Looking ahead: 2014 trends for the serviced apartment sector

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• Blurring the boundaries
Traditionally the main differentiating factor between serviced apartments and hotels has been the levels of service on offer. The serviced apartment user - or his employer - either didn't need or didn't want to pay for a range of hotel services he or she wasn't going to use. But in 2014 the two offers are likely to become less clearly defined. We have already seen the likes of Hilton stripping room service out from some of its hotels, a move it intends to roll our further. The new Nadler Hotel in Soho has no F&B provision whatsoever, preferring to send guests to local restaurants. And simultaneously, serviced apartment operators are adding services. Marlin Apartments has recently launched its @marlin concierge service which offers guests ready meals, in-room spa treatments, babysitting and childcare, dry cleaning and a 24-hour taxi facility. At the upper end of the market, the concierge at Jumeirah Living's Grosvenor House Apartments in London can get you pretty much anything, within reason. BridgeStreet's recently introduced ApartHotel concept, aimed at a "new tribe" is a good example of the crossover.

• London to become a global player
Although London is a world leader in the hotel space with its mixture of household names and an ever-expanding collection of cutting edge boutique properties, it has never come close to punching its weight in the serviced apartment sector. A Savillsreport in October said London has 1.6 serviced apartments per 1,000 business visitors compared with 5.7 for New York and 5.3 for Hong Kong. It also revealed investment in US serviced apartments totalled £1.3 billion from January to October 2013, equivalent to 12 per cent of total US hotel sales. This compares with investment of £123.5 million in the UK, just five per cent of total UK hotel sales. It is US money that will be leading the charge - Oaktree Capital has allocated a £300 million development war chest to the newly established Central London Serviced Apartments (CLSA), while another US fund, Patron Capital, has already funded and sold serviced apartments in London and is looking for further opportunities. The forthcoming £121 million InterContintal hotel in Greenwich, funded by Queensgate Investment Fund, will also include the 23-storey Peninsula Tower offering 100 serviced apartments.

• The rise of the leisure consumer
What is the main reason that leisure travellers aren't using serviced apartments by the million? We think it's because they either don't know about them or don't understand what they are. But that will start to change in 2014 as consumer awareness grows, helped by some of the bigger hotel chains pushing their extended stay brands, and by more flexible, user-friendly shorter stay serviced apartment offerings. In some markets, the tide is already turning - in London, Think Apartments says its customer mix is an even 50/50 split, a dramatic change from a few years back when it was dominated by business travellers. The potential for increased leisure use was starkly illustrated to us in the summer when a successful hotel-owner, with several highly successful properties, told us: "I never stay in hotels when I travel, I always take a serviced apartment. I don't want to pay for services I don't use."

• Travel managers are your friend
It's not just leisure users who don't fully understand the serviced apartment concept. There is still an educational task needed to ensure that corporate travel managers and third-party TMCs are up to speed with what the sector can offer. They are used to choosing serviced apartments for corporate relocations and long-stay deployments, but aren't aware what a broad range of offer the industry can now offer. Operators in 2014 will mount a charm offensive to ensure that they are 'front of mind' when travel managers are placing their business. They are some of the most potentially influential and lucrative contacts you will ever deal with - how many other individuals have the power to send hundreds, and sometimes, thousands of customers to your properties?

• BRIC by brick
While established but undersupplied markets like London will finally get up to speed in 2014, younger, less rigid markets will see explosive acceleration in terms of awareness of the serviced apartment concept and in development of properties. In India particularly, the floodgates are already open, with local and international developers and operators all fighting for market share. At Serviced Apartment News we have reported on six major project announcements in India within the space of just two months, and there is an enormous development pipeline behind that. In Brazil, Accor's Adagio brand has just announced plans to open 40 developments within three years. In China, Ascott alone has 10,000 units under management, and plans to add 2,000 more by 2015.

• Mobile no more

The 'year of mobile' has come and gone as smartphone manufacturers show signs that mobile is no longer an emerging technology or media platform with flat revenues and declining average selling price for devices. Despite mobile accounting for 20 per cent of all travel sales, hoteliers battle to convert mobile users who are currently three times less likely to book a hotel room than those using a PC. Hotel marketers who proclaim themselves innovative and disruptive will already be looking elsewhere in the technological sphere for the next big thing.

 And what do some of the sector's leading players see ahead in 2014?

• Diane Mayer, VP and global brand manager for Residence Inn, Marriott International
We are seeing more extended stay hotel growth outside North America than ever before. I believe this is partly fuelled by the emergence of "the middle class" both in terms of hotel product and socio economics. In many fast growing markets (Brazil, Middle East, India, Asia) we are starting to see more three- and four-star hotel development. Most lodging markets develop from the top (luxury) and bottom (budget/economy) first, with the middle filling in last. Outside North America, MI's three- and four-star hotel pipeline is starting to approach the size of full service luxury. Socio economically, as the middle class grows they bring a different value equation to the hotel purchase decision that enables the market for mid-tier hotels. Additionally middle class families can now afford to travel and when they do they appreciate the extra space and kitchen facilities that extended stay hotels provide.

• David Curtis-Brignell, communications and brand lead, Think Apartments
I believe we will definitely see a greater understanding of the serviced apartment sector in 2014 by the property and financial sectors leading to more investment and a growth in supply from 2015. We should use 2014 to create a better awareness with the consumer who still face a range of names for the same thing (apart-hotel, serviced apartment, even corporate housing). I think I heard an industry leader at the ASAP conference say that there is no definition of apart-hotel, so if he doesn't know there is then there's a big issue to get across. A prediction? Over the next two years I see more penetration by branded operators and a reduction in the number of smaller companies, often with a limited number of units in a particular geographical area.

• Stephen Hanton, managing director, SACO
In 2014 we will see new entrants to the sector getting bigger and developing purpose built blocks. Hotel chains will increase their understanding and expand into the sector at the extended stay end of the market. Also Current trends indicate that increasing residential values will see serviced apartments decrease in size, making spaciousness and design all the more important. Equally, the growth of long term rentals and planning restrictions will continue to limit developments. Serviced apartment operators will therefore need to be creative in satisfying increasing demand and be clear on the product that they are providing as apartment sizes shrink to satisfy economic requirements. Added value extras are starting to feature as threshold elements within the "aparthotel" extended stay concept, with extras such as complimentary gyms and on-site coffee shops becoming more common.

• Steve Thorne, director of sales and marketing, Grosvenor House Apartments by Jumeirah Living
We will see a continual push by apartment operators to enter the shorter-stay, hotel-centric market. There are issues of routes to market, rate comparisons with hotels, service delivery issues (when compared to hotels by the guest) - all of which have greater impact and perhaps hinder the delivery of what in its true form is a product not aimed at this transient market. Guests being charged hotel prices but not getting the hotel experience may open up some operators for complaints about expectation for the rate charged. There is also the issue of the legalities of leasing in some areas for less than the stipulated minimum duration under a lease or council legislation. There will also be an expansion of short-stay holiday lettings websites pushing into the serviced apartment/self-catering city market. Homeaway, AirBnB and Unique Home Stays are three good examples of web-based agencies encroaching on the professional serviced accommodation industry, and operating perhaps in the face of the planning laws which apply to the accommodation submitted by unsuspecting owners, unaware that they may need local council approval for such stays on a regular basis. This will be an interesting side of the industry to watch.


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