Shaking it up: Changes in the serviced apartments sector

As the global market for business travel accommodation grows and changes, the serviced apartment sector is under pressure as never before. Fiona Murchie looks at how some of its key players are adapting to stay ahead of the game.

Serviced Apartment living room

Source: Bristol Broad Key image courtesy of SACO

It’s all change for the serviced accommodation sector as it rises to the challenges of global growth.Established provider SACO is rocketing into the future with the announcement that it has merged with CL Serviced Apartments (Oaktree Capital Management) to launch Beyonder ApartHotels.The new company has cleverly targeted the tech-savvy generation that corporates struggle so hard to cater for. As employers know, this demographic is a challenge; they want global experience, but often on their terms. While acknowledging that many younger players are intent on managing their own careers and will be off to pastures new after three years or less, HR and talent managers are aware that these people are the lifeblood of their businesses. The cost of global mobility is high, and there is intense pressure to keep costs down, but there is also a need to balance talent retention and duty of care.Beyonder ApartHotels is focused on helping Millennial global travellers to get the most from their stays, whether of six days or six months. Tablets control everything from the lighting to the television to the blinds, and free, high-speed wireless internet, telephone and films are standard.The combined company will have a portfolio of 1,645 apartments, which includes new transactions on 945 apartments across ten properties in London, Amsterdam, Edinburgh, Glasgow, Aberdeen and Dublin that are scheduled to open from December 2015, along with SACO’s existing portfolio of 700 apartments across the UK.Presumably there will be no age restrictions on the door, and if you are handy with a mobile and are on the go, the concept will catch on.Times change, and so do fashions. Who would have thought that collaborative consumption – sharing, swapping and renting – would become so popular? Being resourceful and connecting people around the world is not new. Baby Boomers travelled and passed on contacts in the heady days of the 1960s and 1970s. In recent years, from Boris Bikes and car shares to pop-up restaurants, the concept of using what you want when you want it, and making the most of the community you live in, plus an appreciation of environmental impact, has begun to shape our world.Nowadays, when some people travel for work, they want to feel part of the community in which they stay. No longer are recommendations for local restaurants sufficient. Serviced accommodation providers have appreciated this, extending their levels of service and hospitality to include a sense of belonging.Airbnb has exploded as an accommodation concept for the independent minded. You stay in someone else’s place while they are absent but have left most of the traces of home. Recommendations are key to the property’s next occupancy. The website is clear and easy to use. You take a bit of a punt as a user and as a property owner, but, for many millions of users, it is a win-win arrangement. The concept is beginning to bite into the business travel sector.Airbnb, now in London, exhibited at the recent Business Travel Show and was proud to have signed up Grant Thornton as users.The BridgeStreet IQ Report: Business Travel Insights 2015 revealed that, while 15 per cent of business travellers had used a service like Airbnb, only 31 per cent of corporate travel policies allowed their use. This will be a serious problem for the growth of the concept.However, as 46 per cent of respondents indicated that employees were responsible for making their own business travel arrangements, there is potentially a big market for the serviced apartment providers who claim their attention. It makes sense that this will be via phones and mobile devices, so the race is on to influence end users.The news is good for serviced accommodation providers regarding preference for this type of accommodation. A massive 74 per cent of corporates with a travel policy include serviced apartments, with 44 per cent recommending them for stays of between one and four nights, rising to 76 per cent for stays of longer than a week. This is a clear indication that serviced apartments are preferred to hotels. This reflects the huge growth in the sector over the last five years.Drilling further into the report, location was the key driver for choice of accommodation for the business traveller. Perhaps more importantly for the serviced apartment sector, which is working hard to establish global brand recognition, consistent customer experience is most likely to drive loyalty to a specific brand.This must be rewarding for BridgeStreet, with its tiered system of six brands, providing guests with six- to two-star serviced apartments. It has been very focused on promoting the quality of its offering across all its brands, the ‘memorable hospitality experience’ and the consistency, which is so important for the corporate market.BridgeStreet’s stand at the Business Travel Show reflected its confidence in meeting the needs of the UK and European marketplace. With more than 50,000 apartments in more than 60 countries, it is a main contender for taking on more of the European business, which is driving into relocation hotspots and emerging markets. London and the UK are a springboard for global growth, but the complexities of getting the message right in other parts of Europe must not be underestimated.

Duty of care

Let’s not forget the responsibilities of the employer. Oakwood was one of the first global serviced apartment providers to show the lead, by providing emergency accommodation for employees airlifted to safety following incidents of political unrest.Oakwood is also aware of responding to the values set by its corporate clients. Impact on the environment is taken seriously by corporates assessing accommodation providers, as are evidence of appreciation of corporate and social responsibility and an understanding of critical business needs.Corporate HR cannot afford to overlook duty-of-care responsibilities, and they look for these to be reflected by their accommodation suppliers.

Business travel risk

Compliance is also high on the agenda for corporates. This is not a new phenomenon, and we have written articles across the Re:locate media about the risks of stealth business travellers. That this issue is gaining so much attention now may be to do with governments around the world stepping up the penalties for tax and immigration misdemeanours, or it may be to do with the increase in the volume of business travellers as international assignment numbers are reduced.As the session on compliance at the recent London Worldwide ERC summit revealed, corporate clients cannot afford to let business travellers slip under the radar. However, it is important to make sure that the compliance debate doesn’t drive the innovation out of global mobility, or the relocation management companies could shoot themselves in the foot. Last year, the relocation market was a key focus of the serviced apartment sector. This is still the case, with increasing numbers of the big brands growing their market share, and smaller providers appreciating the advantages of longer stays. The proposition is compelling, where quality is consistent and the supplier understands the relocation requirements of security, trackability, flexibility and quality. But what are the cost savings against hotels now?Now that business travel is high on the agenda, some serviced apartment providers are also embracing the short stay.Key providers, such as Cheval, the London-based operator which formerly dealt almost exclusively with the corporate relocation market, now have an offering for business travellers of the same high standards but for a few nights’ stay. The crossover market is very much on the radar of the savvy operators, who realise that competition is hotting up.The threat of international hotel groups coming into a marketplace which has become the preserve of the serviced apartment sector is always around the corner. Staybridge, the InterContinental Hotels Group brand, has been in the UK since 2008 and recently opened in Vauxhall following a successful opening in Stratford.A coup for the Association of Serviced Apartment Providers (ASAP), which now has 88 members, was the announcement that the world’s largest operator/owner, The Ascott Limited, had joined the association.  Rebecca Hollants Van Loocke, Ascott’s UK country manager, said, “We feel that now is the right time to get on board with ASAP, who are gaining serious momentum within the industry.” “Ascott has seen that a united voice for our industry is paying dividends, and we look forward to working alongside the team to ensure business and leisure travellers make serviced apartments a primary choice for their accommodation needs when in the UK.”In the UK, Ascott has six properties under the Ascott and Citadines brands, with 736 apartments. Speaking at industry events, Ms Hollants Van Loocke has been open about her organisation’s desire to grow in the right locations, including London and Paris.ASAP’s managing director, James Foice, said that Ascott’s international reach would be of particular benefit to his organisation as it sought to build membership beyond the UK and roll out its quality programme to help create an international quality standard for serviced apartments.The association has already made overtures in the US, but Europe, with its different models in France, Germany and other regions, will perhaps be a harder nut to crack. Asia is a hugely important market for global businesses (the prized corporates with a relocation and business-travel need), and the expertise that Ascott can bring to the table will be invaluable if ASAP is to reflect the global ambitions of its leading international members.The spirit of collaboration is a sign of a maturing market. There is huge knowledge of the market, hospitality and the service model – not to mention flair and sophistication – within the global apartment brands. But perhaps this spirit of cooperation, which is embracing the very big players, is also an indication of the seriousness of the potential threat from the international hotel chains if they surge forward into what has become the domain of the serviced apartment sector. Interesting times as the stories unfold. For more Re:locate news and features about serviced apartments click here

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