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Report Conclusions
By Charles McCrow

In 10 years’ time, when The Apartment Service reaches its 40th birthday, commentators will regard the recession of 2008/10 as a milestone in the development of the global serviced apartments industry.

I believe that the serviced apartments sector will gain a significant share of the global lodging market over the next decade and that this success will be driven by the following factors.

• Greater consumer awareness.

• A more detailed knowledge of apartments’ facilities, pricing and benefits of the extended stay market.

• A slowdown in the expansion of serviced apartments’ supply, caused by reduced investment in future developments driving rates upwards.

• Greater international mobility demanded by quickening global integration and a shift in the balance of world economic power towards the BRIC nations.

Although occupancies and rates vary between international markets, the overall picture is one of steady increases in every global region except those severely affected by political unrest.

Although the pace of rising demand may fluctuate with market sentiment, the trends demonstrated highlight the fact that serviced apartments have finally come of age. In this respect, there are clear parallels with the emergence of the budget accommodation sector in the early 1990’s.

Demand

Demand for serviced apartments is on the increase, evidenced by the continuing and overriding optimism amongst apartment operators.

The relocation industry is placing more short (i.e. less than a year) term assignments; business travel has picked up and is seeing more trips of a week or longer; multi-cultural societies are travelling further and longer to spend time with friends and relatives. These disparate forces are all driving demand.

The variations in types of apartment are becoming clearer, although very slowly. Previously restricted to the US, corporate housing is establishing itself in Europe and Asia. India is a now a leading market source for corporate stays and Brazil for leisure stays, demonstrating the growing power of the BRIC countries.

Nevertheless product differentiation continues to be an issue, and in this report we have looked at how the sector is trying to make life easier for its customers. However I believe the main difference is a fundamental one.

Extended Stay hotel offerings are typically purpose-built properties catering for stays of five nights or more. The corporate housing industry provides residential apartments with added services, where the average stay is around three months.

Product differentiation

It is the length of stay that determines the product the customer actually needs, but there is no question work is needed to define apartment categories, and the major chains are trying to create brands to differentiate themselves from the competition.

This will help address issues such as consistency of product and included services, but what the industry still needs is a grading system based on room configuration, overall floor area (size), quality of furniture and equipment, service levels and on-site facilities. Only then will apartment users and buyers have a good idea of what they can expect from any particular brand.

An international accreditation scheme is an obvious option but has already proved to be impractical in the hotel industry, so I don’t see the serviced apartments sector proving any more capable of implementing the concept, at least in the short term.

Supply

It has always been difficult to accurately quantify the size of the global serviced apartments market due to the difficulties in getting relevant and accurate data from many regions. Although the number of new apartments being built has slowed dramatically, The Apartment Service has seen the total count rising as we identify new operators who were previously below the horizon. There are also new entrants to the market.

It remains to be seen whether global growth of serviced apartments will match that of Australia, where the sector enjoys a 30% share of the total lodging market. By comparison, serviced apartments share of the US lodging market – including corporate housing and extended stay - is just over 8%. In the UK it is around 2% and in Europe apartments have 1% of the market. There is real space for growth in the sector for most regions.

Over the next few years I hope that we see the emergence of more regional associations like the UK’s ASAP and USA’s CHPA representing their members and helping to address the issues summarised above.

Many of these problems are common to all operators regardless of location, so standardized codes of conduct and guidelines for all operator members will greatly help to develop the sector. I have been an active supporter of both of these organizations and I can confidently say this is the way forward for the industry and with the big brands taking an active role. The sector has to speak with one voice.