Serviced apartments: Room for improvement?

Challenged by falling rates elsewhere, the growth of extended-stay hotels and a lack of sector standardisation, Jonathan Hart asks what serviced apartment providers are doing to remain in the running for business travel budgets

There's nothing like telling it like it is: "Let's face it, you want to sit in your boxer shorts and munch on a pizza without the constant knocking at the door or worrying about someone trying to sneak in and put a mint on your pillow." Coming amid distinctly loftier proselytising, this down-to-earth aside from a serviced apartment (SA) provider was made earlier this year at a Business Travel & Meetings Show (BTMS) seminar assessing low-cost accommodation alternatives for corporate buyers.

Elementary or not, this observation by panelist David Smith, founding partner of London's City Apartments, might be considered freshly apposite for a short-stay corporate sector in which the home-from-home, leave-me-alone aspect of SAs is becoming as much a selling point as their traditional more-space-for-lower-prices challenge to the hotel industry.

However, the extra space argument still holds strong, as do those for the freedoms, sharing potential, productivity benefits and general recognition of SAs as a cost-saving solution for extended stays. By most operator accounts, corporate buyer interest in the sector as a transient option is also growing in conjunction with a new penny pinching austerity.

Yet with hotel rates shifting generally downwards in the wake of the recession together with a growing international spread of extended stay hotels, many SA providers are having to modify their sales pitches to revolve as much around underscoring their core values and credibility as it does selling themselves on lower prices.

Traditionally viewed by a largely indifferent network of travel managers or travel management companies (TMCs) as mostly lacking in standardisation, quality controls, real time access or streamlined working practices, the sector endures a somewhat fuzzy image in a short-stay market hinging on late bookings, ever more flexible service options and contractual speed.

Solitary by design, disparate in distribution and largely out of synch with mainstream procurement, booking and billing processes, the sector can also be perceived, rightly or wrongly, as being as susceptible to developers' changing whims or real-estate expediencies as it is to the travails associated with full-time hospitality servicing.

All of which adds up to SAs facing accessibility, reliability and visibility issues among short-stay corporate buyers who have neither the time nor inclination to source accommodation off-track or trawl through the protracted tenancy negotiations and mostly manual processes normally associated with extended stays.

This presents no big problem for established apartment or aparthotel chains. With inventory on central reservation systems (CRSs), a presence on global distribution systems (GDSs) and an adjustable choice of essential and non-essential services, they are deemed fit and ready for transient purposes.

In contrast, it represents no small drawback, either real or perceived, for the remainder of a micro-managed sector ranging from single or city-centric groupings to loose UK, European or global partnerships limited to scatter-gun web- or third party marketing by a labyrinthine network of individual owner/ managers, agents and operators-cum-agents.

"Frankly, looking from the outside in, it's a bit of a maze," admits Charlie McCrow, managing director of The Apartment Service and author of the Global Serviced Apartment Industry Report 2010, which is canvassed from operators from around the world.

He says fluctuating supply and other build or rental issues help to exacerbate an image of a sector that's hard to fathom, divided into segments and sub-segments, and seen by some as going through turmoil.

"Corporate short-stay demand has definitely increased but, while it is difficult to generalise, many in the sector offering this option may not yet be geared to the mandatory applications or management disciplines required," he says.

Despite some fits and starts over the past year, the benefits of apartments for longer stays are firmly established with corporates and promise good overall growth, says McCrow. "the concept did, after all, evolve from extending the attributes of the long-standing corporate housing and relocation industry," he says.

However, those same attributes are not always easy to apply for transient business travellers. net result, from a buyer viewpoint, is a sector that, as a whole, is fragmented - particularly in terms of instant access and real time transactions at best available rates. McCrow admits: "As a sector, we clearly have a lot of work to do in trying to eliminate some of the negatives."

McCrow says that the Association of serviced Apartment providers (ASAP), recently launched as an independent entity from the Association of relocation professionals (ARP), is aiming to imbue SAs with a more cohesive image in the day-to-day cut and thrust of corporate accommodation provision.

As a founding member, is one of the leading light of the ASAP(along with city Apartments' David Smith, who is chairman), which has instigated a proper code of conduct and quality guarantees for its member providers, and has set up working groups and seminars addressing the qualitative and quantitative aspects of as a contributory industry sector.

At the same time, the Apartment bookers Association (SABA), with its own codes of conduct regarding good service and business practice, has just been launched.

The association expects to attract a membership of 50 UK and European specialist SA agents by the end of the year, says SABA spokesperson Alex Wood.

"It's important that buyers have a clear point of reference with specialist agents who are unbiased in terms of apartment selection or reach," she says. "A lot of companies operate dual practices in the supply and sales chain and this can lead to confusion or lack of real choice for buyers.

"In most respects is probably more naturally aligned to organisations like the Hotel Booking Agents Association [HBAA] than it is to ASAP. Membership will reassure properties and clients of the standards to expect on both sides."

It's a moot point, however, whether ASAP, or any other sector collective can address much more than improved visibility and co-operation, according to Peter Morgan, head of marketing and development for Clarendon Serviced Apartments.

"While we were members of ASAP, for example, and applaud the principles, it's virtually impossible to apply set standards in any meaningful way. the sector, by nature, is not one size fits all. It's dependent on a multiple of variables suiting individual client or company needs beyond location or price suitability and whether or not it includes, for example, satellite television, wi-fi or a designer kitchen." He says every rental warrants the application and approval of services within individual client parameters, regardless of the length of stay.

"In the same vein, I don't think there's anyone, supplier or buyer, who gives much credence to the Visit Britain rosette system for grading apartments because it's largely inapplicable and not very cost-effective from an owner/manager point of view," he says.

Equally, says SAS are not generally structured to allow TMCs to, for example, simply pick up the phone and immediately hook into a benefits programme. whole process is more complex for suppliers.

"Complexities in what most apartment operators offer do not fit a standard GDS model, for instance," says Morgan. "It's not that easy. It's more a question of developing individual web strategies that build on long-term client relationships."

Marcus Angell, managing director for SilverDoor, agrees.

"About 95 per cent of our business is from corporate clients. We find that a GDS is ineffective at booking medium to long-term stays," he says.

"The same applies for one night bookings as it does for the average 20-30 nights booked for company use. Independence is as important to us as having expert knowledge of what apartment is available where, and if it will deliver.

"The business is more about who and what you know personally rather than processes. It's about developing trust and good repeat custom. Our website details what's on offer, and rapid response - along with hitting the phones and email - works best." Industry experts in recent years have been predicting a gradual fusion of the hotel, extended stay and SA markets, with standards set by familiar global brands.

Yet periodic industry calls for an internationally recognised star rating system for apartments have been met with a mixed response - even by the big players.

"Apartments are a different animal to hotels," says Rebecca Hollants van Loocke, regional general manager UK for the Ascott Group. "It doesn't make sense to install various bells and whistles to gain this star or that when they're not really focal to the purpose of delivering client satisfaction.

"Instead we should be concentrating, as we do, on supplying the fundamentals: items that clients absolutely use and want. High standards should be a minimum, whatever the brand or tier, providing the essentials with optional added-value services."

She says rather than stars, what is needed for corporate buyers is a better definition of the differences between apartments and hotels and what the former can offer in terms of flexibility, such as block booking a set number of weekly nights for the use of different employees, or different numbers of employees, over a period, adding or subtracting optional services to fit specific needs or outlay.

Guus Bakker, chief operating officer, Europe and Middle East, for Frasers Hospitality says more and more corporates are now using SAs beyond a certain length of hotel stay - four days or more in some cases, one week or more in others.

He says an international star rating system, based on a existing national system such as France's, would have to draw up an exhaustive checklist including quality, size, finish, equipment, gyms, breakfast, lounges, service levels and reception hours.

Both Bakker and Van Loocke agree that the spread of extended stay hotel brands, while not directly comparable, is positive. "It shows that the sector is becoming more mature and can only be beneficial," says Bakker.

Both Ascott and Frasers are expanding globally, including in the Far East where the SA concept, in a formerly burgeoning property and long stay expatriate environment, first took root as an alternative to hotels.

Mid-market and economy SAs are the principal trend in the region, echoing the substantial growth in similar category hotels. But now that real estate is not such a firm investment-bet in some areas, what will happen to confidence and longevity in this sector? "Hospitality and real estate go hand-in-hand," says Bakker.

"Good operators add value to the real estate they are managing in a professional way.

"There is no good operation without a good operator, nor can an operator perform without a good property."