Serviced apartments look to take hotel demand
25 FEBRUARY 2015 7:32 AM
The operators of serviced apartments are looking to take demand away from traditional hotels in Europe, but hoteliers don’t seem worried.
GLOBAL REPORT—European hoteliers largely don’t see much threat from serviced apartments, but the operators of these serviced apartments see themselves as significant competition, sources said.
Serviced apartments—the hybrid hotel-apartment, rolling services such as reception and housekeeping together with self-contained accommodation—are gaining ground in Europe. The term “serviced apartment” is interchangeable with “extended stay” in Europe.
Although the development of serviced apartments has been slow off the ground in Europe, that is changing. Paris and London are the leading markets, followed by Dublin, Lisbon, Prague, Moscow, Edinburgh, Zurich and Frankfurt, according to sources.
Matthew Dixon, commercial director of Corinthia Hotels, said the growth in serviced apartments connected to hotel brands is a significant development in Europe.
“Some of the budget brands have introduced long-stay facilities marketed around the apartment concept. This is a popular product with business people requiring longer length of stay in cities such as London and Paris. They are particularly important with businesses carrying out project work that require a company to be present in a city but do not want to go through the complexity of short-term rents.”
A report by HVS titled “The European serviced apartment sector: Growing up” found average occupancies for extended stays in France and the United Kingdom in 2013 were around 75%. In Germany, occupancies averaged 79% and revenue per available room at €84 ($95). As a comparison, hotels in Germany recorded an occupancy of 67% and an average rate of €94 ($107), resulting in a RevPAR of €63 ($71), according to the report.
PricewaterhouseCoopers forecasts serviced apartments as a key growth area across Europe in 2015, due to spiraling demand, yet with current supply “insufficient and partially dated.”
Savills UK real estate, meanwhile, finds European supply is low relative to hotels. London, where supply accounts for 12% of hotel rooms, has the greatest presence of global operators—for example, The Ascott Limited, Frasers Hospitality, Staycity, BridgeStreet and AKA—yet “there is still major room for expansion.”
Savills predicts growth will pick up in the next three years, primarily in London, Paris, Frankfurt and Amsterdam.
Some hoteliers have a wait-and-see attitude, and believe there is plenty of room in the market for both serviced apartments and hotels.
“It’s a new segment in the industry and part of ever-changing travel habits,” said Sam Holmberg, GM of the Radisson Blu Waterfront Stockholm Hotel & Conference Centre in Sweden. “Right now, we do not see it as a competition but a supplement to the industry in Stockholm, where there are independently run and hotel-operated apartments. I believe it will have a positive impact for Stockholm to have a wide range of accommodation choices.”
Charles Muller, cluster GM at the Hilton Frankfurt Airport and Hilton Garden Inn Frankfurt Airport, is also unfazed. He believes the city’s serviced apartments answer largely to a different clientele.
“They are specially adapted to guests who intend to stay for a long period of time, while our hotels are focusing mostly on the conference, meeting, business and leisure travelers who stay for shorter periods, usually less than 14 days,” he said.
Muller added the variety of hotel services offered at the hotel still make it the best choice for many guests.
‘We are competing with hotels’
Although hoteliers don’t seem worried, some serviced-apartment operators contacted for this report see themselves as hotel rivals.
“In today’s market we are competing with hotels,” said Rebecca Hollants van Loocke, country manager for the U.K. and Germany at Ascott.
Ascott is the world’s largest serviced residence owner-operator with a global portfolio of 40,000 apartments. With serviced apartments exceedingly slow to take off in Europe , so far only accounts for only 44 of these properties are located in Europe. Now the group is busily expanding across the continent, particularly the U.K., France and Germany, with its Citadines brand.
Hollants van Loocke said aparthotels pose a bigger threat to hotels as they move away from the long-stay business model.
“Traditionally, serviced-apartment properties and aparthotels have mainly catered to long-stay, business travelers. But we’ve seen a significant increase in leisure travelers choosing us over hotels, because they have bigger rooms with a fully fitted kitchen and home-from-home comforts while still enjoying the convenience and security of a 24-hour reception desk,” she said.
Tom Walsh, CEO of Dublin-based Staycity, said his company is looking at increasing the number of apartments in its portfolio to 5,000 from 1,000 during the next five years.
“We see ourselves as competing with hotels,” he said. “In U.S. cities, aparthotels and serviced apartments command more than 10% of the ‘hotel’ market. In Europe it's a fraction of that, suggesting that many people who would rather stay in aparthotels and serviced apartments are staying in hotels due to lack of supply. We're trying to fill that gap, and that is our business model.”
Adagio Apparthotel, a joint venture between Accor and Pierre & Vacances Center Parcs Group, has 100 properties in France and the U.K.
Marketing campaigns at Adagio play on flexibility of choice, independent cozy living and lower rates from the fourth night’s stay, said Director Martine Balouka-Vallette.
Balouka-Vallette said the reason for the aparthotel brand’s success is that it’s the best accommodations solution for medium and long stays for business travelers.
“To be able to offer employees a real apartment, a living space to call home, rather than a hotel room, is a real plus for companies,” Balouka-Vallette said.
However, Balouka-Vallette said aparthotels, operated by Accor, does not compete with the hotel model.
“Seventy-five percent of our customers book with us for stays longer than four nights and 45% for stays longer than 10 nights,” Balouka-Vallette said.
Adagio sees a big future in capturing increasing demand from leisure travelers for extended stays in major gateways such as Paris, Berlin and Vienna.