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A desire for more sustainable stays and increased emphasis on wellbeing is changing the face of accommodation, writes Gillian Upton
We have a lot to thank the likes of Booking.com and Trivago for as online travel agents (OTAS) have alerted the travelling public to the idea of shopping around to get the best hotel deal and forced travel managers to sharpen their focus on hotel spend management.
Traditionally, hotels played second fiddle to air spend management but times are changing. With fares, particularly short-haul, well under the £100 mark, the total cost of a hotel stay when food and beverage has been included, can be up to three times as much.
TMCS are also pushing stronger hotel spend management as they want to ensure the “attachment rate” of every flight booking being booked with accommodation so that they can capture hotel spend and enhance their negotiating power.
Over and above these elements is the fact that travel managers are more savvy nowadays and far more aware of market dynamics. Although they are resisting the trend to dynamic pricing and pushing twoyear hotel RFPS, it’s almost certain that they are already using these rates unwittingly in low-volume areas as they are usually the lowest price on the day.
“It’s already happening,” says the BTAʼS
Hotel Strategy Group Chair, Maria Baty. “Corporates need dynamic pricing as there’s a good argument for it but it’s always best to add a cap on it.”
The more, the merrier
Content underpins any good hotel programme and aggregating OTA content enriches traveller choice and introduces lower price points for buyers from this distressed inventory, so it’s a win-win. Not embracing this type of content runs the risk of travellers booking direct with an OTA, thus losing duty of care.
“With greater emphasis on traveller wellbeing, choice is key,” says Angelina Bunting, Commercial Director at Reed & Mackay. “Corporates are increasingly looking to give staff the opportunity to select the right accommodation for their needs.”
We can also thank OTAS for helping spread the word about hotel alternatives such as aparthotels, serviced apartments and home rentals. As this non-hotel market blossoms for long stays, business travel usage has grown alongside.
The Global Serviced Apartments Industry Report (GSAIR) report tracks this increased usage; while project work has shrunk, business travel and relocation have both shot up, by 11% and 52% respectively over the last year.
Corporates turn to serviced apartments the majority of the time for one to threemonth stays, followed by 14-30 nights when the equivalent hotel cost would be prohibitive. But apartments still only represent a small part of their accommodation spend (10%), according to GSAIR, and only one-third of corporates include serviced apartments in their RFPS.
Those figures are not surprising when you consider that there are inherent challenges of booking non-hotel accommodation. The pricing is attractive and the capacity is there but “the main challenges for buyers have traditionally been the booking process, availability of MI, compliance with duty of care, as well as inconsistent levels of quality and service,” sums up Reed & Mackay’s Angelina Bunting.
It’s hard to commodotise non-hotel properties as by their very nature they are not standard, but there is an upside, says Bunting. “Non-hotel supply rarely outstrips demand in key locations. Due to minimumstay restrictions in place and average lengths of stay, serviced apartments don’t usually take shorter stays too far in advance, meaning they don’t suffer from the usual black-out dates over events and festivals,” Bunting explains.
Business travellers, who are getting younger and younger, are drawn to these nonstandard, often quirky properties. Commercial property consultants Lambert Smith Hampton say serviced apartments and aparthotels are the fastest-growing segment of the UK’S hospitality market, albeit it from a small base of 3%. Some 6,000 new units will open over the next two years in the UK.
It's hard to commodotise non-hotel properties as by their vary nature they are not standard”
The US is the heartland of the extendedstay market, representing 64% of all serviced apartments in the world. This is also where the Residence Inn brand from Marriott dominates, with 175 long-stay properties across the country.
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Globally, Residence Inn has more than 800 properties located in more than 10 countries and territories. Within Europe, there are more than 10 properties and a quickly expanding portfolio.
“We have a development pipeline of over 15 openings over the next two years, demonstrating the brand’s response to the growing demand for extended-stay within the continent,” says John Licence, Vice President Premium and Select Brands at Marriott International, Europe.
Alex Neil, Group Head of Relationships at Oakwood, explains the shift: “Many seasoned travellers choose to be in a residential block and live in the city as a local. Giant communal areas are a big trend; they’re good for graduates, for business travellers on a training session perhaps, or just somewhere to hang out together in a social space or meet new people.
“It’s not such a strange concept nowadays as the demographics of employees are changing. The average age of travellers is 27 so that’s what they want.”
Hotels have reacted to the changing demographics, probably best exemplified by The Collective, a brand with a co-living vision, but others include Citizenm and more mainstream brands such as Sheraton which has introduced a communal lobby concept across Europe. This includes a community table, private booths and a coffee bar.
House of fun
“Business hotels are becoming more of an experience, they’re becoming more fun, with rooftop gardens, wellbeing facilities and the like,” says the BTA’S Baty.
Hotel capacity is growing and the ‘fullʼ sign is appearing in the top cites. Major player Accor is focussing on two development levels over the next few years, luxury and extended stay. The latter will come via the established Adagio aparthotel brand and the company’s EMEA expansion plans include Romania, Poland and Bosnia, its heartland of France and Germany, plus the UK.
“We’re expanding everywhere,” says Karim Malek, CEO of Aparthotels Adagio. “The big guys are stepping up their capacity and so are we. Our expansion is based on the momentum we see in the market.”
The home-stay market is also adding capacity despite being tainted by negative experiences in Airbnb properties. Airbnb opened the market to hotel alternatives and it’s driven the short-term rental market, currently growing 30% year on year across Europe and worth €330billion by 2025 according to PWC figures.
Upmarket home-stay brand Under the Doormat, which offers everything from onebed flats to seven-bed homes in London, reckons that most hotel brands will have their own home accommodation brands in their portfolios “within the next five years”. It appears to be a question of, if you can’t beat them, join them.
Under the Doormat prides itself in offering the comfort of a home with the quality service of a hotel, according to founder and CEO Merilee Karr. “For a night or two a hotel serves its purpose. But travellers want a lounge to sit in and they want to make their own breakfast,” she says.
One mega hotel brand with no plans to join the apartment sector is Radisson, focusing instead on traditional hotel expansion as 80% of its business is stays of less than two days.
It’s in a good place, says Gianni de Fede, VP Total Revenue Performance, EMEA for Radisson; pragmatic about Brexit – “We cannot deal with Brexit until it happens” – although admitting that the company has concerns about finding staff.
Nonetheless, the group is busy investing in its UK properties, namely the 900-room Heathrow Park Inn, which is undergoing a major refurbishment. “The picture looks pretty good in the UK,” says de Fede.
The wide-ranging accommodation sector is booming and broadening as new entrants grab a piece of what is a large, lucrative market. Furthermore, travel managers are now in a good position to manage their spend as well as they have traditionally managed their air spend.
One mega hotel brand with no plans to join the apartment sector is Radisson, focusing instead on traditional hotel expansion as 80% of its business is stays of less than two days”