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Global Industry Overview
By Mark Harris
Travel Intelligence Network

Definitions - corporate housing vs. extended stay

The term ‘serviced apartment’ is traditionally used to describe an apartment alternative to hotel accommodation for long stay leisure or business travellers. However there are two types of accommodation to which the description serviced apartment applies, with an ever-growing list of sub categories.

1. Extended stay hotels –mainly studios, one bedroom with a few two bedroom apartments typically found in urban locations, ranging in standard from budget to deluxe. All are fully furnished and include -

• En-suite bathrooms

• Fitted kitchen or kitchenette

• Lounge/dining area sometimes including a sofa bed or pull down bed

• Working area, desk, office chair, internet access & direct telephone line

The hotel services usually available from extended stay hotels include -

• Reception desks – some manned 24hrs, others on limited hours (e.g. Travelodge), or none at all

• Daily or weekly cleaning. & laundry service. (Most properties have either shared laundry facility or an in-apartment washing machine)Reception desks – some manned 24hrs, others on limited hours (e.g. Travelodge), or none at all

• Daily or weekly cleaning. & laundry service. (Most properties have either shared laundry facility or an in-apartment washing machine)

There are typically no restaurants, bar or lounge areas, although the level of services is generally higher than those found in hybrids Apart-hotels or Apartotels, which are usually a leisure or resort based product, and also come in standards of accommodation and range of services from budget to deluxe

2. Corporate housing - residential apartments up-graded for stays of 30 days or more and packaged together with services such as:-

• Weekly cleaning

• Utility charges

• Local taxes

• Telephone and TV

• Guest services - telephone support for maintenance etc

This type of product - also referred to as suite living, residence living and condotel - works as company apartments for either regular visitors or those on extended projects. There are two types of corporate housing:-

• Apartments rented and maintained by the operator on an on–going basis

• Those rented specifically for a particular housing requirement and length of time, after which they are handed back to the owner. This is also referred to as virtual housing.

Extended stay vs. corporate housing

Here are some of the considerations when deciding which option to select.

• Minimum stay – typically 30 days or more with corporate housing providers, although there are exceptions. Extended stay hotels usually have no minimum lease term.

• Lease agreements – there could be cancellation charges if a stay in cut short as the rate offered is based on the expected length of stay. Different areas have laws covering occupancy and sales tax as it relates to furnished rentals.

• Services – in corporate housing you are more on your own and with less hotel feel.

• Space - corporate housing provides more space than extended stay.

• Rates – it’s a matter of the location required, length of stay and what facilities you want.

• Amenities – remember, you get what you pay for!

Brand as differentiator

Many extended stay providers are using brand as a means of differentiating their product from the competition. However those differences can be so slight as to render the distinction pointless.

For example, Ascott operates the four-star equivalent Somerset serviced apartment and five-star equivalent The Residence brands. Frasers Hospitality operates Fraser Place and Residences in the same categories. All four products are found in city or business locations; have fully equipped kitchens (or kitchenettes), laundry and reception facilities. At first glance, the only difference between the four star and five star products is the frequency of housekeeping.

The problem is that the serviced apartments sector does not yet enjoy a level of product awareness that consumers can discern the subtle differences between their brands. Apartment marketers need to ensure that the differences between their brands are clear, recognisable and priced accordingly.

Economic impact on supply & demand

With the global economy teetering – seemingly perpetually – on the proverbial precipice, the serviced apartments sector has proved remarkably resilient, despite the future outlook being brightest for the emerging countries rather than the heartland of the apartments sector – the USA and Europe.

Across the worldwide lodging industry STR Global points to the Asia Pacific (ASPAC) region leading a global recovery driven by returning demand and a steady supply of rooms in all regions except the Middle East and Africa. However the apartments sector’s performance has been characterised by the lack of new apartments coming on to the market because of the shortage of development finance. This has characterised up both occupancy and average rate.

In 2011, most categories of global serviced accommodation are growing occupancy, and STR predicts that average daily rate will follow suit.

The fortunes of the serviced apartments sector across all international markets will inevitably vary with local and regional circumstance. The Middle Eastern apartments sector has undoubtedly suffered due to the political unrest in Egypt and neighbouring countries. However the impact on the region has been that demand has shifted to other destinations such as Dubai. The disasters in Japan have thrown the spotlight onto corporate contingency planning, but the knock-on effect on demand for serviced apartments has been far from cataclysmic. According to research by PwC and SLH Research, the first priority for 63% of people looking for a hotel is searching for the best price. The legacy of the recession may be the continuation of recessionary behaviour amongst business and leisure buyers, but the signs are that the apartment sector will out-perform the rest of the lodging industry in 2011 and beyond.

In November 2010, STR Global predicted that extended stay hotels would see a double-digit growth in revenue per available room during 2011. By the end of the first quarter in 2011, these estimates had been downgraded, but STR still predicts that, overall, average hotel rates will increase by 4.2% in 2011 compared to 2010.

global economic outlook 2011.12 worldwide lodging demand in numbers 2010-2009 global lodging occupancy 2011