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 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.
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
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
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.