Director of Space Design
In this edition of the Global Serviced Apartment Industry report we have invited
industry experts in every region to provide an overview of their local market. Ruth
Shiraishi, Director of Space Design Inc gives her perspective on the Asian serviced
For the serviced apartment industry in Asia, 2010 was the beginning of revival following
the long-term effects of the global financial crisis.”
Serviced apartments in the region accommodate mainly business and corporate requirements
so despite the shock of the financial crisis to companies in general, client firms
actually looked to reduce costs by increasing the amount of extended stay single
business travellers as opposed to footing the bill for full family travel on ex-pat
The number of corporations bringing over whole families with a parent in upper management
became less, so serviced apartment operators catering to the upper end long term
family-size user suffered increased competition and price pressure.
Studio and one bedroom apartment operators who cater for the singletravelling business
person were surprised as operators of larger apartment facilities (for families
etc), came down in price almost to the same level of the compact apartment operator.
For instance, from the end of 2009 to mid-2010, a business traveller could get a
two bedroom fully furnished serviced apartment for about the same rate as a studio
or one bedroom would have cost before the financial crisis hit.
Service providers in Hong Kong were able to maintain cash flow with guests from
mainland China who wanted to keep long term furnished apartments in Hong Kong as
a sign of prestige and clout.
Up and coming markets in Vietnam, the Philippines and Thailand benefitted from an
influx of business users along with a limit in serviced apartment supply, so operators
in those countries were able to benefit from multi-national corporations (MNCs)
market entrance as part of an overall global cost-cutting strategy.
For Japan and Australia, the two most developed markets in the region, the financial
crisis meant severe price pressure and more competition because of a shrinking potential
client pool. Over the two years after the collapse, we have witnessed a severe restructuring
in the market with some operators taking on more hospitality responsibility to function
more like a hotel and other operators opting to take a long term furnished apartment
approach with much less service support and lower price points based on stays of
one or more years.
Operators in Japan that focused on studio and one bedroom executive serviced apartments
or those who targeted the lower-end price ranges of 5000 yen to 8000 yen per day
were able to bolster occupancy as high-end clients in spacious apartments had business
travel budgets cut and thereby started using more economy class properties.
As a mid-size serviced apartment player and a strong growth economy, Korea was able
to weather the storm because of less market players and a relatively steady flow
of business users.
Beginning in June of 2010, the number of business travellers began to increase and
companies that were not as visible before the crisis started taking advantage of
new business opportunities and demand for serviced apartments rose.
With the rise in demand, operators forced to slash rates by up to 40% found it easier
to get by with discounts of 20% or less. However, compared to an average stay of
3 to 6 months pre-crisis, average stays went down to 1.5 to 2 months. Shorter average
stays meant increased efforts to secure more clients via advertising campaigns and
a stronger effort in terms of actual building operation to shrink the gap between
visitors as much as possible with better housekeeping management.
Despite a slight downturn in occupancy in January and February of 2011 due to longer
New Year’s holidays for the West and for China, the industry as a whole seems to
be coming out of the downturn and operators that could not survive the crisis are
no longer in the market. As business travel increases and the trend from expat family
to extended stay single travel grows, serviced apartment operators are in a position
of strength in almost every respect. However, price points remain about 15 to 20%
lower than pre-crisis levels.
Overall, business travel is increasing across the region. In fact, since the number
of long-term expats is going down (many international schools in the region are
seeing a decrease in student populations) the opportunities for serviced apartment
operators remain huge and relatively untapped.
Many MNCs and small to medium businesses are still unaware of the advantages of
using serviced apartments and still have staff staying in hotels for one month or
more. Also, many serviced apartment operators still try to attract short term visitors
(less than one month) instead of focusing on the one to three month group.
In terms of daily rate, serviced apartment operators can offer lower rates than
hotels so many operators attempt to attract very short term stays. Stays of under
one month makes for much more expense in terms of client turnover, human resource
expense because of frequent billing, check-in, check out and so on. Operators that
stick to the over one month stay model seem to do better in protecting their bottom
Most serviced apartment operators without hotel licenses have realised that stays
of less than one month should be left to the professional hotel operators. Focusing
on stays of one month or more helps streamline cost and manpower. The operator functioning
as an accommodation solution for a stay of more than one month can wholly focus
on efficiency in terms of staff numbers and service level, while the same operator
trying to function as an extended stay hotel would need to place much more emphasis
and resources into staff numbers and hospitality level.