As serviced apartments are increasingly recognised as a more secure, comfortable and cost-effective choice for business travellers, Catherine Chetwynd finds that there is still room for improvement
If one part of the business travel industry has held up during the exigencies of the past 18 months, it is the serviced apartment sector - and this is despite the increase in market stock.
According to the Global Serviced Apartments Industry Report 2010, undertaken by The Apartment Service (TAS), property stock has grown by 11.19 per cent in the extended stay sector and 54 per cent in corporate housing (the American term for serviced apartments).
"Because of the poor residential market, property is coming on line that has not sold and that has fed a lot of the inventory in most of the regions," says TAS director Charles McCrow.
Despite this, figures provided by the Association of Serviced Apartment Providers (ASAP) show there has been only a small drop in occupancy, reflecting a rise in demand.
Average occupancy across the sector was 83 per cent (down one per cent) in London for the first half of 2009 and 69 per cent (down two per cent) in the rest of the UK. These drops are minuscule compared to the hotel industry.
However, occupancy is not the only measure of the industry's and the report notes: as corporates have inevitably cut back on expenditure of every kind, demand for serviced apartments has dropped significantly, in some areas by as much as 35 per cent, and apartment operators have generally accepted shorter stays than normal - and at a lower rate. Generally, however, operators are upbeat.
Select Apartments "expected to see a substantial drop in business and saw small growth", while rates were down for City Apartments but occupancies and turnover were up by 0.5 per cent and 6.5 per cent respectively (to December 2009 against the previous year). BridgeStreet experienced increased demand during the last quarter of 2009 and has had strong advance bookings for the first quarter of 2010, with pace up by at least 10 per cent year on year.
More specifically, Saco's Sales Director Jo Redman has noticed greater interest from certain sectors. "[We've seen] an increase of around 20 per cent over previous years in [demand] from engineering and manufacturing companies," she says.
Grass Roots HBI, the event management specialists, operates in a niche sector, providing accommodation for the banks' graduate programmes in London and New York. "We will take up to 1,000 apartments a night, typically between July and the beginning of November," says group Managing Director for Venue Procurements Des McLaughlin. "Some of the programmes have been reviewed slightly but overall they have held up strongly because the banks have to invest in talent in the long term.
"We prefer to use companies who own the apartments, as you get a more consistent product," says McLaughlin. "BridgeStreet Worldwide and Marlin Apartments both fit these criteria and are popular with clients, as is Think Apartments for companies looking for a good product at a slightly lower rate."
Coming of age
The growing corporate interest in serviced apartments and aparthotels reflects an increasing understanding of the sector in the UK. And the ASAP's newly acquired independence - it was formerly part of the Association of Relocation Professionals (ARP) - is another measure of the industry's maturity.
The arrival of IHG's Staybridge Suites (four-star, equivalent of Crowne Plaza) in Liverpool in 2008, followed by Newcastle last year, raised the profile of extended stays in the UK and broadened the sector's offering. Marriott Executive Apartments is the luxury player in the UK with its West India Quay apartments in London's Docklands, while Citadines and base2stay cater for the budget market.
Even though guests in extended stay properties may be working on a project and staying for months, the average length of stay is typically around seven to 10 days.
"The ones that have opened here will do well and I think there is expansion potential for this kind of model, but it does not have the potential to grow as it has in the USA," says base2stay's CEO Robert Nadler. "Extended stays will be quite expensive because it has a bar, restaurant and shop and none of it is making a lot of money for the hotel, so it is subsidised in the room rate."
Quality control
According to BridgeStreet's Jo Layton, the sector's star rating system "has become part of day-to-day serviced apartment life and continues to evolve," she says. "The grading is a fantastic tool for companies wanting to evaluate what is available."
And it helps operators compare like with like. "We recently did an RFP for major users of serviced apartments and needed to look closely at the comparative specifications of the buildings we work with and I found the star rating useful for that," says Select Apartment's Adrian England, although he feels it does not cater for the idiosyncrasies of various buildings.
"Serviced apartments are very individual and we are passionate about matching up the person with the property."
However, according to the chairman of ASAP, David Smith: "The star rating has not yet shaken out the cowboys, but it has given corporate buyers a Plimsoll line by which to evaluate quality and legitimacy," he says. "It is pretty clear that the legitimate operators are involved with the programme, bar two or three - those that aren't are the dodgy, fly-by-night ones.
"Some of the bigger operators are struggling to justify the cost of the programme because they would claim they have a quality programme implemented through their global brands and we are trying to make it more viable for them," he says.
Research by the Institute of Travel and Meetings (ITM) shows an increase in demand for serviced apartments among its 500-strong buyer membership. "The research confirms that serviced apartments have become an integral part of many company accommodation programmes over the past two years," says ITM's chief executive, Paul Tilstone. "48 per cent of members said that demand for these products has been increasing and 57 per cent of buyers stated that this type of accommodation is being used to reduce costs and provide alternatives to hotels for short-term stays of five days or less."
"Not only do serviced apartments offer a flexible home-from-home environment, but they can help business travellers keep their costs down further by avoiding hotel extras such as minibars and room service by providing travellers with the opportunity to cater for themselves," says ASAP's Smith.
Or as SilverDoor's Marnie Delaney- Parker puts it: "Would room service make you beans on toast with cheese and Marmite, which you can then eat with your feet up in front of the TV?"
Research (see table) undertaken by Birmingham-based LMM shows that the cost per night of an apartment is normally similar to a hotel of a comparable star rating but, as Smith argues, the real difference shows in extras to be used by a hotel guest.
UK past, present & future
Maintenance and development is crucial to ensure the quality product that commands repeat business and Cheval Apartments (CA) has been investigating technology to meet customer demand. "We changed the quality of broadband we provide," says CA's George Westwell. "We use an external supplier that monitors it all the time and customers can phone them if there is a problem."
CA is fitting air conditioning to the 45 apartments at Calico House and refurbishing 34 of them; its installing a lift in Cheval Place and, subject to planning consent, adding another storey for penthouse flats; and the penthouses at the Gloucester Park property have received a makeover.
Elsewhere, BridgeStreet shed around 25 units at the end of 2008. "We gave back buildings or apartments that didn't meet our set standards," says Layton. "We started rebuilding the inventory in the spring with units that are fresher, greener and of a higher standard." This includes a new building with 57 units that opened in Canary Wharf on February 15, an another to open in March and one further option in the City.
The company took on a new building in Liverpool last year, which is "doing well", according to Layton.
This is despite competition from Staybridge and two new hotels - Hilton and Novotel - whose presence affects supply because stays are shorter outside London. Layton welcomes competition: "Any brand that comes in and gets coverage lifts the profile of the industry," she says - a fortunate view, since base2stay opens in the city this summer.
Ascott is investing in its Citadines properties in London. "We are reinventing the concept and have reinvigorated the design to something more contemporary and stylish," says regional general manager UK Rebecca Hollants van Loocke.
The sofabed has been replaced with a full-size bed, and the kitchen has been opened into the living space by knocking down internal walls, so no rooms have been lost. In addition, there will be iPod docking stations, digital clock radio, expanded TV network and free wifi throughout. Public spaces will also be improved. The company is spending around £7.5 million on the South Kensington property, which reopens in early spring, and the Holborn property, where work starts on March 1.
Trafalgar Square follows. "What we are creating will sell like hot cakes," she says. "Customers we have shown it to are over the moon."
Last year, City Apartments took on 20 apartments and plans to grow by an additional 61 units in the City this year. And Select Apartments, which is expecting to add up to 100 units in the UK, plans to build up its Select Living loyalty programme community and enhance its website, with a view to delivering new 30- and 60-minute service levels, alongside its existing two-hour turnaround time.
TAS made its inventory available on its website in January. "We are offering web services for companies that want to define an apartment programme, where they can access properties at their negotiated rate," says McCrow. The Spires, with accommodation in Birmingham, Glasgow and Aberdeen, has recently introduced Director's Suites in all three locations. These have a second bedroom equipped as an office with wireless internet access.
The Spires Aberdeen was refurbished to the tune of £500,000 last year and the company will soon be announcing a second location in Glasgow. Meanwhile Staying Cool will be opening a second floor of apartments at Rotunda, delayed from last year; and Supercity is awaiting planning consent for a building it owns in Clerkenwell, which should open in 2011. It is also looking at a site in Camden Town.
However, expansion is not as easy for those developing new-build properties. "There is a big log jam of potential deals: the problem is getting financing from the banks," says John Wagner, spokesman for Cycas Hospitality, which develops Staybridge Suites. "And there is still a gap between sellers' expectations of prices for land and buyers' evaluations." That said, Cycas is negotiating sites in Edinburgh, Aberdeen, London (several), Manchester, Birmingham and the Hague, plus another 10 to 15 are under consideration.
The rest of the world
The serviced apartments world outside the UK is as dynamic as it is at home. Owner-operator Adina recently opened aparthotels in Berlin and Frankfurt and launches one in each of Hamburg and Berlin later this year, bringing the portfolio in Germany, Denmark and Hungary to seven. "We are looking to enter the UK within the next 12 to 18 months," says Andrew Hunter, director of Adina Europe.
BridgeStreet has plans for seven new locations across Europe during the next 18 months and opens a building with 182 apartments on March in the Dubai International Financial Centre with a raft of facilities, including a café, a bistro and high-end dining, including a food take-away option. "It is a perfect location and a fabulous product," says Layton.
"Most of the hotel brands have developed apartment-style living in a neighbouring block but we are the only serviced apartment operator with housekeeping and full facilities opening in Dubai. A lot of the apartments attached to hotels are not designed to be used in full," she says. Also in the UAE, Staybridge Suites launched a property on Yas Island, Abu Dhabi in 2009 and opens in St Petersburg and Cairo this year.
Meanwhile, Ascott is looking farther east with an emphasis on China and India. "The concept is well understood there and we have opened Somerset, Ascott and Citadines in China and Tokyo," says Hollants van Loocke. Saco's Jo Redman also sees growth in China. "There is evidence of serviced-apartment providers opening in the second- and third-tier cities of China such as Chongquin and Harbin."
The agent's view
Booking serviced-apartment accommodation online has traditionally proved difficult. "Longer stay corporate housing model providers don't like to put property inventory on GDS because people who move into corporate housing don't always know how long they want to be there and if they want to extend their stay, someone might have booked another guest in after the original booking," says McCrow.
This makes booking a clunky process for TMCs. "While transient accommodation can be booked on GDS and electronically, it is always a phone call and separate negotiations for each serviced apartment let," says Director of Global Hotel Relations for HRG Margaret Bowler. It means each booking takes up a disproportionate amount of time, given that it is only a small part of a TMC's business. As a result, TMCs generally need to partner with specialist providers or agencies.
Hotels vs serviced apartment - Birmingham competitive set
| | Copthorne | Holiday Inn Express | Novotel | cityQuarters |
| Cheapest room price | £76.00 | £99.00 | £89.00 | £84.00 |
| Breakfast | £15.75 | Included | £13.95 | DIY |
| Evening main course | £9.95 | No Facilities | £13.00 | DIY |
| Premium lager | £3.60 | £3.00 | £3.85 | BYO |
| Ham sandwich | £5.95 | No Facilities | £6.95 | DIY |
| Shirt laundered | £3.80 | £3.75 | £4.20 | Free |
| Trousers laundered | £4.45 | £4.50 | £4.50 | Free |
| Wifi | £12.00 | £10.99 | £10.99 | Free |
| Total | £131.50 | £121.24 | £146.44 | £94.00 |
Price comparison research, November 2009
Dave Richardson finds that interest in serviced apartments from TMCs and corporate buyers is growing, but there are still concerns
Mark Cuschieri, director - travel management, UBS
"We launched a corporate serviced apartment programme last year in our key cities of New York, London, Hong Kong and Zurich. We are targeting this through travel policy and the response has been positive, although there are mixed opinions. Location and size of rooms are very important, but you have to look at them property by property. What I want to see is serviced apartments and hotels compared side by side on GDS, because I want a one-stop shop."
Ben Varey, travel manager EMEA, Credit Suisse
"We use them for both long-term and shorterterm stays, and they are well understood and accepted. They are suitable for all types of traveller, usually alone but sometimes with their family when re-locating. People not used to them may have pre-conceived ideas, but the product is becoming more consistent, especially when in large blocks."
Frances King, relocation manager, Marks & Spencer
"We use them especially for people moving to London, while they look for somewhere to live. Everything is included in the price, whereas if you rent your own apartments you have to pay gas and electricity bills, and council tax. To get people to try a serviced apartment rather than a hotel is more difficult, but once they have tried one they will go back. Female customers appreciate the 24-hour security you usually get, the laundry facilities, and not having to sit in a hotel restaurant alone."
Rosie Mohammad, travel manager, Pinsent Masons
"There is definitely more space for your money compared to a hotel room, and you can have a Jamie Oliver moment and decide to have a cook-in. But I don't think any of them come with daily cleaning services unless you pay extra, and as there is no concierge service, this could be a disadvantage if you are new to the area. You may not always know what you're getting. Some people may miss the hustle and bustle of a hotel environment, and you could feel somewhat isolated. Generally there are no restaurant facilities, which may put some travellers off."
Kathie McGuire, Inntel's commercial manager
"Any company regularly booking accommodation for extended periods could save. If you require the flexibility, with late cancellations and the ability to take a room for one night only at short notice then the cost benefits [of serviced apartments] are dramatically reduced. Multiple occupancy can save up to 40 per cent if two employees share a two-bedroom apartment. Many serviced apartments may not be suitable for VIP travellers, as they're usually short on extras and most bookings are managed offline, due to the negotiation process that is required to secure the best rates and reductions. This can be bad news for those relying on a self-booking tool."
Margaret Bowler, director of hotel relations, HRG
"Acceptance is growing as large hotel brands introduce long-stay products in the UK and Europe. People are becoming more aware of what they will get, and lots of corporate customers now want a serviced apartment provider in their hotel programme. Supply in key cities is generally good. Some apartments are available to view on self-booking tools, but prices are negotiated as with groups and meetings."
Geoff Allwright, travel and expenses manager, Airbus UK
"We are using them more for shorter stays. They can definitely reduce costs, but some people prefer to use their daily expenses allowance in other ways, such as to stay at a bed-and- breakfast. Their image suffers a bit, because some large brands don't have control over individual apartments and act only as booking agencies. Quality can be inconsistent, especially abroad."
Trevor Elswood, managing director, BSI
"We do about £4 million worth of serviced apartment bookings a year. They used to focus on long stays and re-locations, but are now good for shorter stays, too. Procurement people like them because of the cost savings above four nights and they can also control the extras bills, as people may eat a take-away rather than a £25 meal in a hotel restaurant. When three or four people travel together you could easily save 50 per cent, and all bedrooms have en suites. Most complaints about hotels are about the restaurant, bar or gym, but with apartments there are fewer variables to cheese you off. Booking and distribution are fragmented, however, but more GDS booking will come."
Paul Tilstone, chief executive, ITM
"This sector presents a plethora of alternatives for the business traveller, and their standard and services are improving all the time. Often very centrally located, they compare well price-wise against high-end hotels. The cons are they are not always easy to locate, as sometimes an apartment is in a residential block. A stay does require some planning on shopping, and it's a different experience to high-end hotel service. It's only really for travellers who like to do it themselves rather than have someone do it for them."
Margaret Birse, global director of travel, Serco
"We've begun moving longer stays (five nights plus) to serviced apartments on a voluntary basis. We may in future look at mandated usage for five nights plus, or maybe less. Cost is often lower than a hotel, with much more space. But there is a lack of availability, and late check-in can be challenging. Consistency of product is lacking and the booking process often confusing and complex. You can book with an agency, and then find you could have booked direct for much less."
Runners & riders with UK inventory