Serviced apartments: At your service

Apartments and aparthotels are becoming increasingly popular, says Catherine Chetwynd, offering good value in an ever-widening range of locations.

ACCORDING TO RESEARCH undertaken by estate agents Savills and published in autumn 2010, occupancy in the serviced apartment sector bounced back to pre-2006 levels at 88 per cent in the first half of last year. This reflects the increasing recognition among corporate buyers of the value this accommodation represents and the savings that can be made against using hotels.

Occupancies did drop with the onset of the global recession, as corporates cut costs by curbing travel and lengthy secondments, but serviced apartments consistently outperformed hotels with occupancies at 87 per cent between 2005 and 2009, against the 80 per cent for hotels.

CAPITAL PROGRESS

Shorter stays are also a characteristic of the market. London has the largest turnover - 59 per cent of stays during the first half of 2010 were for less than one month, whereas the Midlands has the largest proportion of stays in excess of six months, accounting for 22 per cent of business over the past two years.

However, there is also a lack of new supply and this "is placing a significant upward pressure on rates", says Savills' report. Central London dominates the market with 6,284 units, with a further 2,380 expected over the next five years. The dearth of accommodation is partly a reflection of straitened times. The extensions of banking covenants and mothballing of development projects in 2009 made it increasingly difficult for operators to find expansion opportunities through lease or management contracts; and for those hoping to pursue their own development projects, access to funding for a sector that is still relatively little understood remains an obstacle.

Flexible housing solutions company Go Native's rate rise of more than 12 per cent in some London locations reflects this and goes hand-in-hand with occupancies of on average 93 per cent through 2010. Similarly, The Apartment Service (TAS), which celebrates its 30th anniversary this year, saw occupancies rise by 8 per cent last year to 78 per cent, which managing director Charles McCrow attributes partly to "much more decisive procurement decision making".

Bucking the trend, average length of stay for TAS clients has grown to 41 nights.

Frasers Hospitality's performance in the UK also points towards the improving economic climate. "We had an excellent year - revenue increased by 14 per cent against 2009 and reached the same as in 2007/08," says Frasers' COO for Europe and the Middle East, Guus Bakker. He feels this may partly be a reflection of the reluctance of banks to give mortgages, so that relocating corporate clients stayed longer in serviced apartments before buying somewhere to live.

"Demand for certain areas of London, in particular the City, far outweighed supply and all signs point to this continuing through 2011, as corporates continue to be smarter in seeking cheaper solutions for short and extended stay accommodation in the capital," says head of marketing and market development for Clarendon Serviced Apartments, Peter Morgan. "And with the Olympics now in sight, there is more demand for London accommodation."

Outside London, supply is largely concentrated on regional centres with a high presence of international firms, exemplified by the likes of Manchester, Edinburgh, Birmingham, Reading and Newcastle.

BRANDING

"Wherever you go in the world, you know what you are going to get with a Hilton," says Savills' associate director of research, Marie Hickey.

"But with serviced apartments, there is an issue with branding." The sector is split into two: aparthotels, which are closer to hotels, with a reception desk, public seating area and other services; and apartments.

Aparthotels are still a minority player in the UK, with Citadines (managed by The Ascott Limited) and Staybridge Suites (InterContinental Hotels Group) being the main players.

Staybridge Suites has properties in Liverpool and Newcastle and is opening others next year in Edinburgh and Stratford (in time for the Olympics).

In addition, as part of a strategy to educate the marketplace about serviced apartments, SACO has increased the number of aparthotels it runs, now covering Manchester, London, Birmingham, Bath and Bristol, with a second property opening in Bristol this year.

In a move to clarify its inventory in an international language, BridgeStreet rebranded in November last year and categorised apartments into Residences (five-star), Serviced Apartments (four-star) and Suites (three-star).

"It is difficult to communicate the brand if it is not clear what the message is, so we decided to make it simpler," says the company's CEO Sean Worker. "We tell the client we offer a tiered product in five-, four- and three-star, which gives clarity at the operating level."

BridgeStreet has already seen a difference. "Look-to-book has gone up, as has traffic through our main channels," Worker says. "Service scores are also starting to move up again. Customers are saying they understand what they are meant to pay for - they know how to find it and what amenities are in that tier. We have moved the space our product sits in - it is a hospitality offering."

Worker considers this last point to be fundamental. "We have four drivers: communication with our teams; an apartment that works; the basics for the customer - bed, shower, TV, internet and so on; and someone friendly helping you and welcoming you," he says. "People are relocating with family members, they have a new job and are weary by the time they get to us with 15 bags. We have to be the beginning of the new experience, not the last straw because a light bulb does not work."

BridgeStreet is a staunch supporter of the UK star rating system, but this does not apply outside the UK, and when rating properties abroad there are different cultural criteria to factor in, depending what country you are in. In Paris, for example, there are often no lifts because the structure of the building cannot be changed; in Germany, a lot of serviced apartments are like guesthouses but with a sitting room; and in the US, apartment blocks very often have a public laundry room with washing machines.

Credit Suisse uses BridgeStreet for international assignments, transfers and relocations. "If people are travelling to London for more than five nights, we use apartments instead of hotels," says Credit Suisse vice president for corporate real estate and services, global travel, Ben Varey.

"When we implemented the mandate in 2006, we got a lot of feedback from people who were not that happy with the change. However, it is now an accepted part of the programme and there is a consistency of product, so expectations have been levelled off."

And regarding the new tiering?

"BridgeStreet has taken an innovative approach," says Varey. "They are trying to demystify the apartment world and I think it is a good step. We use accommodation across all three [tiers], depending on the type of stay."

AT HOME ...

Operators are beginning to recognise the need for stronger branding, and the Cheval Group has rebranded to Cheval Residences. "'Residences' is more global and gives a clearer message to our consumers," says Cheval director George Westwell. "We are on the cusp of finishing the new brand standards and are engaging staff to look at what we are about.

We have started a training academy, which provides both physical- and e-learning, and have also engaged a learning and development manager and HR manager, which will ensure consistency in all brand messages."

Cheval is also upgrading and acquiring properties. Work has started at Cheval Knightsbridge to extend the building and construct an additional storey to house two penthouse suites; Cheval Calico House in Bow Lane is acquiring air-conditioning and being improved; and contractors move into Cheval Three Quays, next to the Tower of London, in April to build 97 serviced and 61 unserviced apartments, plus retail space. Cheval also recently attained a shorter-term licence on Gloucester Park, reducing the minimum stay requirement from 90 to 28 days.

Westwell adds: "We have been approached by a number of organisations which have recognised the quality of the Cheval brands and asked us to engage with them as an operator. Normally, we are owner/ operators but it is a move we are considering - in the right location.

Both those who have approached us are outside the UK."

In London 196 Bishopsgate will start on a full refurbishment programme early this year. The property has been rated four-star by EnjoyEngland and its location, near Liverpool Street station, makes it convenient for the City. There is no minimum stay. The City also benefited from the opening of a building containing 32 apartments on Cannon Street, run by City Apartments, which lives up to its name with 170 units in the Square Mile.

Also investing in its portfolio is The Ascott Limited, upgrading Citadines Apart'hotels to Citadines Prestige.

The company's South Kensington property emerged rejuvenated last summer, Holborn has followed suit and Trafalgar Square is about to undergo a similar transformation.

"Some of the features, design and layout will be tweaked but the concept is now being relaunched in Europe," says The Ascott Limited's regional director of sales and marketing UK, Steve Thorne.

Citadines has an entirely new look.

Gone are the sofa beds, replaced with twins or doubles; there is free wi-fi throughout; and there is a buffet in the sitting/dining area, which also hosts two Apple laptops. There is a laundry room (with pay-per-use washer/ dryer), and some properties also have meeting space and/or a gym.

There is more to come: Citadines will soon offer Club Apartments, which will have a better, more spacious location in the building and will have a large bed and duvet, flat-screen TV and iPod docking station. Continental breakfast, daily housekeeping and an extended range of amenities will be included in the price.

Of The Ascott Limited's residences, Citadines is aimed at the two-to-three weeks' stay market, Ascott The Residence nine-to-ten weeks, and Somerset Serviced Residence two-to-three months.

International SOS medical and security assistance uses Citadines throughout London. "We use them for training purposes and when we bring patients and families in for medical treatment," says International SOS travel manager Patrick Kuziw.

"For a two-week period, we prefer to use serviced apartments over a hotel, both for the comfort and reduced cost to the client. We get fairly good feedback regarding Citadines in South Kensington, which is our preferred provider, and we use its other properties if they are close to a hospital or within reasonable distance."

... AND ABROAD

South America, India and China are increasingly popular markets, reflecting the growth of their economies. And according to Savills' Marie Hickey, Chinese pension funds are now allowed to invest in property, enabling joint ventures for serviced apartment operators. "There is so much coming on to the market in China and there is huge demand from expats," she says.

Over the past two years, Citadines has opened in Japan, China, Singapore and Thailand and, according to The Ascott Limited's regional general manager UK, Rebecca Hollants van Loocke: "There is strong potential in Asia/Pacific, where the key markets are China, Singapore, Vietnam and India. Europe benefits from a high volume of interstate travel and Ascott will continue to build on its strong presence in Paris, London and Germany's gateway cities."

The Ascott Limited is said to command 14 per cent of the serviced apartments in China, where the market is already extending to secondary cities, following the path of hotel development, according to Frasers Hospitality's Guus Bakker, who says the company has seen enormous growth there and in the Middle East.

WEB OF INTRIGUE

Frasers Hospitality is looking at a bespoke booking system. "Many companies in the hospitality industry struggle with the commissions being charged through third party websites; these can be very high," says Bakker.

Clarendon Serviced Apartments also invested in major web developments to produce a more interactive company website and a platform of six micro sites. "In 2011, we are continuing to broaden Clarendon's distribution and booking channels and will be working on harnessing GDSs to full potential, as well as direct online booking," says head of marketing and market development Peter Morgan.

THE RATING GAME

All The Ascott Limited's properties in London are VisitLondon approved, but the VisitBritain star-rating system does not apply to the aparthotel model. "We educate customers and explain what they are going to get," says Ascott's Steve Thorne. "For the client, it is about location, service and price - if the product is right, star rating has no relevance."

Clarendon's Peter Morgan agrees that location and price predominantly dictate demand. "Clarendon has its own standards and service levels, which it rigorously maintains."

Go Native opted out of star rating and now applies a bespoke system to both its own and third-party suppliers.

It also operates an eco-rating to highlight operators that are taking steps to reduce their carbon footprint.

Select Apartments has also recognised that hot competition brings the need to differentiate itself by service. "Travel professionals and PAs require a problem-solving approach and an agile customer service model," says Select's marketing director Adrian England. "And we have gone farther than any of our contemporaries by implementing a response management system that monitors how quickly we respond to new enquiries. Across all our corporate clients, between November 1 and December 24, 2010, we responded to 63 per cent of corporate enquiries in under 30 minutes, and 82 per cent in under one hour."

And relative newcomer Skyline Worldwide Accommodations is also going down the service route with the creation of guest relations executives (GREs) who meet and greet guests, escort them to their apartment and show them around.

Skyline's sales manager James Swift says: "GREs inspect every apartment upon move-out to note damages and do a full inventory, so that everything can be fixed and replaced before the next guest moves in."

Skyline has in excess of 120 serviced apartments in Canary Wharf and will take on 20 new units in the City in the spring. The company has also opened its first branch office outside the UK in Brazil plus its first branded Skyline building. "Brazil is the next big thing for serviced apartments," says Swift.