Charles McCrow, Managing Director, The Apartment Service
Welcome to the second Global Serviced Apartments Industry report compiled by The Apartment Service in partnership with Travel Intelligence Network.
This latest edition is an up-date to the first and is based on research we have conducted with apartment operators worldwide. We set out to understand the major challenges facing their businesses, to assess how the global recession has affected them individually, and to find out what the short and medium term future holds for the serviced apartments sector in general.
When we compiled the first Global Serviced Apartments Report, we were just sliding into recession, wondering how deep it would be. The results of our new survey show that, despite the difficulties of the last 18 months, in almost every global region there is an abiding optimism for 2010 and beyond.
The question of how long it will be before normal service is resumed remains unanswered however. 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%. Deals have become more rate-driven and apartment operators have generally accepted shorter stays than normal, and at a lower rate. New extended stay hotels and more corporate housing inventory have made conditions more difficult for serviced apartment operators across the board than they would otherwise have done.
To set this in context, hotels in every region reported year-on-year reductions in occupancy levels during most of 2009, although the extent of these falls varied. For example, according to STR Global, in October 2009 hotel occupancy was down 0.6% in Asia Pacific, 8.5% in the Middle East and down 2.3% in Europe in the same period.
Since our first report was published, numbers of new operators entering the sector have grown rapidly, some bringing property portfolios made available unexpectedly by the collapse in residential property sales. This has been a significant factor in the rapid growth in the sector worldwide.
The 2009 CHPA Corporate Housing Industry Report compiled by The Highland Group, showed a reduction in demand with increased competition which helped to push rates down. Operators across the US reduced their inventory by an average of 23.8% in the 6 months to June 2009 to counteract this and shorter stays also played a big part in reducing achieved average daily rates. A significant amount of impact to business was also caused by increases in inventory from the extended stay sector.