Serviced residences are a tantalising prospect for future growth, as corporates and entreprenaurs increasingly look for homely stays, says Bindu Gopal Rao.
The concept of serviced apartments has evolved gradually in the country, having come to the fore in the early 1990’s as a result of increased economic activity in the sub-continent.
Says Keshav Baljee, vice-president corporate affairs, and co-promoter, Royal Orchid Hotels: “The response has been terrific, because these have typically been cheaper than hotels, and are more homely in nature.
However, although this model has worked very well even in the recession scenario, with hotel rates now correcting dramatically in the recent slowdown, we need to re-assess the relevance of these products.”
Indeed, once the global recession starts to lift, as many expect it to next year, could serviced apartments offer a lucrative option for hoteliers? And if so, how?
The demand for serviced apartments emanates primarily from the corporate market. With key Indian cities suffering a shortfall of star category rooms when it came to extended stays, this paved the way for residential units being utilised as long-stay hospitality centres.
In that context, serviced apartments directly compete with hotels for the long stay segment considering that historically, 12-to-18% of demand for hotel rooms comes from that category. In addition, serviced apartments are also competing against hotels for their business and leisure clients, as operators have developed products that include more services and amenities.
As a concept, this certainly has great potential, as is evidenced by the fact that the Serviced Apartments Asia 2009 conference in Singapore, 19-21 October, is being marketed as an opportunity for serviced apartments companies to generate new business opportunities for themselves.
Says Kelly Lim, project manager, Terrapinn (the organisers): “This is the only senior level serviced apartments forum in Asia Pacific, presenting development and investment opportunities to operators, developers, and investors, in this growth region. Over the past year, serviced apartments have proved to be one of the most resilient sectors in real estate.
It is able to offer a stable yield to owners at a time of uncertainty, with a stable occupancy rate and price-point, compared to hotels. The business model allows serviced apartments to be the more cost-effective option for both business and leisure travellers. With the potential influx of FDIs and foreign business travellers into Asia, the demand for quality housing with a flexible lease-term is set to increase.”
Lakeside Chalet Marriott Executive Apartments were among the first to introduce branded residences in India. Taj Hotels & Resorts (IHCL), entered the segment with their luxury branded residences with Taj Wellington Mews that opened in 2004, and comprises 80 units.
Today, the market is opening up with the entry of other big players; Global Hyatt Corporation is expected to bring its extended-stay brand Hyatt Summerfield Suites, and the environment-friendly luxury brand Andaz, into India soon.
The Hilton has a joint venture with real estate company DLF Limited, while Ascott The Residence, and Frasers Hospitality, have a number of properties slated to open shortly.
“The organised service apartment players are about 3-5 at a national level. Most are in the unorganised category, or stand-alone units. With pressure on companies to reduce cost due to recession, there is a demand for service apartments,” says Vivek Madappa CEO, HummingBird.
Oakwood Worldwide recently made a debut in India with Oakwood Residence, Naylor Road, Pune. “We have expanded from one property to four, in just two years, which is significant growth, since the demand for serviced residences has increased manifold”, opines Vikas Kapai, general manager, Oakwood Premier, Pune.
Mercure Homestead Residences offers 126 luxury suites, where the interiors reflect a regional flavour – a hallmark of the Mercure brand that seeks to link hotel guests with the local culture.
Mercure Residences in Bangalore offers all five-star amenities; “We currently have one multi cuisine restaurant, and 24-hour room service; our speciality North Indian restaurant By The Blue is due to open in October,” says Vinay Gupta, general manager, Mercure Homestead Residences.
Adds Alfred Ong, senior vice president, corporate operations, Ascott Asia Pacific: “We understand that travellers may be visiting a particular city for the first time, and will be unfamiliar with their new environment. To help them settle in quickly, we organise residents’ programmes that include city tours and workshops on local culture.” Ascott’s Properties in India include Somerset Greenways, Chennai, pencilled in for a 2012 opening.
While Citadines Chennai Boulevard is scheduled for 2010, Citadines Chennai OMR Gateway, Citadines Hyderabad Hitec City, and Citadines Ahmedabad Parimal Garden are scheduled for opening in 2011.
“The biggest advantage is the space. In a regular hotel you have only the bedroom, however, a serviced residence comes with separate living area, bedroom and kitchen along with gardens on the ground floor that are a major attraction,” says Kapai.
“With increased focus on added services such as room service, daily turn down services, and 24-hour coffee shops, there may be an effect on the hotel business largely because the rates are comparable (if not lower) in serviced apartments.
The room sizes are much larger, the kitchen in the unit adds versatility to the offering, and the living room gives you the option of actually entertaining in-house,” says Omer Bin Jung, managing director, Prestige Leisure Resorts Pvt. Ltd, and a speaker at the forthcoming Serviced Apartments Asia 2009 conference in Singapore.
The hospitality business’s future lies in serviced residences, as a lot of corporates and entrepreneurs prefer staying at these rather than a hotel.
“Travellers have been pleasantly surprised that we can cater to individual requirements by installing extra cabinets or shelves, enabling those who stay for longer periods to bring their favorite furniture from back home into their serviced residence. Those with families appreciate our children-friendly facilities,” states Ong.
Pricing is typically 40-50% lower than a hotel and that makes serviced apartments a good financial choice.
“Overall, evidence would appear to show that the demand for serviced apartments from the business segment is growing at a minimum of 12-to-15% year on year. One of the reasons behind the attractiveness of serviced apartments may also be the lower tariffs compared to hotels, in exchange for limited service,” says Akshay Kulkarni, executive director – South Asia, Cushman & Wakefield Hospitality.
The cost of an apartment hotel is approximately 20% less than the cost of staying at an ordinary double room in a hotel of equivalent standard. For instance, at Oakwood, the per night introductory rates ranges from Rs 8,250 for a Studio Superior apartment to Rs 18,750 for a three-bedroom with garden.
These rates are discounted by 25% or more for long stay travelers, depending on the length of stay, or volume of business from a particular corporate.
The pricing structure at serviced apartments is predicated on longer duration stays, thus resulting in significantly higher occupancy ratios. The cost saving is not only in the average rate of an apartment, it’s the savings on the incidentals that makes a service apartment more economically viable.
The pricing model for Marriott Executive Apartments is based on length of stay. “In markets like India, the length of stay can be 15-days to six months and in some cases, even longer than that”, says Rajiv Menon, area vice president, India, Malaysia, Maldives & Pakistan, Marriott International.
“At Citadines, travellers can choose from a menu of services according to their lifestyle, and pay only for what they require. For long-stay travellers, Ascott can also customise packages and offer them greater value; if they do not require breakfast or daily housekeeping, we can offer the savings back to them,” says Ong.
Acknowledging the demand for serviced apartments, a number of brands, both domestic and international, have either planned or begun work on their projects.
“With Oakwood, Chalet, and Mercure Homestead already operational, the competition is all set to intensify with more projects underway. Besides these pure serviced apartment products, a few of the planned hotel developments might build up a few serviced apartments as a part of their hotel facilities,” says Kulkarni.
“It is a natural extension of hospitality, and worldwide all major brands have extended-stay products. We already have three signed properties, and are aggressively courting developers and landowners for more opportunities,” adds Baljee.
As the old saying goes, there’s no place like home, but serviced apartments certainly aim to come close.
