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The serviced apartment moment

Serviced apartments are in the midst of a revolution. The industry has grown a phenomenal 80% in the past seven years and everyone wants a piece of the action. Established hospitality brands are moving aggressively to expand their extended-stay inventory, while Airbnb continues its push into the corporate space – the core audience for serviced apartments – with a new search tool designed for business travelers.

Demand is there – in fact it continues to outpace supply in many key markets ­– but this is not the time to be complacent.

As Mark Harris of the Travel Intelligence Network puts it, ‘the serviced apartment sector can no longer rely on organic growth to see itself through an increasingly complex hospitality world.”[1] If brands – in particular small or independent operators – want to continue growing they must evolve and innovate to meet the shifting demands of tomorrow’s travelers.

So how did the serviced apartment industry get to where it is today? Among the many interrelated factors driving recent development, two in particular stand out. First, companies are increasingly embracing the expansion of short-term overseas assignments, in place of a limited number of long-term relocations. And second, the 2008 global financial crisis compelled many companies to reduce employee relocation costs, shifting their focus from hotels to often more economical serviced apartments.

Additionally, the rapid success of Airbnb has created a mainstream awareness of hotel alternatives, which simply did not exist several years ago. Today’s travelers desire greater flexibility and easier access to leisure, especially when traveling for business. They’re increasingly looking to stay somewhere that fits their lifestyle, and they’re far more aware of and open to non-traditional options.

If Airbnb has helped to raise the profile of hotel alternatives, however, they have also created some serious challenges. Their sharing economy model has led to a highly fragmented perception of the industry, where many different products of varying quality are all sold under the same banner. Today’s travellers may be more likely to look for hotel alternatives, but they are also less certain about what to expect from serviced apartment offerings. For some, even the mixed-up terminology that pervades the industry – from serviced apartments to aparthotels to extended- or long-stay hotels – can be confusing enough to send them looking elsewhere.

The future of the serviced apartment industry will be determined by the brands that can maintain a clear, cohesive identity, while evolving to meet shifting consumer demands. Big hotel chains, who already enjoy high levels of consumer awareness, as well as tried and tested booking methods, have been quick to understand this and are moving to expand their offerings.

Recent moves by AccorHotels, which purchased London-based Onefinestay last year, and Hilton, which is currently consolidating three extended-stay brands into a single All Suites Collection, illustrate that while their strategies may differ, hotel brands are increasingly embracing the serviced apartment model. As Carlson Rezidor Executive Vice President and Chief Development Officer Elie Younes puts it, ‘there is a lack of brand awareness in the sector which we can capitalize on.”

As a whole, however, the serviced apartment industry has been slow to innovate, especially when compared with the ever-growing number of select-service lifestyle hotel brands. Most current offerings, whether from large or small brands, are clustered around the mid-market and tend to be less than inspiring.

There is a clear opportunity for strong, niche brands that respond to modern consumer desires, whether at the affordable or upscale end of the spectrum. Indeed, the successful reception of new brands like Zoku, SACO’s Locke and Bridgestreet’s Mode demonstrates the appetite for such products. As the industry moves forward, it will be the inventive and distinctive brands that survive and thrive.

 


Contributed by Daniel Grossberg, brand strategist, QUO, Bangkok

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