Where is the serviced apartment sector heading?

The big players are expanding, takeovers and mergers are consolidating brands, and the hotel sector is muscling in on the action. What does this mean for serviced accommodation providers?

Leman Locke – SACO

Leman Locke – SACO

Many serviced accommodation providers appear to be switching their attention to the business travel and leisure market. How do those managing corporate relocations and international assignments ensure quality, compliance, tracking, and the safety and security of their employees against a backdrop of cost control and peer-to-peer recommendations? As the serviced apartment sector chases more investors, does it care?The distinction between agents and providers is being blurred as networks grow to accommodate regional and global expansion. The big hotel chains are getting their act together with improved aparthotel models, and moving in on the market.On the employer side, there are big decisions in the pipeline for many corporates as they respond to political and economic drivers and increased competition in many market sectors. Now is, perhaps, not the time for the serviced apartment sector to abandon the employer market, just when it is getting its act together on areas such as big data, technology and strategic issues.HR corporate decision-makers and global mobility specialists may not want the responsibility of their organisation’s business travellers; for many, however, the risk is too high to leave them out of the equation. We ask the question: who really understands the employer market and wants it for the long term?

BridgeStreet launches online booking

Travel bookers will be delighted at the progress in online booking, but do corporate buyers care?Online booking finally appears to be here for the relocation sector. At February’s Business Travel Show, BridgeStreet Global Hospitality announced the next phase of its drive to connect the sharing economy with the extended-stay travel market: the official launch of the first online travel agency (OTA) for business travel.With the launch, BridgeStreet’s supply partnership of over 65,000 serviced apartments in 60-plus countries will be searchable from its website, with easy connectivity to the global distribution systems (GDS) that have traditionally been difficult for this sector to access.
BridgeStreet Stüdyo – Sussex Gardens
But does this really matter for HR global mobility specialists and relocation professionals charged with meeting the accommodation requirements of international assignees and domestic relocatees?The answer is, perhaps not. What difference does it make to wait a few hours – or even overnight – while availability is checked, location assessed, and due diligence put in place? Behind the scenes, miracles can happen as accommodation requirements are matched, apartments shuffled, and client needs seamlessly met.The problem is that expectations now run very high. We are used to booking our leisure trips instantly when we are in control of the price range and the timescale. The end-user employee expects instant success. With Airbnb snapping at the heels of the corporate market, it is not surprising that BridgeStreet, as a leading brand, has embraced the challenge of online booking. This will accelerate the pace of all those in the sector who nurture their corporate relocation clients for length of stay, better profit margin, and returning custom.
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HR taking ownership?

But more than that, responsibility for business travellers is beginning to fall firmly in the lap of global mobility professionals. More and more businesses are realising that it is just too risky to allow swathes of under-the-radar business travellers to be untracked and unaccounted for in the minefield of compliance issues, from tax and immigration to duty of care in a turbulent world.Increasingly, there is a trend for business travel to fall under the remit of HR global mobility. As more HR take control of data analytics, and companies demand a full picture of talent movement, cost and metrics, it stands to reason that business travel is plugged into the data, and that HR mobility takes ownership.The world is changing, and the obstacles in the way of an international assignment, group move or domestic relocation have to be factored in for business travellers, too. Companies need a steady pair of hands, and global mobility specialists are taking their place as business partners at the top table of decision-making.Volume and risk mean that the computer must say yes to as many serviced accommodation requests as possible, to keep up with demand and stay first choice in the battle of the brands.Online booking, which, for so long, has been the holy grail of the relocation sector, has been provided by BridgeStreet, and all the other brands will have to follow suit. Indeed, they are already progressing with the online agenda.Do corporate decision-makers care about online booking? The answer is, yes, they probably do, because they can’t afford not to. On-demand is expected, and so are security, tracking and due diligence, plus high-quality service and duty of care.

Responding to change

The wider question is, do corporate relocation buyers care very much about serviced accommodation? For ten years, we have been charting the rise of this fledgling industry sector, but now it has nearly come of age.As the market looks for more investors and backers, it has more to prove. Glossy investment summits and conferences are establishing the sector as a hospitality market to be reckoned with.These are interesting times as the aparthotel model adopted by the leading players to head off the hotels starts to overshadow the longer-term serviced apartment model. Changes in the marketplace, accelerated by uncertainty with the fallout from Brexit and the change of government in the US, plus the trend to shorter assignments, point to the importance of aparthotels in accommodating shorter stays.It is, perhaps, time to be counted for serviced apartment providers who want the employer business. If they want the corporate mobility markets, they need to listen to clients’ responses to global change and trends, to be flexible, and to go with the flow. They also need to be able to take the rough with the smooth – to devote time and energy to increasing supply in unpopular locations where there is little leisure-occupation appeal, as well as in preferred and popular city-centre and business-district locations.Devotion to new infrastructure hotspots or manufacturing investment zones will be a valuable prize in the changing accommodation landscape, as pioneering project teams pave the way in the brave new world of new trade agreements.In this long-term game, who cares will win, but it won’t be a task for the fickle or fainthearted.

Fit for the future

Serviced apartments company Oakwood Worldwide was recently acquired by Singapore-headquartered Mapletree Investments. This would certainly help with the growth of the company’s branded footprint, explained Tom Meertens, Oakwood’s general manager for EMEA, when I caught up with him at the Business Travel Show. He cited Mexico, the US, Europe, and, in particular, Switzerland and Ireland as high-growth locations.Commenting on Brexit, Mr Meertens reflected that, following the referendum, there had been so much noise around the topic, followed by the November US elections, that it had been difficult to gauge the potential impact on the serviced apartments market. As he explained, Oakwood offered global solutions, so if clients were no longer in London, they would be accommodated in Dublin, Paris, Frankfurt, or their latest destination.As an organisation, Oakwood was not committed to long-term builds, he said, and there was flexibility to scale up or down properties in particular locations or regions. It was important to be ahead of the trends, and to understand the regions to which clients were going.Tom Meertens felt that a lot of Oakwood’s Fortune 500 clients were still planning their Brexit strategies, and adopting a considered approach rather than making rash decisions. Oakwood was still experiencing very high occupancy, and, with competitive daily rates, its market share had not fallen.Dublin was the company’s biggest European city after London, and an important destination for its clients. Demand was through the roof, Mr Meertens said, reflected by property prices and occupancy.Commenting on the potential to support Brexit demand, he emphasised Oakwood’s long experience of providing group-move solutions. The company’s history with oil and gas clients reflects its understanding of the relocation marketplace. Oil prices are lower, and obviously such clients are price driven, but compliance comes first for the sector. It is all about transparency and justifying the cost. If oil and gas projects are cut short, there is movement.

‘Better than best’

Particular regions, such as Africa, could present challenges, but Oakwood would offer a client a solutions package in locations like Angola. This could include 24-hour security and escorts. Oakwood was used to dealing with clients’ risk-assessment teams and very focused on assignee safety, as its employees could sometimes be targets, Tom Meertens said.He emphasised that Oakwood had a robust supplier network to service its wide-ranging client base.Industry sectors have cycles, too. The technology market was huge, Mr Meertens explained, and that accounted for the high occupancy in Dublin. A recent PwC report found that 20 per cent of Millennials expected to go on international assignments. For these travellers, shorter, 60-day assignments were common. New developments included Oakwood’s new studio brand in Singapore, which is perfect for this demographic.Keeping up with trends, the Oakwood App was proving very popular with clients; it ticked the box with regard to tracking, which was so important for employers and emphasised their commitment to duty of care. Oakwood already had 400 apartments that could be booked online.Reflecting on disrupters in the market, such as Airbnb, Tom Meertens felt this helped Oakwood to do a better job with its guests. “Our goal, he said, “is to be better than best.”

Expansion brings best of choice

SACO, founded in 1997 in Bristol and well established in the relocation market, merged with Oaktree Capital Management in 2015. In addition to the 980 apartments it operates in the UK, it now offers a further 80,000 apartments across 260 key destinations through partners in 55 countries.At the Business Travel Show, SACO announced a major expansion of its operated portfolio of serviced apartments and aparthotels with the addition of six new properties across the UK, Ireland and the Netherlands by 2020.The new properties in Manchester, Dublin and London’s Buckle Street will be operated under SACO’s new lifestyle aparthotel brand, Locke. The properties in London’s Fitzrovia and Moorgate will be SACO Serviced Apartments. The property in Amsterdam will be a SACO Aparthotel.
Oakwood – Fitzrovia
Stephen Hanton, commercial CEO of SACO, says that this marks “a key milestone in the growth we first started planning two years ago to meet the ever-increasing demand for serviced accommodation. This exciting phase in our development will see our inventory double and SACO take its first step into continental Europe with the opening of our Amsterdam property later this year.“Our expansion reflects the marked and ongoing shift in consumer demand from traditional hotels to stays at serviced accommodation properties that allow greater flexibility and more opportunities for social engagement with fellow guests and the surrounding community.”SACO has chosen its new locations because they are all in major UK and European hub cities which attract a mixture of transient business-traveller stays, extended stays, and demand from leisure travellers, boosted by growing demand from a number of key sectors, including tech, media and creative.Stephen Hanton adds, “With our mix of different serviced accommodation brands, from SACO Aparthotels and SACO Serviced Apartments to our new Locke lifestyle aparthotels, we offer the breadth of choice to meet the needs of the travellers of today and tomorrow in all of our locations.”

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