Serviced apartments: Well-founded confidence?

The serviced apartment sector had a rare foray into the UK’s national newspapers in March when Premier League footballer Wilfried Zaha offered his business portfolio of 50 apartments to NHS staff battling the coronavirus outbreak in London.

Over the course of the pandemic, it is such keyworkers that have helped fill the apartments of many long-stay properties and given the sector cause for optimism that has been communicated by operators and industry specialists this week.

Data and analytics company STR reports that serviced apartment occupancy through April and into May was trading above hotels at 25 per cent in the UK, while the Association of Serviced Apartment Providers (ASAP) says some of its members have reported occupancy as high as 45 per cent. 

Property specialist Savills said it too was aware of operators performing well above STR’s figure and attributed this performance to the sector’s guest profile and the typical configuration of properties.

The trend is not unique to the UK. In the US, a report from Kalibri Labs showed that RevPAR across extended stay hotels performed 14.4 per cent better than other hotels in March. It is the only month in the last five years this has occurred, it noted.

“Serviced apartments have not been immune to the Covid-19 crisis but have shown a degree of relative outperformance,” Savills noted in a report published this week. “As seen historically, this could become more pronounced once recovery starts to emerge.”

It points in particular to the appeal of the product in a post-Covid world: serviced apartments have fewer public spaces than hotels; guests have minimal or no contact with staff; and apartments present a more comfortable environment in which to spend longer periods of time.

There is also the cost-effectiveness aspect for longer stays, a facet that will not be lost on corporates faced with tight travel budgets.

Indeed, there is a degree of confidence within the sector that it will find favour among corporates with health and safety and duty of care now firmly at the top of the agenda.

One player, Synergy Global Housing, claims more than a third of travel buyers plan to increase their use of serviced accommodation as an alternative to hotels as a result of Covid-19.

It launched SynergyCares last week, “a wide-ranging global safety and health initiative”, in the same vein that hotel groups have unveiled new protocols in a bid to build traveller confidence.

ASAP has also been highlighting its accreditation standard and the addition of a ninth element to its Stay with Confidence pledge.

“We took a lot of advice from the World Health Organisation, government and specialist health and safety advisors. We’re also trying to align with other bodies and establish a common standard,” says ASAP chief executive James Foice.

“There is certainly optimism and as an industry we’re well positioned. We think the sector will get going again before hotels. It’s an opportunity to open the market to new customers who aren’t familiar with our product.”

Travel manager Jan Jacobsen of AIG agrees but adds a note of caution.

“The sector absolutely stands to benefit. It has served key workers well, and some quarantine restrictions have pushed people towards apartments too because they’d rather isolate there than in a hotel. But it doesn’t mean it [the sector] is necessarily going to win new business travellers right away.”

He continues: “For the sector to continue its growth path, it needs to take a step up now. It needs a set of truly global, sector-wide industry standards that helps build traveller confidence. I’d like to see every operator abiding by these standards, no matter their size.”

Jacobsen says AIG will only work with operators who are ASAP accredited in the UK or conform to a comparable accreditation scheme in overseas locations. Serviced apartments comprise around 10 per cent of the organisation’s total accommodation programme, but he’d like to see that move towards 20 per cent.

He believes global hotel groups, however, are also in a strong position, having established new cleanliness protocols that are standardised globally – something that is not so easy in the more fragmented long-stay sector. 

“Apartment operators must communicate their cleanliness standards too,” he says. “There is no such thing as over communication; just bad communication. It must be calm and factual. 

“There is too much marketing spiel at the moment which is just a distraction. It’s as if suppliers are doing something new, but what they’re actually doing is increasing the frequency of cleaning. The difference now is that they need to track and document this for us.”

Jo Layton, Director at CAP Worldwide Serviced Apartments, meanwhile, calls for balance and an understanding of the current mix of business being handled.

“The extended stay industry has been incredible at stepping up during this crisis, but it is important to remember that we have been servicing high numbers of ‘crisis’ travellers. This is a moment in time, and the majority of these projects will finish. When this happens, the current demand will change again and we will be servicing a more balanced mix of business, including corporate and leisure travel,” Layton explains.

While the relative isolation that apartments offer is touted by some as a duty of care win, Layton says providing a balance is key.

“Isolation is great sometimes but it’s not ideal for everyone. Some people want or need the support services that come with hotels or to simply have other people around,” she says. “Corporates need to offer a balanced accommodation programme, which reflects the wide variety of travellers needs.” 

While Layton agrees the sector could attract new business post-covid, she too calls for an agreed global operating standard for the sector.

“What this [crisis] has done is to, again, put assessment and accreditation firmly back on the table. We should continue to aim at creating a minimum set of standards, internationally, set by a body that measures the success of the accreditors, and that acts agnostically – the accreditors need to be checked too.

“This would ideally not be a commercial environment or a sponsored environment, as this can lead to a bias one way or the other. SAFFAA (Serviced Apartment Forum For Assessment And Accreditation) is trying to support and develop the understanding of this critical area through active discussion and debate.”

The concept of trust and confidence is also raised by Chris Crowley, partner at consultancy Nina & Pinta.

“I think the sector’s optimism is well placed… ASAP and Synergy and others have acted quickly and professionally to provide companies and travellers with that assurance of supply – reliable standards – that they can use to keep building traveller confidence,” he says.

“Accommodation is a personal trust issue for many travellers – where you sleep, where you eat, where you meet, where you work when you are not in the office. In a serviced apartment you can control this environment.”

For apartment operators and agents, translating current optimism into business growth and diversity will depend on clear communication, building traveller confidence and, in the long-run, establishing globally recognised standards to unlock the potential of the sector.