Serviced residence operators believe they are a a more resilient accommodation model that can withstand shocks
Lisa Rauch, director of sales, Asia-Pacific, Oakwood Worldwide
Demand For serviced apartments, demand is driven not merely by economic growth but globalisation and the need for talent, which lead to the movement of people. For example, over the past decade demand for serviced apartments across Asia-Pacific grew 25 per cent despite the global economic recession.
Therefore, in spite of projected lower economic growth for Asia-Pacific, demand will continue to grow; however, the lower economic growth will alter patterns.
Assignees will be looking for increased flexibility and value in their accommodation solutions as organisations issue more short-term contracts when looking to plug skills gaps and contain costs. PWC’s Talent and Mobility: 2020 and Beyond report shows 20 per cent of assignments now last less than 12 months, compared with 10 per cent in 2002. The options for short- and long-term stays make serviced apartments a desirable model for assignments of varying durations.
We foresee that the strongest growth in this region will be seen in China, India and Indonesia.
India, as an example, is experiencing the highest growth rate in business travel in the entire world. This is further supported by GBTA’s Annual Global Report and Forecast, which shows India had US$26 billion in business travel spending in 2014, which will grow by a compound annual growth rate of 11.5 per cent through 2019 to US$45 billion.
Product What will be most in demand is expertise: an accommodation solutions partner that has access to a broad portfolio of accommodations, both for short- and long-term stays and that has the experience to deliver cost-effective solutions with a 24/7 team on the ground.
So over the past 12 months Oakwood Worldwide has, for example, introduced a hotel desk and partnered Abacus Hotel and Abacus RoomDeal to access real-time room availability, rates and instant booking confirmation. Alongside that, we continued to grow our network of supply chain partners in Asia-Pacific, so that we can provide additional accommodation solutions in Tier 1, Tier 2 and Tier 3 cities where demand for serviced apartments often outstrip supply.
This increase provides access to more than 400 properties across Asia-Pacific, 28 of which are Oakwood Worldwide-branded properties in key destinations throughout the region, offering 3,800 units in total.
Expansion Oakwood Worldwide plans to double its branded portfolio of 28 properties over the next three to five years. We have a pipeline of 14 properties in Asia-Pacific currently. And with our joint venture with Mapletree, we expect additional acquisition and development deals.
Choe Peng Sum, CEO, Frasers Hospitality
Demand Despite lower economic growth projections, we expect a sustained demand for serviced apartments as they offer a good value proposition for all types of travellers, whether for business or leisure, individuals, couples or families. The sector has proven to be resilient and it is against a backdrop of austerity measures when the advantages of serviced apartments really come to the fore.
Curbs on extravagant spending have actually created demand, which offer the win-win situation of flexible leases and are equipped with everything necessary to help residents and their families settle in.
We expect Australia to still do very well, given that the lower Australian dollar will attract more tourists to visit the country.
While China’s GDP is slowing down, the absolute growth of six to seven per cent is still significant. Besides, the China story lies with increasing domestic demand, aspirations and rising consumption.
In South-east Asia, the 10 countries continued to receive growing numbers of Chinese travellers in 2015, but the big story was the growth in intra-ASEAN travel. ASEAN collectively is home to more than 600 million people with significant combined GDP.
Countries with stronger economies at the moment, including Vietnam, Indonesia and the Philippines, registered strong economic growth last year, and their growing middle classes were using their rising disposable income for domestic or regional travel at previously unseen levels. Frontier markets including Myanmar, Laos and especially Cambodia continue to join the regional tourism landscape with the opening of new roads, airports and hotels.
Furthermore, the launch of the ASEAN Economic Community (AEC), removing barriers on the flow of people, goods and capital across the block, will boost business and demand.
Product The future product has to be more than just a luxury apartment. Millennials and e-generation travellers are expected to grow in force. They don’t just look for the traditional hardware (rooms, furniture, fit-outs, etc) or the traditional software (services, butler, concierge, etc), but value e-check-ins, e-concierge and unique lifestyle experiences. Herein lies the opportunity to bridge the gap between hotels and serviced apartments and provide unconventional lifestyle offerings such as our Spin & Play integrated launderette games rooms and personalised cycling tours with the general manager at Capri by Fraser, Changi City Singapore.
Expansion 2015 was exciting for us. We grew across several key areas, adding more than 3,500 units to our global portfolio, which stands at 136 properties (including pipeline) with over 22,000 units worldwide. Highlights last year included new market entries (Capri by Fraser in Barcelona and Frankfurt) and the acquisition of the Malmaison Hotel du Vin group, which doubled our Europe portfolio.
2016 will continue to be a year of expansion, particularly in China – both in emerging and key cities where we already have a presence – and Europe, particularly in high-growth cities with strong foreign direct investment (FDI) potential. We are capitalising on a window of opportunity now as prices would naturally increase as the economy picks up.
Our objective is to expand our global presence, be it through owned or managed properties. Our goal is 30,000 units by 2019.
Lee Chee Koon, CEO, The Ascott
Demand We foresee a strong demand for quality serviced residences in key global gateway cities and regional cities in Singapore, China, Australia, capital cities in South-east Asia, Seoul, Tokyo, Paris, London and key cities in Germany and the US.
Domestic demand for serviced residences is rising in China. This is driven by the fast growing number of corporate and leisure travellers, and rapid urbanisation of Chinese cities. We are accelerating our expansion across Tier 1 and 2 cities, increase our business development in the growth cities of central and west China, and reach out to a wider group of travellers by creating O2O (offline-to-online and online-to-offline) experience for our guests through various partnerships.
Last year, we invested in Tujia.com, China’s largest and fastest-growing online apartment sharing platform, allowing us to expand our reach to more customers online. Since August last year, we have also listed our China properties on Alibaba’s online travel service platform, Alitrip, to tap on the more than 100 million Chinese travellers it serves.
South-east Asia is also one of the most vibrant markets, with a young population driving domestic demand, growing export figures and various economic policies in place to attract foreign capital. The AEC will boost its competitiveness and connectivity, increase business activities and FDIs, driving demand for serviced residences.
Japan has been an equally attractive destination for corporate and leisure travellers given the weak Japanese yen, eased visa requirements and the proliferation of LCCs, coupled with the implementation of pro-business policies and designation of special economic zones.
Product As travellers are increasingly tech-savvy and connected, the customer experience must evolve with their lifestyles. Last year, we forged an exclusive partnership with Samsung Asia to develop smart solutions customised for serviced residences. Guests will be able to use their mobile or wearable devices to control devices such as washing machines, refrigerators and smart TVs. We aim to testbed the technologies at selected Ascott serviced residences by the first half of this year, with plans to roll out to our properties globally in phases.
Ascott will continue to focus on providing personalised services. We launched the Ascott Lifestyle programme last year, offering guests bespoke cultural, gastronomical, local and wellness experiences. To help guests settle in a new city, there are local language classes and guided tours of the local market. Guests can stay fit by exploring the area with our customised jogging routes. There are also cultural programmes such as batik making workshops and personal cooking sessions in their apartment.
Expansion We added 37 properties (over 6,500 units) last year, reaching our global target of 40,000 units ahead of schedule. We are well on track to reach 80,000 units by 2020. We will continue to grow through management contracts, investments, strategic alliances and franchises.
Last year, we opened in cities such as Hong Kong, Macau, Shanghai and Wuxi in China; Surabaya in Indonesia; Tokyo in Japan, Busan in South Korea; Cyberjaya and Nusajaya in Malaysia; Si Racha in Thailand; Hai Phong in Vietnam and Jeddah in Saudi Arabia. This year, we plan to open over 20 properties with more than 4,500 units, the bulk of which is in China, and the rest in South Korea, Indonesia, India, Malaysia, the Philippines, Vietnam, Oman and Saudi Arabia.
Ascott’s US$600 million serviced residence global fund with Qatar Investment Authority, which will focus on Asia-Pacific and Europe initially, will provide Ascott with the financial boost for acquisitions. In November 2015, tapping on this fund, we acquired two prime properties in Paris and Tokyo.
Marc Hediger, CEO, Lanson Place Hospitality Management
Demand Despite the regional economic growth softening during the past six months, there remains a strong demand for serviced apartments in certain individual cities, particularly within the Tier 1.5 and 2 cities in China (Shenzhen, Chengdu, Dalian, Hangzhou, Suzhou) and for some key South-east Asian destinations such as Singapore, Bangkok, Jakarta and Manila.
But within these markets trends are changing. Tenancies are being shortened, with middle management being posted on more temporary assignments and MNCs relocating their administrative offices to cheaper decentralised CBD locations. Yet certain cities also suffer badly from congestion, so high net worth individuals seek a mid-week solution for a second home within their own domestic markets, where serviced apartments have been the ideal choice to cater for this, predominantly in mixed-use developments providing for every requirement.
We have also seen a shift in the resident demographics throughout all the properties in Asia-Pacific. With advanced technology, the millennials are signing shorter-term tenancies, wanting to do business faster and more efficiently. We see baby boomers and gen-X residing without families or younger families seeking smaller and more versatile units.
More significantly, residents who have been educated abroad are coming back to their own countries and relocating from within Asia-Pacific. In China, corporates are expanding their companies to Tier 2 and 3 cities yet still seek a comfortable but affordable lifestyle for their employees.
Product We’ve introduced a third business model, Serviced Suites by Lanson Place, to address the changing trends and needs of corporates relocating. This lean, efficient and contemporary serviced apartment style not only provides a higher ROI for developers but most importantly offers residents a ‘niche lifestyle’, no matter the location or purpose of their residency.
Smaller units are creatively designed with unique combined open living and working spaces; public areas are the extension of their homes offering seamless connectivity throughout the entire development; ‘grab n go’ F&B concepts and resident activities all promote well-being and more energising activities.
Expansion This year, the majority of our pipeline is for the upscale Serviced Suites by Lanson Place, within either secondary locations in key gateway cities or Tier 1.5 cities within China and South-east Asia. There will be a further two properties opening this year in Shanghai, alongside another three new properties within Asia-Pacific in the pipeline.
With Japan and Australia favoured not only due to currency investment, but also Chinese travellers where Lanson Place hold a strong reputable market position, there are a lot of opportunities now. Additionally, markets such as Jakarta, Bangkok, Singapore and Hong Kong remain a strategic focus for Lanson Place to enter. Here, we also see opportunity to expand our boutique hotel model.
With predictions of a more cautious 2016 ahead for speculative investments and distressed properties, developers are seeking alternative solutions to hold on to their real estate assets until the time is right for them to sell, considering this slowdown could be longer than anticipated. Investment funds and arms also seem to be able to capitalise in these circumstances. Introducing a serviced apartment component to developments within this environment will help establish marketing the property as an exciting destination while in the meantime, taking in some return until the economy strengthens.
Bernold Schroeder, CEO, Pan Pacific Hotels Group
Demand Softer demand is expected in South-east Asia, especially in developed cities like Singapore, due to an increase in supply and a decline in corporate travel as companies cut back on relocation and accommodation expenses. We also cannot underestimate alternative accommodation providers such as Airbnb, which are competing for a slice of the long-stay pie.
Demand in markets such as China and India is expected to be more stable due to slightly higher barriers to entry and a lack of alternative accommodation. In China, Pan Pacific enjoys a strong brand presence and familiarity with our properties in the key cities of Tianjin, Xiamen and Ningbo, and we are expecting moderately strong growth in these cities. The co-existence of a hotel in the vicinity of the serviced suites allows us to offer additional services and comforts which allows us to sustain a longer stay at the latter.
Product The compact apartment, such as the one-bedroom, will be most in demand. But while the units may have shrunk in size, traveller expectations have not; they continue to look for serviced suites with facilities such as a well-equipped gym and other conveniences. More corporate travellers and businessmen are travelling without their family while on work assignments (which are also getting shorter due to tighter budgets). Socio-economic trends such as the rise in dual-income families where both spouses are working are contributing factors to more travellers embarking on work trips without their family.
Expansion The hybrid model of hotels and serviced apartments we are operating under our Pan Pacific brand in China has given us a good niche and the opportunity to convert hotel to long-term stays at our serviced suites, which helps us grow organically.
At the same time, we are constantly on the look-out for new opportunities and projects. In 2015, we renovated Parkroyal Yangon and converted a number of hotel rooms into serviced suites to meet demand. Also in the same year, we announced the planned opening of Pan Pacific Serviced Suites Puteri Harbour in Johor, Malaysia, which will be ready by 2018. Located in Iskandar, it will be the first serviced suites we are operating under the Pan Pacific brand in Malaysia, and is strategically close to medical and healthcare services, educational institutions and entertainment facilities.
Arthur Kiong, CEO, Far East Hospitality, Singapore
Demand We expect occupancy and rate to be flat. This year, Singapore is expecting modest economic growth of between two and 2.5 per cent. As a developed economy, this is the new normal. The issue we’re looking at is really new supply. Direct competition from new entrants as well as indirect competition from Airbnb will also affect supply.
Demand for serviced apartments has grown in the last 10 years, and has reached a matured level. In Singapore, serviced apartment occupancy has exceeded that of hotels from 2010 to 2012. This trend can also be seen in Hong Kong, Sydney and London.
But even with the projected lower economic growth for the region, serviced apartments continue to appeal to the savvy corporate and leisure travellers, who see the value in serviced apartments as a viable alternative to hotels or renting private apartments.
Serviced apartments demand is closely linked to industries that rely on foreign talent who require mid to long-term accommodation due to the nature of the projects they are involved in. These industries include financial services, engineering and IT-related projects.
Product With a moderate business outlook, companies will be more likely to curb spending in relocation and employee mobility, increasing the trend of shorter home search durations as opposed to relocating an entire family. We thus foresee the demand for smaller-sized apartments such as studios and one-bedrooms to grow.
Within the serviced apartment segment, Far East Hospitality will continue to leverage our advantage in prime locations, for example, in Orchard district with Orchard Parksuites, Orchard Scotts Residence, as well as in Clarke Quay and Robertson Quay with the Village brand. This market segment is complementary to our hotels.
Expansion We recently announced that Oasia would be expanding locally and abroad. Three strategically located hotels and serviced residences will open in Singapore and Malaysia next year, adding over 700 rooms to our growing portfolio.
The expansion of Oasia comes at an opportune time as the region continues to mature and we believe the brand’s clear focus on health and well-being will resonate with our business and leisure guests.
Specifically to the serviced residence offering, we will be opening the Oasia Residence, Singapore in 4Q2016. Located in the West Coast of Singapore, and within close proximity to the business parks and education institutions in the area, Oasia Residence, Singapore will be well-suited to capture the growing business traveller market and meet the rising demand for serviced residences in the west, where the current supply is relatively low.
Peter Henley, CEO, Onyx Hospitality Group
Demand Across our regional portfolio of 37 properties, 17 are either serviced residences or residential-style properties. We do not anticipate a softening in demand. On the contrary, we are seeing a noticeable shift from more corporate-heavy demand to an increasingly growing leisure clientele choosing to stay with us. Benefits like additional space, residence-like feel and enhanced in-room facilities appeal to guests, particularly families and couples travelling on holidays. And because many of our properties also offer the added flexibility of full hotel services, the draw becomes even stronger.
Product Our residential-style properties tend to perform well, and we are confident there will be growth in the year ahead. This is the reason why eight properties out of our 21-strong pipeline are either serviced residences or hotels with residential facilities. From our pipeline, China holds the strongest potential, both in primary and secondary cities. We also see strong investor interest in Malaysia and India.
Expansion Over the next three years, we have eight residential-style properties scheduled to open across the region. These include Amari Residences Pattaya, Shama Daqing Heilongjiang, Shama Pazhou Guangzhou this year; Amari Residences GIFT City in Ahmedabad and Shama Caojiadu Shanghai in 2017; and Shama Medini in Johor Bahru, Shama Tianfu Chengdu and Shama Yangling Beijing in 2018.
John M Flood, president & CEO, Archipelago International
Demand This will definitely soften in the long-stay serviced apartments market due to the economic slowdown, and in particular, the slowdown in the oil and gas business.
However this slowdown was predicted by most people in the industry several years ago, so new projects been designed and fitted out with more of the short-stay market in mind. This market views serviced apartments as a great alternative to a standard hotel room. In most cases guests can get a room or unit the same size as a large hotel suite but for the price of a hotel room. With several bedrooms sometimes included in units, many families or groups of friends prefer to share an apartment rather than several hotel rooms so they have a larger common space that they can gather in.
We expect a five to 10 per cent growth in business this year mostly due to the demand from short stays. The Middle East market continues to grow especially during the hot season when many want to get away to somewhere cooler and less humid.
Product Smaller one-bedroom units with a living room (a typical hotel suite) will continue to be most in demand due to the extra space it gives guests.
Expansion On average in Indonesia we open about one new hotel every two weeks. About 10 per cent of these hotels are geared towards the serviced apartment market especially in areas where expats need them for long stays, such as Jakarta or Balikpapan, or places in demand by families such as Bali.
Many condotels are larger units as this helps the real estate sales to individual investors. Therefore many of these then become more serviced apartment type developments. Due to the high bank interest rates in Indonesia, condotels are a much cheaper way of financing a development and moving real estate – something that’s obviously attractive to the bigger developers in the region.
We will continue to open about one hotel every two weeks for the next three years and after that we will see a slowdown as the market in many areas becomes saturated and we reach a level of hotels similar to Malaysia or the Philippines. – Mimi Hudoyo
Kem Siew, vice president sales & marketing, Swiss-Garden International
Demand 2015 was a challenging year. We experienced a 20 per cent year-on-year decline in demand compared with 2014. We expect demand in 2016 to be similar with 2015, with bookings coming mainly from Asia.
The strongest markets will be corporate clientele from Asia and leisure, family clientele from Singapore, Indonesia, the Middle East and India. Weak demand can be expected from the oil and gas sectors as well as corporate clientele from medium and longhaul destinations.
Product Two-bedroom serviced apartments for leisure clients and one-bedroom or studio apartments for corporate clients will be in most in demand. Leisure tourists will prefer serviced apartments located within the city centre and close to shopping malls. Corporate clients will look for serviced apartments which are close to their workplace.
Expansion Swiss-Garden International Hotels, Resorts & Inns managed three new serviced apartments which opened in 2015. Swiss-Garden Resort Residences Kuantan (179 units) and Swiss-Garden Hotel & Residences Malacca (790 units) both opened in January 2015. D’Majestic by Swiss-Garden, Kuala Lumpur opened on July 1 with 188 units.
We opened the 205-key Swiss Inn Johor Bahru on January 16. We are looking at opening a serviced residence in Cameron Highlands and another at Genting Highlands within the next five years. – S Puvaneswary