock booms and suppliers become more innovative, should corporates be moving more of their spend into the sector? Catherine Chetwynd reports
The serviced apartment sector goes from strength to strength: larger European operators have grown at an average of 6.1% per year in unit numbers, a figure that is due to escalate to 39.4% before the end of 2022, representing more than 13,000 units.
And the UK accounts for one-third of planned European growth.
Accor, Staycity and SACO are main contributors to this, largely thanks to their lifestyle-focused brands, according to Savills’ Spotlight, European Extended Stay Market report. Main UK cities of interest are London, Manchester and Edinburgh. And Dublin, to date desperately short of stock, is expected to grow by 1,484 units in eight projects by 2022, including several projects from Staycity and SACO’s Locke.
Further opportunities for serviced apartment operators include a group of high-growth cities: Oslo, Stockholm, Madrid, Edinburgh and Dublin, plus Tallinn, Warsaw, Sofia, Berlin, Budapest and Porto, according to Savills, Oxford Economics and official local tourist office statistics. Favoured destinations tend to be those where there is notable tourist arrival growth and a strong
GDP outlook, so operators can tap into both the leisure and corporate markets.
Although the sector has become a recognised asset class, the main deterrent for investors is the lack of purpose-built stock, although operators are now pursuing expansion through new development.
Staycity’s acquisition of developer Pretique is a good example. It will build its own sites, alongside those with partners, to secure sites and stop having to acquire leases.
Meanwhile property entrepreneur Stephen Vernon recently acquired a 5% shareholding in Staycity and has become a non-executive director, all with an eye on boosting its expansion programme.
Further evidence of this trend is the level of applications for the job of Chief Executive at SACO, which was landed by Stephen McCall, former Chief Operating Officer Europe at IHG, plus the appointment of Cycas’s first Chief Executive, Matt Luscombe, a former Chief Commercial Officer at IHG.
“We are finding loads of exciting opportunities,” says Native Chief Executive, Guy Nixon. “We have grown up; we are clear about what our brand is and have become easier to work with.”
Supporting these strong signs is the sector’s greater traction with corporates. Research released by ASAP and Business Travel Show found that among the 134 corporate buyers polled, 29% increased serviced apartment booking in 2018.
Adagio notes that smaller companies, formerly less visible, are showing new needs and are potential clients.
Frasers Hospitality COO EMEA Rebecca Hollants van Loocke says: “There is still work to do and making sure corporates see the apartment sector as an alternative is key.
“It is important to reassure corporates that apartments are safe and secure, and being part of the Association of Serviced
Apartment Providers (ASAP) accreditation is a great support with this. RFPs need to be adapted for longer stays and accommodate all that an apartment has to offer.”
ASAP accreditation is proving a success for suppliers and their clients alike. “Two have confirmed that they have recently won contracts on the back of accreditation and five organisations that left us when we went 100% accredited at the end of last year have said that they have lost business and want to come back,” says ASAP Chief Executive, James Foice.
“We are also seeing a rise in the number of corporate buyers who are opting to book only via accredited apartment providers.”
However, Oakwood Managing Director EMEA, Ken Moore, insists companies need to ‘socialise’ the inclusion of serviced apartments into travel programmes. “It is not as simple as ‘if you build it they will come’. There is a robust middle step required so that employees understand the benefits and change behaviour.”
Reluctance to book serviced apartments may be a hangover from the days of fixedterm stays, self check-in and no welcome.
“The sector has a lot of myths to dispel and is working hard to do this,” says COO of SACO, Nick Barton. “Today’s easy to book, flexible models, such as aparthotels and new lifestyle brands like Locke, which cross over with hotels, are putting the sector on the map for both converted buyers and those who have been reticent to date. This is coupled with the clamour for Airbnb from corporate travellers – and not always from the millennial generation either.”
Evidence of corporate faith in serviced apartments comes in the form of EY’s booking of between 180,000 and 200,000 nights a year through its long-stay vendors. These are generally used for those on project work and people relocating, who are looking for somewhere to live long term. Transient travel is a smaller proportion of the whole.
Badge of honour
It is important to reassure corporates that apartments are safe and secure, and being part of the ASAP accreditation is a great support with this”
“We generally encourage people to use serviced apartments if they are spending five nights in one location – less time than that and they would stay in a traditional hotel,” says EY’s Global Supplier Leader, Travel Meetings & Events, Tim Nichols.
“They book through our TMC or intranet site, which goes through to the vendor for completion of the leasing process. Last year, we implemented an innovative online booking platform for long stay, which provides instantaneous online booking for serviced apartments in the US, London and elsewhere, and which gives a quick connection between vendor and traveller. It is much more efficient and we get great feedback from travellers.”
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Serviced apartments comprise a relatively small proportion of overall travel spend but still represent significant sums of money.
As was highlighted in the latest Global Serviced Apartments Industry Report (GSAIR), travel managers are increasingly turning to their TMCs/agents to manage this service, which enables cost and traveller tracking to be consolidated into established reporting tools.
And TMCs are working more with specialist providers to procure serviced apartments due to the idiosyncrasies of the sector. As TAS Chief Executive Charlie McCrow points out, this is largely due to the lack of visibility of serviced apartments on the GDS, for reasons such as difficulties in identifying properties (names don’t always give it away), lack of availability, cancellation charges and the requirement for a higher touch as traveller preferences and other personal details are expected to be managed in more detail.
Stay extensions also stand in the way of booking serviced apartments online, as they are often arranged direct at the property, causing fractured information for reporting, traveller tracking and duty of care.
“When we relaunched our website a few years ago we carried out some research which showed that while 89% of bookers like to research online, they much prefer the reassurance of dealing with a knowledgeable consultant, especially when dealing with longer stay, high value bookings,” says Select Apartments Managing Director, Simon Morrison.
“And if for any reason something does go wrong with a booking, it can be easily rectified, which is not always the case with a GDS. The biggest plus is that we guarantee a one-hour turnaround to all enquiries.”
Confident approach
Like the sector it represents, ASAP is also going from strength to strength. “Through the formation of a global alliance, we’re looking to drive this understanding worldwide, while also utilising our newly launched directory as a portal for visibility at stayingwithconfidence.com – both will help to ensure minimum standards for guests as we bid to safeguard the reputation of the industry,” explains Foice.
“By getting more associations on board, we’re hoping to increase the level of traction among the corporate buyer community on a global scale,” he adds.
Similarly, the big players are also highlighting standards and facilities. For example, apps that allow mobile check-in contain an electronic key to apartments and allow guests to communicate with front desk or housekeeping are beginning to take hold in the sector: SACO already does this while Cheval Residences will roll out mobile keys at Gloucester Park when it reopens after a refurbishment later this year.
Frasers’ app will allow online mobile check-in, serve as a key and enable requests. “Local information is appreciated by guests and apps offering concièrge services, 24-hour chat, booking engine capability and other functions such as food delivery are extremely valuable in our industry,” says Hollants van Loocke.
House of Fisher recently upgraded its online booking engine to provide a more efficient, customer-friendly service. “It crosssells the locations better, offering a solution that fits date range and/or price and promotions; and we are able to offer
While 89% of bookers like to research online, they much prefer the reassurance of dealing with a knowledgeable consultant, especially when dealing with long-stay bookings”
long-stay discounts and details for anyone looking at 28 nights or more,” says Managing Director, Trine Oestergaard.
Also seeing an increase in online bookings of 28 nights or more, both direct and via OTAs, is SACO. This is partly due to improvements in direct booking platforms and because shoppers are becoming more comfortable with larger online spend. On the B2B side, the industry is trying to bring longer-stay business such as projects, relocation and secondment bookings online to help meet more demanding SLAs.
“This is in its infancy but could grow substantially as booker/guest generation become more millennial,” says SACO’s Barton. “Part of this is also influenced by travellers’ being given more freedom – for example, given a budget and told to book what they want, rather than being constrained by managed travel programmes that dictate preferred suppliers and are bound by traditional norms.”
Jo Layton, Director of Bloom Mobility Consulting and Corporate Apartment Programmes Worldwide (CAPWW), agrees: “Corporate clients are definitely seeing the benefit of accessing availability and online booking for travellers in the long stay space.
But there are barriers, she adds: “In many global locations a signed lease is required by the operator for the unit. Whether this lease is signed directly by the traveller or on behalf of the traveller, this requirement can quickly halt the opportunity of a fully online global programme and can prove expensive if not managed correctly.”
Meanwhile, Adagio’s new internal data system records guests’ preferences and makes them accessible to all properties, allowing hotels to prepare personal touches before guests arrive. And Oakwood is undertaking a three-year digital transformation, which includes the next generation of accommodation management tool ‘epic’, a recently launched mobile app and oakwood.com. Meanwhile, a partnership with TravelClick will deliver greater streamlining with fewer points of contact on the reservations platform, realtime booking and more transparent pricing.
New world order
The growth of dual-branded properties and having to meet the needs of ever-more demanding clients are two of the biggest trends in the sector.
Adagio has noted a contradictory approach from guests – calls for relaxation and yet more connection, for more personalisation and more privacy, and the desire to live like locals while sticking to their usual habits. The brand will be launching premium apartments and has just initiated a breakfast that combines a hearty buffet in situ or an Adagio-to-go service that is picked up from reception.
SilverDoor has opened its Americas headquarters in Denver, Colorado. “With offices in the UK, US and Singapore, we are now able to offer our clients a 24-hour global account management service,” says Commercial Director, Stuart Winstone.
Meanwhile, Native recently achieved an ‘Excellent’ BREEAM sustainability rating for Native Bankside, illustrating the company’s commitment to cutting its carbon footprint.
Dual-branded properties continue to provide complementary services, with shared investment cost for brands, bigger ROI for investors and consolidated back-ofhouse operations delivering savings of up to 15%. At the same time, guests get more choice and increased opportunities for earning loyalty points.
Developments include Paris Hyatt Place/ Hyatt House, which is under construction at Paris Charles de Gaulle Airport (2020). Holiday Inn in Cardiff will be refurbished and gain a 75-unit Staybridge Suites and Moxy/Residence Inn opens in Slough alongside residential apartments.
“It’s easy to see how Moxy’s bar will appeal to locals as well as hotel guests and how
Apps offering concièrge services, 24-hour chat, booking engine capability and other functions such as food delivery are extremely valuable”
the wider development will add new life to the town centre,” says co-founder of Cycas, John Wagner, who draws parallels with Cycas’s Holiday Inn/Staybridge Suites in London’s Stratford, where guests benefit from the Westfield shopping mall on the doorstep and the hotels benefit from the retail teams that visit the stores.
“At a time when the retail world is struggling, we come across conversion opportunities as former department stores come onto the market,” he explains.
“We’re increasingly seeing that incorporating hotels into mixed-use developments and regeneration schemes can help inject new life into town centres.”
Great technology, smaller rooms and more focus on mid-term stays contrast with reduction in average length of stay, possibly reflecting a more cautious approach and reduced confidence, thanks to Brexit.
The ‘B-word’ has also seen some businesses holding fire on projects, pending the outcome of the negotiations, and while shorter lead times put on pressure, an appetite for new brands (SACO's Locke, for example) maintains the buzz.
Globally, Oakwood sees huge potential in Africa, particularly the Nigeria-Kenya belt, and like many in the sector is focusing on emerging markets and key gateway cities in Europe such as Frankfurt, Paris, Dublin, Amsterdam, Geneva, Warsaw and London, plus other UK cities.
And although many companies continue to focus on cost, a worldwide upsurge in growth markets is transforming the global economy, leading to corporate demand for extended travel and long-term relocation programmes. In addition, “Multi-family housing (US) or private rental sector (UK) is of growing interest to developers,” says TAS’s McCrow.
These large residential buildings can be compared to the mansion blocks in London such as Chelsea Cloisters, Nell Gwynn House or even Grosvenor House. They offer more services than the typical residential landlord, including bicycle stores, gyms, reception desks with porterage, function rooms and support services such as cleaning and highquality concièrge.
“These will typically be long-term rentals but this is a rapidly growing sector in the UK specially,” explains McCrow.
More controversially, Cheval’s George Westwood suggests the sector could
At a time when the retail world is struggling, we continue to come across conversion opportunities as former department stores come onto the market”
become more relaxed in its approach: “We will start to see a mixture of short- and longterm stay, five-star and four-star properties with common areas and a community workspace such as WeWork all under one roof. Consumers are driving this change.”
To cater for the demands of consumers and the speed at which the market evolves, operators and developers are going to have to be nimble to keep up. Technology will continue to play a major role in the industry but service is also essential – robotic vacuum cleaners may make customers smile but robotic receptionists will not.