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living room and bedroom of typical serviced apartment unit charles
By Charles McCrow
Managing Director, The Apartment Service

Welcome to the third edition of the Global Serviced Apartments Industry Report, which coincides with the 30th birthday of The Apartment Service.

When we published the first edition of this report in 2008, it was the first survey of demand and supply trends for the sector. The second edition, published in 2010, looked at how the industry was coping with recession and also provided a summary of the key global markets for serviced apartment operators.

In this third edition we look at how these trends have evolved over the last three years, and at what apartment operators believe the immediate future holds. We look at how corporates are using apartments, and in particular at the natural synergy between the relocation market and serviced apartments. We also examine the mechanics of the corporate housing market, long established in the US, but now making ground in Europe.

This year’s report includes contributions from a dozen experts on their local serviced apartment markets, together with our own Apartment Serviceresearched summary of rates, new market entrants and estimates of total supply by region. This local knowledge brings a new dimension to the Global Serviced Apartments Report, and one which I believe corporate procurement, training and HR functions alike will find invaluable when making informed purchasing decisions.

We further shed light on how the different sectors in the serviced apartment world work and how these sub categories address the wide range of corporate accommodation needs.

Supply & demand

Despite the recession and attendantcollapse of worldwide property markets, the global serviced apartments industry continues to expand. In 2010 we estimated that there were 446,996 Extended Stay/Apart-Hotel apartment units in 7,119 locations. Today, we have identified 599,187 units in 8,362 locations – an increase of 34.1% in inventory and 17.5% in coverage. Similarly, corporate housing identified in the US and Canada has risen from 44,469 units in 2010 to 70,557 units in 2011 – an increase of 58% year on year.

Although partly attributable to thecompletion of apartments already in the pipeline before the recession struck, thisgrowth reflects the increasing popularity of serviced apartments with operatorsand users alike.

The perception amongst operators in all the regions covered by this report is that competition is growing. 77.4% ofoperators who took part in our survey confirmed that local inventory is increasing.

Interestingly, although inventory has grown the major global operators remain largely unchanged. Marriott and Intercontinental continue to dominate the supply chain, together with Extended Stay Hotels following the latter’s successful exit from Chapter 11 insolvency, albeit they are mainly located in the US. The only new entries in this year’s top 15 are Pierre & Vacances (Europe’s largest property developers) and Value Place, who operate 27,633 and 20,300 units respectively. Our survey found that just over half of respondents reported that the number of serviced apartment operators was growing locally.

In the last edition of this report, buyers and operators alike were optimistic about the year ahead, despite hotels in almost every global region reporting reduced occupancies for 2009 compared to the previous year.

Our latest figures suggest that this optimism was well-founded, with operators out-performing their hotel counterparts in all key areas. In contrast to hotels’ slow recovery from global recession, members of UK’s Association of Serviced Apartment Providers (ASAP) have reported substantial growth in the last year.

In 2009, up to 70% of apartment operators reported increased occupancy levels. In 2010, this fell to 59%, with 22% reporting no change. Operators have seen occupancy rise over the last 12 – 18 months to almost record levels, with average lengths of stay also increasing. Although almost all operators are seeing longer average lengths of stay, those in the corporate housing sector have a much higher average of 80 nights (according to The Relocation Report), compared to Extended Stay offerings because of the different character of the two products.

In our survey, a third of operators reported increases in length of stay, with over half reporting no change to 2009 levels. Less than 20% reported average length of stay to be falling.

global serviced apartment availability for corporate housing and extended stay