Serviced apartments 'expanding into new and emerging markets', but 'little progress' on standardisation

Demand for serviced apartments is growing faster than new supply is coming on stream, as an increasingly mobile global workforce drives business travel and relocation activity.

Demand for serviced apartments is growing faster than new supply is coming on stream, as an increasingly mobile global workforce drives business travel and relocation activity.However, while global apartment brands are expanding into new and emerging economies and new sub-brands are launched, the industry is no nearer the levels of standardisation in product and distribution required by corporates.These are two of the findings in the fourth edition of the Global Serviced Apartments Industry Report, published by Travel Intelligence Network for The Apartment Service (TAS). The report includes the findings of a new survey conducted among corporates, travel management companies and apartment operators, as well as an overview of global supply and demand trends and individual regional reports.Charles McCrow, MD of The Apartment Service, says buyers and suppliers agree that greater standardisation is the key to realising the full potential of the sector, yet little progress has been made since TAS’s last report was published in 2010.“Standardisation should be the clarification of minimum service levels and quality thresholds that can be expected from different categories of product,” says Mr McCrow. “The emergence of strong brands will go a long way to enable this, but, with so many independent providers, universal clarity is required.“Eighty-six per cent of corporates and 72 per cent of agents agree there should be a global code of conduct for serviced apartment operators. Operators agree, but only 48 per cent believe that a code of conduct is feasible.”Barriers to growthThe report also found that there were three principal barriers to sector growth: a shortage of supply in required locations, the sector’s limited online booking capability, and a lack of understanding about the serviced apartment product itself.Despite these challenges, property professionals, hospitality providers and entrepreneurs are realising that the extended-stay market can provide good returns on investment. This, Charles McCrow believes, will fuel the pipeline for both existing and new providers.Other key findings from the new report were:Supply
  • There are 655,911 serviced apartment units in 8,802 locations worldwide, an increase in supply of 9.4 per cent over 2011
  • The sector growth rate has slowed from 17.5 per cent year-on-year, reflecting the difficulties in raising capital for new developments
  • The inventory of the 15 top global suppliers, whose supply has grown by just 1.7 per cent, suggests that the bulk of new supply has come from independent operators
  • Supply of corporate housing in the primary US and Canadian markets has declined by 2.2 per cent. This is due to corporate housing operators’ ability to withdraw inventory during tough times
Demand
  • 94 per cent of operators report that demand in their regions is increasing, compared with 77 per cent in 2011
  • Demand for serviced apartments is outstripping supply in many territories, owing to greater adoption of serviced apartments in corporate travel policies, more apartment operators taking short-stay business away from traditional hotels, and the growth of project and assignment work
  • 77 per cent of business travellers stay in serviced apartments five times a year for up to seven nights
  • Corporates choose serviced apartments because of cost per night, length of stay and location
  • Of those who have stayed in serviced apartments, 79 per cent prefer them to hotels
  • Average achieved rental rates reflect a 10–20 per cent discount
Distribution
  • 80 per cent of corporate bookings are made online, of which 27 per cent are via a self-booking tool
  • 75 per cent of operators claim to be bookable online with live inventory
  • 62 per cent of operators are not represented on any GDS platform
Copies of the report can be downloaded, free of charge, from www.apartmentservice.com/news_events/global-serviced-apartments-industry-reports 

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