The serviced apartment sector, although present throughout the global accommodation markets, has different degrees of expansion and development, which are dependent on regional standardisations, the supply and demand dichotomy, and the legislation in place. However, regardless of the fragmented nature of the sector, "the global serviced apartment industry is continuing to mature, albeit at different rates in different places across the regions" writes Mark Harris from the Travel Intelligence Network inthe latest Global Serviced Apartments Industry Report (GSAIR) 2013-14.
North America and Asia
Although it is generally acknowledged that the origin of serviced apartments lies in the US, both North America and Asia have had an operational sector for over 30 years. The maturity of the market in North America has been driven by several factors. "It boils down to the demand for the accommodation – executives travel longer distances, stay away from home for longer periods, and require a home away from home; supply of space for the accommodation – larger scale short-stay accommodation can be offered cost-effectively, and brands which can develop on nationwide referral business," says Richard Majewski from Essa Consultancy for Serviced Apartments.
In South America the serviced apartment sector only started developing about 5-7 years ago, so it still in its infancy. However, given the encouraging overview of the business climate, corporate demand for the sector is expected to see a rapid increase, and countries like Brazil, with a booming economy, will drive the movement forward.
Travel and tourism is one of the fastest growing markets in Asia, and accounts for 8.4% of its GDP. According to the GSAIR, there are 49,480 serviced apartments in 419 locations across the region, and they range from branded and independently operated serviced apartments, to local furnished accommodations, and villas. This type of accommodation is the preferred choice for longer stays, as opposed to the rental market, and represents 7.54% of the global serviced apartment sector. Hong Kong, which registered a 90% occupancy rate in 2011, also leads the way in terms of units per business visitors, with a 5.3/1,000 ratio.
When placed against the background of established serviced apartment sectors, Europe can be regarded as being immature. However, recent developments in the market are pointing to a rapid expansion in the major European cities.
There is a general tendency for large operators to build aparthotels, a model which closely resembles the hotel stay. This necessity is prompted by the mobility of corporate travellers throughout Europe, who either relocate or have to spend more than one month in a different city.
Although some standard hotel services are provided, often there is no restaurant in site, cleaning occurs weekly, and laundry facilities are available on site but predominantly for a fee. This accommodation model is preferred as it caters for the need to reduce travel costs in the climate of the ongoing economic crisis. The pricing for longer stays tends to be reduced depending on the length of stay, which makes serviced apartments and aparthotels a cost-effective solution.
According to the HVS report, An overview of the European Serviced Apartment Sector (2013), over the past ten years there has been significant movement in the aparthotel industry. Large international brands such as Residence Inn by Marriott, Accor, Ascott, Fraser, or Adina, have been operating in Europe and there is scope for growth. "A slight different model may develop in each local market. However, I believe it will be the global extended stay brands which will ultimately determine the development of each market," says Majewski from Essa.
Adding to the existing number, aparthotel supply is predicted to increase by 50%, according to a recent Savills report, European Serviced Apartment Market (2014). "Europe's gateway cities continue to offer expansion opportunities for operators pursuing branded development" writes Tim Stoyle from Savills Hotels.
In 2014 alone, Ascott, Accor, Frasers, and Staycity will open eight new properties, in major European cities, the focus being primarily on London, Frankfurt, Paris, and Amsterdam. At present, the later has one of the most constrained supply with 0.2 units per 1,000 visitors, closely followed by Paris and London with 0.3 and 0.6 units, while the supply in Frankfurt is slightly better with 1.1 units.
However, compared to the American or Asian markets, the European serviced apartment sector still accounts for a relatively small percentage when compared to hotel supply, and has yet to face some challenges that affects directly the dissemination of the model. Global providers are confronted with a lack of understanding of this operational concept in Europe, which makes it all the harder to secure financing for further investment and expansion, while at the same time facing barriers entering the market as planning issues tend to vary from country to country.
The most striking aspect of the Australian serviced apartment sector is the contrast between the high demand and short supply, and according to the GSAIR report this sector is expected to outperform hotel accommodation in the next three years. One of the main reasons that lead to this tendency is the high concentration of hotels in the main cities, whereas most business centres are located outside these hubs, generating an ever-growing demand for extended stay accommodation.
Sydney alone accounts for the third largest accommodation supply globally with 2.8 units per 1,000 visitors. According to a CBRE report on the Australian serviced apartment sector, The Formation of an Industry (2010), serviced apartments seem to be the main driving-force behind supply in recent years, attracting 25% of market demand, a lot stronger than other sectors.
The serviced apartment landscape in Africa resembles to some extent the one in South America, where fast economic growth drives business, and impacts the number of international arrivals. According to the GSAIR report, the total number of serviced apartments in Africa stands at 4,634 in 76 locations, which accounts for a small percentage of 0.714% of the global market. Despite this, serviced apartments seem to cost less on average than anywhere in the world.
Article written by Laura Onita on behalf of VisitRentals – VisitRentals is the world's largest booking website devoted exclusively to serviced apartments and aparthotels.
- Thursday 27 March 2014