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Report: 2016 Serviced Apartment Summit

Serviced Apartment Summit

Senior travel industry professionals gathered in London for the 2016 Serviced Apartment Summit to discuss challenges and opportunities in the sector.

The agenda included investment, corporate travel policy, new market entrants, the impact of Brexit and more. BBT was once again an official media partner to the summit, which was attended by more than 350 industry professionals.

Thomas Emanuel, director at data specialist STR, analysed the sector’s performance in the UK and worldwide. He said in terms of occupancy, serviced apartments are ahead of hotels, with 77.9 per cent UK occupancy for year-to-date (YTD) May 2016, compared to 72.4 for hotels. All other global markets measured showed serviced apartments surpassing hotels by several points, with the UAE topping the chart at 85.1 per cent occupancy.

Other findings included:

  • UK serviced apartment occupancy was slightly down (2.8 per cent) year-on-year, while ADR (average daily rates) were up 1 per cent – at £132 this is nearly £49 more than the UK hotel ADR for the same period. 
  • This ADR gap is a different scenario to other markets – for example in the US, ADR for apartments is more than $23 cheaper than hotels, while in the United Arab Emirates apartments are on average $48 less.
  • In terms of revenue per available room (revPAR) in the UK, Birmingham and Manchester lead with 5 per cent increases (YTD May 2016), London saw a 2 per cent fall, and Aberdeen suffered a 45 per cent fall.
  • STR data also revealed significant areas of growth in the pipeline. The Middle East leads the way with 52 per cent increase in number of rooms, followed by Asia Pacific and South America (both 14 per cent) Africa (11 per cent) and the US (9 per cent). Europe has the smallest pipeline growth at 3 per cent.

The impact of Airbnb was discussed by Tom Caton, chief revenue officer at Airdna – a company that specialises in analysing Airbnb data. He revealed some startling figures illustrating the accommodation provider’s growth.

Leading the way was Paris, which Caton described as a “perfect storm” of conditions for Airbnb growth: expensive hotels, ideal housing stock, economic struggles and a supportive mayor. In terms of ‘entire place’ monthly room nights, the French capital has seen 411 per cent year-on-year growth since August 2014.

Other large markets have also seen strong growth, with London at 160 per cent and New York at 67 per cent.

Also showing spectacular growth, but on a smaller scale in terms of volume, were Copenhagen (231 per cent) and Manchester (242 per cent).

Caton said there is a “massive opportunity” to bring professional revenue management to the sector, which is currently an amateur market in terms of dynamic pricing.

Keynote speaker Pat McFadden, Labour MP for Wolverhampton South East and former shadow Europe minister, talked about the impact of Brexit on business and the economy.  

He said one of the critical challenges facing the UK is its trading relationships with the rest of the world – both inside and beyond Europe.

“It has been estimated that there are only a couple of dozen UK officials that have real expertise in negotiating trade agreements,” he said. The country will now face tackling a large number of trade deals which for decades have been conducted through the EU.  

“It’s certainly a huge task. The magnitude of those trading questions give some indication as to why the new PM has been cautious about invoking Article 50. This a sensible approach.”  

The MP, who supported remaining in the EU, said he hoped Labour would have input into the Brexit process. McFadden said he’d previously told Cameron that “given the scale of challenges facing us, a cabinet office unit didn’t meet the task. I don’t think these issues are purely questions for government.”

He added: “Labour has good links with parties throughout the EU. I certainly hope that as main opposition party we adopt the attitude of wanting to be involved and having input into the process.”

During another session, serviced apartment bosses were asked about the impact of Brexit on their businesses. Karim Malak, deputy CEO at Aparthotels Adagio, said he’d seen more short-term impact from Liverpool not competing in the European Cup than from Brexit. Staycity CEO Walsh said he was committed to “growing a bigger business in the medium term,” while Bridgestreet CEO Sean Worker said business was “still strong” with “lots of opportunities”, and viewed the situation from the perspective of operating in 63 countries.

Travel policy
Senior corporate travel buyers from leading banks and professional services firms told delegates about their travel policies that either mandated or “strongly recommended” serviced apartment usage for longer stays, with various minimums of 4-6 nights.

The buyers also discussed aligning transient business travel spend with that of relocation. They were achieving some degree of buying leverage through combining volumes, but said this was an area where they “could do better.”

Challenges in the sector for buyers included “service gaps” such as reception, bars and restaurants; travellers’ attraction to hotel loyalty schemes; ease of booking; and distribution and access to inventory.

The buyers added that while the likes of Airbnb seem to be generating excitement in the travel industry, there is no appetite for it in their companies, due to duty-of-care responsibilities, nor are they seeing demand from their travellers.

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