Larry Korman: making places from spaces

George Sell By George Sell
Uploaded 3 weeks ago

Larry Korman, co-CEO of Korman Communities and president of AKA, talks to SAN about luxury serviced residences, Airbnb and mixed-use development.

• How well established is the serviced apartment sector in the US (as a separate entity from extended stay hotel brands such as Residence Inn and Homewood Suites)?
"There's a differentiation between serviced apartments and serviced residences, and I make that differentiation between our AVE brand and our AKA brand. But in the case of serviced residences, whereby a company purchases an entire building, provide hotel services and resort amenities, works with top designers and curates a beautiful package - that's very rare in the US. However, it continues to be more available and relevant in Asia and Europe, where the concept is better understood than it is in America. I think Americans continue to travel for two to three days and they'll stay in a Four Season or a Marriott, whereas in Europe they like to holiday, they like to go and understand a city and the people, and feel the spirit of the neighbourhood."

"This idea of serviced residences is still new in the US, but you now have companies like Airbnb which have made a younger generation aware of the benefits of a residence versus a room, especially in terms of value and price. What we are trying to do is awaken the world to those advantages but at a higher price level, based on the level of services, design and the overall curation of the experience."

• The corporate housing market is a major provider of serviced apartments in the US, but how are apartments perceived and used by leisure travellers?
"A corporate apartment, as the name suggests, is for business travel. Somebody who is travelling for leisure may be dissuaded from trying a corporate apartment. We started corporate apartments in 1966 at a high-rise building my father had built, which had triangular apartments. People didn't want to stay there as a traditional apartments and he recognised a need between the daily stay of a hotel the annual lease of an apartment. People were saying 'I can't rent an apartment for three or six months, and I can't rent furniture for the length of time either'. So my dad saw there was a market and rented these apartments for three and six months, particularly for corporations who might have people come in to town for three months who did not want to stay in a hotel. It was more convenient for them and provided better value. It caught on quickly and our first branded portfolio, Korman Suites, which started in 1986 had the tagline - twice the space of a hotel at half the cost. We were meeting a need for value as well as comfort and quality at the same time."

"A lot of leisure travel is based on the services and amenities offered. Today because of Airbnb, leisure travellers may be more open to trying a quote/unquote corporate apartment if there's a swimming pool and they are bringing their family - it would be dependent on communicating effectively and connecting with them to see the value proposition. We haven't really gone that route with AKA but AVE has - AVE continues to cater to Fortune 500 companies and we have taken the offer to a much higher level, with brand new apartments offering amazing resort amenities, great furnishing but still offering value. Corporations are impressed by that."

"I would say leisure business is more of an anomaly for AVE. But for AKA, which is much more based on the individual traveller, they may be coming as the new CEO, they may be working on a movie, they may be on vacation. So we do get more of a blend between leisure and business. We are also offering residence which can work for either/or as well as amenities targeted to somebody on vacation who needs business services. We have really targeted our audience - sophisticated global citizens who are looking for a certain level of refinement, design, comfort, quiet and anonymity. The way you communicate the message of what you're offering has an impact on how it's perceived for the consumer and whether it's for vacation or business."

"You increasingly hear the word 'bleisure' but we really pride ourselves on having our finger on the pulse of our guests. Our guests who are here for two to three weeks, whether with family, or for medical reasons, or after a divorce, they have business needs during their stay so we have to provide elements including phenomenal wifi, a conference room for meetings, printing services and so on. Also people who are with us on business, want to other things incorporated in to their stay, whether that's fitness, wellness or yoga, and we need to provide that. People want have their cake and eat it too, and people in our industry need to facilitate that."

• How much of a challenge to traditional serviced apartment operators is Airbnb, in tandem with vacation rental management companies who provide services for Airbnb hosts?
"Way back when, I was fascinated with Airbnb, I was following it and I reached out to Chip Conley. He and I met and we became good friends. I am impressed by their business model and I really think there's great synergy for those us in the serviced residence arena - we can all work together. At the end of the day they're like a residential Google, they've created a marketplace and are able to communicate and connect unlike any other company I've met for our purposes. AS I have said to them for years I just want a level playing field - I don't want to be penalised at AKA United Nations for being in a residential zone and therefore unable to do a two-week stay; and I don't think that in West Hollywood we should be told that we can't do a six-month furnished apartment. So I share some of their frustrations but on the other hand, if we have to have certain life safety measure to do that, if we have to communicate to residents that somebody next to them would be here for two weeks , if we have to pay a certain tax - I just think it should be a level playing field and that a lot of the animosity that those in hospitality have toward Airbnb would go away of everybody were playing by the same rules."

"Airbnb are OK with that and they have sought out partnerships with groups like us to reach guests who have never stayed in an Airbnb. My children would always stay in an Airbnb, whereas my wife and I might not. We want a well curated, professionally managed property that offers consistency, cleanliness and the comfort level I require. I think Airbnb is well positioned as it enters its second decade to partner with us and companies like us in the serviced apartment industry, to help us collaborate and create synergies. I'm bullish on Airbnb - I share with them sone frustrations they have with regulation, and there are things we differ on, but in terms of the macro picture I think what they've done is incredible. They have awoken people to the advantages of a residence over a room, and they have embraced the experiential aspect of both leisure and business travel. For people in our sector to not acknowledge their existence or to fight it, they have their head in the sand."

"Airbnb is evolving smartly and strategically in the right direction, and we have to be open minded and do the same thing. We need to recognise that it's all about what the customer wants - we need to constantly have our eyes and ears opened, tuned to our guests, then to refine who we are and communicate it to a global audience. Airbnb can really help in that, more so than OTAs who are more focused on shorter, hotel type stays rather than longer term, high end serviced residence guests. Airbnb is helping to create a marketplace for that sort of business and keeping us connected."

• The extended stay hotel brands are hugely successful in the US but most of them have not moved in to other territories such as Europe - why do you think this is?
"I think that on one hand, the extended stay hotels in America are basically glorified hotels - Homewood Suites for example has replaced the motel, a lot of the Marriott brands have just blended the hotel offering within Americas, and most people view the Extended Stay America, Embassy Suites and similar brands as interesting niche hotels. I don't think there is a great differentiation between a Residence Inn or the Marriott Marquis - they all blend together and have their own unique price and target market. I also think the serviced residence, serviced apartment and corporate housing sector in Asia and Europe are so well established and mature that it would be hard for the extended stay brands to go over there and replicate what they are doing here, with a small twist, and then be dependent on Americans travelling for their market."

"There are so many established brands such as Ascott that can assuage that need for a more residential experience. Because there is only AKA in the A-range in the States, this B,C,D offering is well received here and is extremely well received here but you have so many brands in Europe and Asia that are established in each segment, based on quality, that customer seeking that offer has those options available. I think if they build those extended stay hotels they might also be replicating what they already have with their original Marriott or Hilton brands. I think they have to take them to the next level. Potentially partnering with AKA and opening there!"

• How important is the growth of mixed-use development to the increased use of serviced apartments, and will it lead to more hybrid/residential/apartment/hotel/workspace/leisure offerings in the future?
"I am very excited and enthusiastic about this. We did something called a lifestyle centre years ago, which had condominiums and stores in Edgewater, New Jersey. But the last two properties we've worked on, for AVE and for AKA, are basically what you're referring to. For AVE, we refer to it as horizontal living - AVE is part of the town centre in King of Prussia, Pennsylvania, so you not only have King of Prussia mall, but you have unbelievable supermarkets, restaurants, ice cream places, fitness stores, yoga experiences, hotels, different types of apartments - it's a whole village that residents can be a part of. We've seen such a great affinity for this horizontal living concept in the suburbs, there's even a casino and movie theatres. It's an amazing collection, and people are downsizing and moving home so they can be part of this town centre experience."

"Our latest AKA - University City in Philadelphia - is a 50-storey building where the developer Brandywine brought us in to be part of a whole. We have 268 residences that run the gamut from daily hotel suites to weekly and monthly serviced residences, to 98 apartment residences that get all the AKA services. We manage level 28 which is between the office sector and the residential sector, which has a stainless steel 72-foot pool, a big movie theatre, a lounge, a bar, we do wine tasting and meals, we have music up there, a giant fitness centre, beauty treatments, business amenities, meeting space, complimentary club breakfasts on the terrace each morning. If some of our residents need WeWork-style spaces, Brandywine has that available. There is private, enclosed parking, with a one-and-a-half acre park above it where residents can take their dogs. We have a Michelin-starred restaurant from New York providing the room service for our residences."

"All these amenities, offerings and services are all in one new vertical building, in an area which was previously open fields. We've created a place where there was formerly just space. There are three vertical high rises, all different - some are just office space, some are student housing, ours has this mixed-use. I love this idea of collaborating and integrating mixed uses, from work to business, to F&B, to members club. I just think it's a win, win, win for people and the way they are living today. A lot of people work from home and don't want to get stuck in traffic in these urban environments. The offerings that are included in developments like this now, you would normally have to go on vacation to have them on a daily basis, all right there where you live."

 

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