By Charles McCrow, The Apartment Service
The corporate market has waited a long time for serviced apartments; just over 20 years in just about every region outside the USA.
Serviced apartments, mainly in the form of Extended Stay Hotels, are now proliferating in countries such as Australia, Singapore, Thailand, South Africa, Germany, Brazil, Dubai, France and India, all places where there is room for substantial future growth. In the USA, which currently accounts for 77% of world stocks, for example, extended stay product is still the fastest growing and a highly profitable sector of the US lodging industry reinforcing the view that a high level of growth is also probable and likely in all these other global regions as well.
Another notable fact is that 86% of the world’s serviced apartments are operated by the top 15 players in the marketplace!
The top serviced apartment brands are operated mainly by mainstream hotel chains who looked to lower their operating costs and to reduce their staff/guest ratios. They did this by adding a lounge and kitchen into the rented space which created a more spacious alternative and also cut away the cost of restaurants or lounge areas which were typically low or non-profit making. Lower costs all round, consumers are delighted and operators are happy – a recipe for a perfect growth story!
To add to this mix, over the last thirty years, the worldwide trend of companies going – and growing – globally has lead to greater staff mobility resulting in the requirement for them to stay away for longer on business trips or on temporary assignments. Expatriate populations have grown strongly too as well due to growth in corporate relocations. The sector’s agency members are reporting that relocation assignments are getting more numerous and also their shorter stay assignments are growing in numbers as well.
Finally, independent operators started to create larger units to house families relocating or on temporary assignments (at a time, coincidentally, when demand for hotel bedrooms also outstripped supply worldwide) delivering higher yields by using residential property packed up with services. This was sometimes due to lack of extended stay availability but also in respect to the size of the units which tended to be much larger and more suitable for families. Charges and cost savings feature highly. This industry has become known as Corporate Housing in the US and is a concept that is set to also grow rapidly in other regions.