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Trendsetter Serviced Apartment Market

Serviced apartments approaching the traditional hotel market

Elisabeth Lang, eTN  Nov 03, 2010

(eTN) - Further to a survey from Savills, 3,400 known serviced apartments units are in the planning pipeline, the bulk of which are in London. Combined with existing units, this will bring a total supply in the UK to just over 10,500 units. London accounts for the bulk of just over 200 new units, with the majority of which are in Southwark close to London Bridge (South Central).

Converting standard residential units to serviced apartments does raise potenial planning issues, said Savills. Developers are looking to new ways to secure income from their unsold stock. For example, in London only 27 percent of the 30,000 currently committed residential units have been sold.

But 2009 was a tough year operationally as companies cut travel exependiture in order to reduce cost. According to BBC News and survey of accountancy firm Wilkins Kennedy, 122 hotel companies were declared insolvent compared to 76 in the previous year. The British Hospitality Association said firms, which had gone bust, had mostly been affected by excessive borrowing versus weak overall trading conditions.

The fact is that serviced apartments can achieve average occupancy levels above the local hotel markets combined. According to the latest survey of VGM Real (October 2010), the United Kingdom commercial market has moved far ahead of other property markets around the world.

Clive Bull, head of London investment for Cushman and Wakefield, sees a 94 percent percent increase year-on-year and a 70 percent increase on the previous quarter.

Trendsetter London, the first of its kind, built in 1908 as a gentlemen’s Pied-a-terre at 44 Curzon Street, Mayfair, was key in the London commercial property market in West End and close to Green Park and Hyde Park Corner. The serviced luxury apartments are offering 6-day-a-week maid service, and the reception staff is on hand to arrange theatre tickets, sightseeing, restaurant reservations, car hire, airport service, just you name it.

For Michael Bennett, managing director of Mansley Travel Apartments, the demand for this type of accommodation in London has always been high. But the markets have shifted from America to Australia and Asia. He said, "We could do with [a] lot more properties in this aera."

The fact that serviced apartments can achieve average occupany levels above local hotels was also confirmed by Wolf Ebeling, former vice president of The Leading Hotels of the World and now CEO of Global Hospitality Consultants in New York, in a Special Real Estate Forum held in Munich at EXPO REAL (in October 2010).

What is the secret about the prosperity of serviced apartments?

“Location, location, and location,” said Hans-Peter Kolditz, director of the Delegue Adagio City Aparthotels, ACCOR in Paris, during a panel session and hospitality industry dialogue.

For 30 percent of leisure travelers, the studio is a budget-driven decision.

Every square meter is important and yet, units still include a small entrance area. The solution for ACCOR is “standarizing on quantity, with the general flexibilty of serviced apartment inventories."

“We love to find the flexibilty, but we have to find the opportunity to have it all – space is really deeply studied and realized,” Kolditz said. "We are only focusing on city centers of big cities with return of capital in volume. We are starting lease and management contracts, but it helps being part of ACCOR. But we also get a good 40 percent of bookings through Internet and Tripadvisor.”

ACCOR started off 3 years ago with 16 Aparthotels and is now running 36 Aparthotels in Basel, Vienna, Berlin, United Kingdom, and Middle East. For ACCOR, these are the most important countries, Kodler said.

For Mr. Sym Keun Lee, senior vice president for business development of The Ascott Ltd., with its headquarters in Singapore and a member of CaptitalLand, Singapore – the company that bought Citadines - it is clear: “It is the long-term business and limited service for service apartments which makes the market so attractive. No meeting rooms, no restaurants, everything is in the flat for an average stay of 7 days.”

Ascott Studios are opening up soon in Munich and Hamburg - they are going to have the same layout of apartments and will target individual business clients.

"We are doing a residential and a hotel version," Mr.Sym Keun Lee said in Munich, when asked about expansion plans in Paris, “We will not be on Champs Elysee but on the street behind. We are also thinking to convert hotels in residence."

The Ascott Limited is the world’s largest international serviced residence owner-operators with over 20,000 operating serviced residence units in the key cities of Asia Pacific, Europe, and the Gulf region, as well as over 5,000 units which are under development, making a total of more than 26,000 units.
The company operates three brands – Ascott, Citadines, and Somerset. Its portfolio spans over 60 cities across more than 20 countries, 12 of which are new cities in Ascott's portfolio where its serviced residences are being developed.

Ascott, a wholly-owned subsidiary of CapitaLand Limited, is headquartered in Singapore. It pioneered Asia Pacific’s first international-class serviced residence in 1984. It also established the world’s first Pan-Asian serviced residence real estate investment trust, Ascott Residence Trust, in 2006. Today, the company boasts a 26-year industry track record and serviced residence brands that enjoy recognition worldwide.

Recent awards include TTG Travel Awards 2010 "Best Serviced Residence Operator" and Business Traveler UK Awards 2010.

The Ascott Limited (Ascott), has launched its own Global Distribution System (GDS) chain code, "AZ," which will take effect from December 1, 2010, from which date The Ascott Limited serviced residences, namely Ascott, Citadines, and Somerset around the world, will be available using “AZ.” Ascott is the first global serviced residence company to have its unique GDS chain code.

Serviced apartments approaching the traditional hotel market
Citadines Trafalgar Square London serviced apartment / Image via

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