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BBT July/August 2018
July/August 2018
For Business, Corporate Travel & Meeting Buyers & Arrangers

Serviced apartment sector: home advantage

THE SERVICED APARTMENTS INDUSTRY CON­TINUES TO SHOW HEALTHY PERFORMANCE ACROSS THE UK. According to accom­modation data specialist STR Global, revenue per available room (Revpar) is up 4.7 per cent – driven almost entirely by average rate rather than occupancy, which increased by only 0.6 per cent across the country, whereas rates went up 4.1 per cent. In London, a fairly robust increase in supply meant occupancy levels showed a small decline, but rates are more than making up for that and there was Revpar growth of 3.1 per cent.

In regional UK, however, performance was more evenly split, with occupancy up 1.5 per cent and rates up 2 per cent. “We have seen greater demand across the board and small occupancy increases are a result of supply-demand equilibrium, with supply growing quickly and, in London, outpac­ing demand growth, which is what we are seeing in the hotel industry,” says STR Global director Thomas Emanuel. He adds that the rise reflects a generally positive situation, with UK hotel Revpar up 4.5 per cent.

London still has easily the largest pipe­line of any city in Europe, with 15,013 keys in the making. “How much better can it get? We have seen the capital perform towards the 90 per cent occupancy mark in summer and early autumn, September/October, with consistently strong demand over the past few years,” says Emanuel. “And because new supply continues to come in, we won’t see dramatic occupancy growth, that will still come from average rates, as in 2015.”

And activity among travel buyers re­flects this. Business Travel Show’s research elicited that 19 per cent of 182 European travel managers polled booked 4 per cent more serviced apartment accommodation in 2015 than in 2014, and 48 per cent of those questioned insist travellers stay in serviced apartments when their trip exceeds a certain duration.

With this robust backdrop, Association of Serviced Apartment Providers (ASAP) membership continues to grow, cur­rently standing at 133, with five more in the offing. “We are looking to have 150 in three months’ time,” says ASAP manag­ing director James Foice. The association is forging ahead with its plan to have an international presence, and the accredita­tion scheme was launched to the close on 300 members of the Corporate Housing Providers Association (CHPA) at the end of January. “In just a few days, we have already received applications to obtain the accreditation for companies representing nearly 1,000 units,” says CHPA chief execu­tive Mary Ann Passi.

ASAP aims to do more to spread the word, with some kind of activity every six weeks in the form of networking events, press meetings and opportunities to educate corporate buyers. The association has a new relationship with recruitment charity Springboard. “They will run re­cruitment fairs, which will be promoted through the Big Hospitality Conversation,” says Foice.

“We are excited about ASAP’s new partnership with Springboard, and we’re investigating the possibility of including them in our recruitment process,” says Marlin managing director Susan Cully.

AIMING HIGH

According to research undertaken by Savills on behalf of ASAP, over the next two years, the sector will be the fastest growing segment of the UK hospitality market. Staycity is tripling its number of units to 3,000 in the next 24 months and is opening in Birmingham, Heathrow, York and Marseille. Go Native is doubling in size to just over 3,000 apartments, includ­ing new properties in Manchester, Bristol, Newcastle and Reading. SACO is also going for 100 per cent growth and will be launching a corporate booking portal this year.

Smaller operators are also expanding. Lamington plans to increase ten-fold to 1,000 units by 2020, with 100 new apart­ments in London and Southampton this year; Prem Group opened in Glasgow’s George Square in January and aims to open its extended-stay brand in 12 new locations in the next three years, including Amsterdam, Rotterdam and Ghent; and Apple Apartments is branching out by a further 170 units.

Internationally, The Ascott’s plan to double in size to 80,000 units by 2020 is well documented; Frasers is adding 9,000 to make 30,000 by 2020, including in Istanbul, Doha and Riyadh; Oakwood aims to triple the number of its branded properties worldwide; and Belgian company BBF is adding some 50 units in Anderlecht.

EVOLUTION AND REVOLUTION

“There is no national, well-recognised serviced apartment brand,” says Piers Brown, CEO of International Hospitality Media and founder of the Serviced Apart­ment Summit. A straw poll undertaken on the street by Brown underlined the point: those interviewed could name only one brand, Airbnb. “It highlighted some of the opportunities and challenges the sector has,” he says.

Go Native has recognised this: “We are working on our brand in a very committed way,” says managing director Shaun Prime. Symptomatic of this is the large-scale blocks the company is building in Bear Gardens on London’s South Bank and Carolyn House in Croydon, with more in the pipeline – those comprising more than 100 units. “We refer to those as ‘communi­ties’ and they will house guests staying from two nights to one year.”

As the sector evolves, so does the offer­ing. Go Native’s Croydon property will have a light food and beverage (F&B) service, flexible work spaces and what Prime de­scribes as, “fun places to hang out”. Other Go Native buildings will have a rooftop yoga studio and a running track.

Staycity’s new Birmingham property is providing its first F&B service with tea, freshly ground coffee, Continental breakfast and afternoon snacks in the lounge. The Heathrow building follows in the same mould. Marlin’s aparthotel on Westminster Bridge Road opens in December with office units, shops and restaurant.

Business models are also changing. AIG’s arrangement with The Apartment Service (TAS), which handles all the com­pany’s serviced apartment bookings, is a step away from the norm. Similarly, Go Native manages PWC’s programme. It has an implant in PWC’s offices, and shares preferred supplier status with SACO.

With spend on serviced apartments increasing dramatically and the incumbent travel management company (TMC) not cut out to manage apartment bookings – especially reporting – to the required level, PWC decided to merge its global mobility and transient travel spend to get a bigger picture for a request for proposal on apartments in 2014. “It became clear we could leave out the TMC. We had enough business to justify a person working on it and Go Native was keen to support us on that,” says PWC’s head of hotels and venues, Sam van Leeuwen. As a result, since March 2015, the PWC apartment lead has been an implant from Go Native. There is one internal number that goes direct to her and she handles all apartment requests and reporting. “And because she is in our offices, there is a better relationship; she is involved in our project work and helps with the communication side,” says Van Leeuwen.

Also taking the broader view is Van Leeuwen’s decision to take long leases on apartments in London for project work – one year with a six-month break clause or longer. This is managed by SACO. “We have leased some apartments for a couple of years for projects in London and that is delivering huge savings,” says Van Leeuwen.

Window on the US: extended-stay hotels

GROWTH RATES IN EXTENDED-STAY SUPPLY AND DEMAND have been healthy since the recession, according to STR, creating an opportunity for hotel owners and operators to increase average daily rate (ADR), while also increasing occupancy levels.

The figures tell the story, with the most impressive performance in 2014 since 2009: 78.8 per cent occupancy, up 2.3 per cent; US$59.29 ADR, up 7.1 per cent; and US$44.34 Revpar, up 9.6 per cent, according to a report released in March last year by Horwath. As a result, the sector has become more popular with developers and investors. “We see extended-stay hotels as part of new and exciting mixed uses or dual-brand projects and now innovative developers are bringing this type of hotel from highway or suburban areas to urban areas,” the report states. And in turn, this has raised public awareness.

And the pipeline is robust, with rooms reported under construction at their highest level in six years. “Extended-stay hotel companies forecast they will add 127,000 rooms, or 35 per cent, to current supply, through 2018,” writes Mark Skinner, of the Highland Group, in the Global Serviced Apartment Industry Report (GSAIR) 2015/16.

Adding to the excitement was the launch of Best Western Plus Executive Residency in October 2015, which was actually a relaunch of extended-stay brand Executive Residency, to capitalise on the Best Western name and offering a range of room types.

LOCATION CHALLENGES

When a client asks for accommodation in an area where their supplier has none, they will take over a house or apartment to fulfil the brief. “Setting up, sourcing, creating and managing bespoke living environments for clients is a challenging process,” says managing director of group commercial sales for The Apartment Service, Jo Layton. “Accurately forecasting costs is impera­tive: underestimating or overestimating will jeopardise contracts for corporate clients. The personnel costs for projects into secondary or tertiary locations can easily be one of the highest outlays of a project.

“Our objective when providing this solution is to deliver a cost-effective, trouble-free process for the corporate client, the booker and the guest. In addition to a fully-serviced unit, we provide furniture rental programmes, utility hook-ups and disbursement billing.”

Relationships with more than 2,500 suppliers requires performance reviews and full vetting that covers legal compli­ance, insurance requirements, duty-of-care, inspection processes and reporting, account and billing practices, and operational excel­lence, according to Oakwood.

But dealing with the vagaries of local laws and standards makes maintaining consistent standards worldwide difficult, to put it mildly. Global project coordinators work with regional account managers and local destination experts to mitigate the worst. “Having this type of relationship with our clients also allows us to set expecta­tions with them as to what is available in each area and to customise the service they receive to fit their needs,” says managing director of EMEA at Oakwood Worldwide, Debbie Lundon.

A client of Skyline is a buyer for an automotive manufacturer, which looks for remote destinations to set up manu­facturing plants in order to maximise space and minimise overheads. However, ac­commodation is scarce or non-existent in these locations. The client’s HR and project departments had traditionally looked for accommodation but, not being familiar with the destination’s real estate and lease laws, health and safety standards and so on, they usually ended up with problems on arrival at the property.

In Rosario, Argentina, Skyline was asked to source accommodation for 60 people on rotation over one year. The company identified six property types and assisted the client in verifying security standards, negotiating budgets and approving service quality – training local personnel in the level of guest services expected and offering assistance with the complexities of local billing were part of the service.

One of the first steps was to ensure that the client’s project leader was familiar with the region and to provide him with full insight into the location and accommoda­tion options so that he could select the most suitable property. The project has been  implemented with a satisfaction score of 95 per cent by the users and the project leader and, as a result, the buyer is now looking to extend the same accommo­dation management model across other countries in Latin America.

As the competition ramps up, with new providers entering the sector and estab­lished suppliers upping their game, ASAP will have its work cut out achieving its plan to become a body with internationally respected and upheld standards. It will be interesting to see whether all parties can keep the requisite number of balls in the air but if they can, then travel buyers and travellers can only benefit.

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