Speakers at the first serviced-apartments summit in the U.S. considered the many similarities—as well as differences—of serviced apartments and traditional hotels.
NEW YORK—The first Serviced Apartment Summit Americas came at a time one speaker called a “defining moment” for that sector after AccorHotels’ recent purchase of Onefinestay. Sources said that sale demonstrates what some see as the convergence of the hospitality and serviced apartment (or “corporate housing”) industries.
A recurring theme of the conference was the blurring of the serviced apartment and hotel industries when it comes to product and distribution.
“We have the same customer base as an upscale Accor hotel. Someone might stay at a Sofitel on a business trip, then stay with us with their family,” said Evan Frank, co-founder and VP of the Americas at Onefinestay. “Accor has acted boldly in response to what Airbnb may do to the hotel industry. They are looking for other options that fill spaces in lodging.”
That blurring is a natural reaction for consumers, according to Andrew McConnell, CEO of Rented.com, which manages short-term rental properties.
“The distinctions of extended stay, short-term rental, Airbnb and hotels are false constructions,” he said. “They are all accommodations, nights you’re spending away from your own home. If horse-and-buggy makers had thought of themselves as transportation rather than horse-and-buggy makers, they might still be around. Hotels should think of themselves as accommodations.”
Like extended stay, but different
There are still differences between traditional hotels and serviced apartments, including definitions, audience and marketing.
Sometimes those definitions are unclear even within the segment, speakers said.
Ricky Kapoor, commercial director of the Edinburgh Collection and Holyrood Suites, which operates hotels and serviced apartments in the U.K., said what’s important is “educating the marketplace.”
“The serviced apartment charter has been signed by a number of brands to create a definition of what serviced apartments and corporate housing are,” Kapoor said. “Even in the U.K. it is very inconsistent. Some say they have serviced apartments even if they have only two apartments on a block while we might have a 24-hour receptionist. We are moving toward a global corporate housing association. We are also looking at an international accreditation program.”
TJ Barring, president of JNB Group—which holds commercial real estate in the U.S. and India—said that consistencies in definitions and even rating systems would benefit serviced apartment providers, especially when they’re competing with branded hotels for the same guests.
“There is tremendous fragmentation,” he said, “and that does not help us get business from corporations who require staying with a branded lodging.”
The two groups also differ when it comes to audience and length of stay.
David Redfern, president of WaterWalk Apartments, said he sees a hybrid of serviced apartments and hotels as a profitable option, and a model in place at WaterWalk.
“We see an opportunity because we offer a hybrid of hotel and apartments,” he said. “We look at the length-of-stay spectrum in lodging. Residence Inn and its competitors are at three to four nights while apartments are looking at 12-month leases—leaving a big opportunity between those two lengths of stay. At WaterWalk we are building both apartments and hotel rooms and can adjust depending on the marketplace.”
Chain-scale segment is another place where extended-stay hotels and serviced apartments differ. While serviced apartments generally sit on the higher end of the chain scale, there is a strong economy category for extended stay that fills a specific need, speakers said.
Jon Pertchik, CEO of InTown Suites, said the outlook for economy extended stay is good.
“We are the closest thing to an apartment hotel with an average of 89-day length of stay,” Pertchik said. “We behave differently from other extended-stay products.”
Pertchik said his company is even considering using more European terminology to describe its properties.
“The economy extended-stay sector has had a stigma and brands like Value Place have made an effort to distance itself from that stigma,” Pertchik said. “InTown Suites itself has had issues in the past, and since there is a negative tinge to long-term extended stay the industry might consider adopting European terms like ‘apartment hotels.’”
Similar struggles with OTAs
While the hotel industry has long sought to deal with multiple distribution channels, especially online travel agencies, the growing serviced-apartment sector finds itself facing similar challenges.
“We view OTAs as crack dealers,” Redfern said. “We advertise on them and prevent reservations on them by having a minimum length of stay.”
Serviced-apartment operators face the same OTA struggles as traditional hoteliers do.
“In the U.K., people don’t know that it’s cheaper to book direct,” said George Westwell, director of Cheval Residences, a U.K.-based luxury serviced apartments and residences provider. “We need to start the conversation with guests that they should book direct. We always seem to be playing catch-up with technology and we don’t come up with the smart ideas. We talk about challenges but what do we do? Is there an opportunity to create an app for the entire industry that consumer would want to use?”
Westwell said that two-thirds of browsers on Expedia and Booking.com have been to the hotel’s website but think it’s cheaper to book on the OTAs.
To get around the OTAs, Pertchik said InTown Suites is building an app to help develop personal relationships with guests. He said some believe that in a few years there will be no websites, but only apps.
“Apps need to be more meaningful so consumers will keep coming back to them with uses like mapping,” he said. “It’s still experimental but the channels of communication are changing.”
Sharing: Halo or horror?
Just like in the hotel industry, some in the serviced apartment sector are wary about sharing-economy lodgings.
“(Airbnb) is good for the industry, maybe not in the short term but in the long term,” said Mohammed Al Marzooqi, group managing director of Cheval Property Management and Cheval Residences. “It makes us deal in different ways with the customer.”
Still, shared-accommodations providers like Airbnb might pose a threat down the road to extended-stay hotels and serviced-apartment providers that have strong business/travel mix.
“Airbnb is now focusing on business travel so we have to keep our eye on that,” said Bruce Rohr, senior brand director for TownePlace Suites by Marriott. “They offer a unique experience. It opens up opportunities for a new customer base that wasn’t in our portfolio before.”
A global industry
Serviced apartments are planting roots in places where even big domestic hotel brands have only begun to venture in a significant way.
Barring, for example, turned his sights to India.
“I was traveling and needed to find a room for a driver,” he said. “The cheapest room available was about $250, which was too much. India has a complicated, changing economy and the serviced apartment industry is not a good one yet.”
Africa is home to other emerging markets that don’t all necessarily have established traditional hotel footprints yet, which leaves room for serviced apartments.
“We are growing rapidly in the absence of any brand presence,” said Abi Adisa, CEO of Amara Suites, a serviced apartments company in Africa. “There are definitely challenges but we aim to seize the opportunities. We see our market as similar to where Australia was a few years ago as far as serviced apartments.”
Paul Constantinou, chairman of Quest Apartment Hotels in Australia, said succeeding in the serviced apartment sector has always been a struggle.
“We recently rebranded from serviced apartments to apartment hotels but we do not have a lot of hotel services,” he said. “We just wanted to show we are an apartment with some hotel services. It will always be a challenge, but large brands like BridgeStreet will help because people will get to know what we offer.”
Adhering to local regulations is something that non-traditional lodging companies are increasingly having to overcome.
“The genie is out of the bottle as far as these type of products,” said Onefinestay’s Frank. “We have to see what we want to do now. We are not in favor of converting apartment buildings into full-blown hotels. We want to grow responsibly.”
“You can shut down a Napster, but you can’t keep knocking down all the ‘whack-a-moles’ in lodging that are appearing because the market is there,” McConnell said.
Parker Stanberry, CEO of Oasis Collections, said the industry needs the appropriate amount of governance.
“We are open to some regulation but it can get out of hand,” Stanberry said. “Uber doesn’t exist in Spain which his crazy to me. Some cities have done regulation well and some haven’t.”