Serviced residences are no longer exclusively targeting the extended stay market, as the sector responds to shifts in market demand for shorter stays and smaller units.
Increasing business activities, an expanding middle class and a growing bleisure market are some of the key factors driving demand for serviced apartments in Asia, spurring accommodation providers in the region to respond with robust pipelines and new brands.
The regional inventory of serviced apartments has exploded over the last four years.
According to the Global Serviced Apartments Industry Report 2018-2019, there are 116,603 serviced apartment units across Asia today, an increase of 63 per cent from 2015.
The growth trajectory for business travel, especially in Asia-Pacific, will continue to drive demand for bleisure across all regions worldwide, particularly for top destinations such as Singapore, Hong Kong, Tokyo and Shanghai, according to Richard Tan, vice-president, serviced suites, Pan Pacific Hotels Group (PPHG).
South-east Asia is projected to grow faster than elsewhere in the region, with demand primarily driven by Chinese travellers throughout the region, especially into Indonesia, Thailand and Vietnam, he added.
Shifting needs, blurring lines
While demand for serviced apartments continues to grow, international assignments are getting shorter as companies become more cost conscious.
Some of the cost-cutting measures include companies sending fewer married people with children overseas and offering international assignments of shorter duration, observed Onyx Hospitality Group’s president & CEO Douglas Martell, resulting in reduced demand for serviced apartments with several rooms.
At the same time, the modern working world is increasingly characterised by short-term contracts, freelance and remote work, co-living and co-working concepts have risen in popularity. The Great Room, Justco and WeWork are just some of the co-working brands that have popped up in Asia in recent years, and hotel operators like Ovolo have also jumped onto the bandwagon.
“The rising trend of co-living, along with co-working, is here to stay,” said Kevin Goh, CEO of Ascott.
Ascott has launched its co-living brand, lyf, to provide flexible communal spaces that facilitate collaboration, community building and social activities among guests. The first lyf property, lyf Funan Singapore, will open in 4Q2019.
The community spirit espoused in co-living is not a new concept though, said Arthur Kiong, CEO of Far East Hospitality (FEH). The company already segments its brands based on travellers’ profiles, e.g. serviced residences under the Village brand provide options for guests to engage in local festivities throughout their business trip, he shared.
In particular, families have risen as a notable growth segment for all the serviced apartment operators that TTG Asia spoke with, especially as multigenerational vacations grow in popularity among Asians.
“Millennials, who have become parents, are bringing their parents – active, healthy Babyboomers – along on trips as the grandparents play a large part in (grand) parenting the children. This is true of the Chinese market, as outbound family travel is often accompanied by grandparents,” observed PPHG’s Tan.
The trend is a perfect fit with the “homely” serviced residence product, he stated, as each unit typically comes with one or two bedrooms which can fit the whole family, plus a common living area, kitchen and family-friendly amenities such as washer and dryer.
“We also see a growing trend of families choosing to stay in serviced residences instead of booking multiple hotel rooms,” Tan added. “Compared to two connecting rooms or a suite in a hotel, a serviced apartment unit offers families or groups the convenience of space and facilities without a hefty price tag.”
A new breed of serviced residences
As lengths of stays become shorter and more leisure segments show a demand for serviced residences, operators have responded by offering more hotel-like services, further blurring of lines between the traditional focus of hotels and serviced apartments.
The “stronger demand for studio apartments over three-bedroom apartments and much shorter stays” has led Onyx Hospitality Group to roll out the Shama Hub concept targeting travellers from the “informal generation”, Martell revealed.
Unveiling the concept in conjunction with the recent Serviced Apartment Summit Asia 2019 in Bangkok, Onyx launched its prototype Shama Hub Bangkok Pratunam studio apartment to offer a first-hand experience of how the flexible space can sleep up to four people, incorporating a king-sized bed complemented by a foldaway wall with two additional beds, a modular mini-kitchen, modular seating that can be rearranged, and separate shower and WC rooms with dedicated vanity space.
“We came up with the Shama Hub concept because we already see from our existing Shamas that the demand for three- and four-bedroom apartments is getting less but demand for studio apartments and shorter stays is really increasing,” Martell said.
“Shama Hub is designed to meet the needs for high demand of studio apartments and (families or groups of friends) wanting to share a room together while getting a proper sleeping area,” Martell elaborated. “It’s a really inventive way to maximise a small footprint.”
The desire “to widen our range of products and services to appeal to the fast-growing middle-class hotel segment of customers who demand shorter stays at a mid-tier price” also underscored Ascott’s recent investment in Tauzia, a major hotel operator in Indonesia, according to Goh.
The Ascott has also launched Citadines Connect, a line of business hotels with selected services, in a bid to widen its short-stay offerings.
Hotels under this sub-brand will have tech-enabled features such as mobile keys, self check-in kiosks, smart washing machines or laundromats, content streaming-enabled TVs and Google cloud printers. Rooms within a Citadines Connect business hotel will mostly be studios ranging from 18m2 to 21m2.
As a predominantly corporate player, Oakwood now wants to tap growth in the leisure market where it sees rising demand, said Asia Pacific managing director Dean Schreiber.
“Our customers are demanding short stays, so we want to address our customers’ needs and develop products suited for them,” he said.
As well, the longer stay nature of guests make serviced residences a desired partner for consumer brands, Schreiber told TTG Asia.
The Oakwood Showroom was launched in its Singapore corporate office earlier this January for property owners to view and purchase in-room amenities. The showroom is a mock-up of a suite featuring the latest gadgets, furnishings and other homewares from various product partners, such as Samsung, Bang & Olufsen and Serta.
“A lot of partners we’re working with are all interested in this space because the customers engage with their brands a lot more in serviced apartments,” Schreiber shared.
“Our partners are very encouraged by the fact that they can put their brands in front of customers longer and the customers actually touch and use them, so we see an exciting opportunity. Our rooms are like showrooms for them.”
Airbnb opens up possibilities
As lines are blurred between serviced apartments and hotels, and the accommodation sector gets more crowded, what FEH’s Kiong finds a challenge is the “uneven playing field” that home-sharing platforms have brought in Singapore.
“Regulations here state that private residences can lease out their premises as long as guests stay for a minimum of three months. Yet, on home-sharing platforms, these lodgings can be booked for even a one-night stay. The intention and reality on the ground is very different,” he said.
“Serviced apartments on the other hand face a minimum six-night requirement, and are strictly regulated. The security and safety of the guests are also a high priority.”
Kiong added: “That brings us to the opportunity to reconsider the relevance of the service residence model with the six-night restriction; perhaps, doing away with or shortening the six-night requirement. This may be judiciously regulated to increase the room supply in Singapore, instead of allocating more land for hotel development where land is in short supply.
“With the deregulation of the serviced residences sector, we see the prospect of creating a new category of accommodation – aparthotels. This will target guests who would trade services for space. Those who do not need fancy services of a hotel, but need more space to have family with them or to cook in the apartment,” he elaborated.
But while Airbnb may have been perceived as a major disruptor in the hospitality sector, particularly persuading younger travellers to seek out alternatives to traditional hotel accommodation, the home-sharing trend has also shown that serviced apartments offer more freedom and space.
“Airbnb didn’t disrupt but made us rethink (our products). They are a solution, not a product,” Oakwood’s Schreiber stated.
“The likes of Airbnb puts us on our toes a bit more to be open-minded and give what the guest want, not what we want, e.g. getting rid of check-in and check-out times. We have to challenge ourselves a lot more.”
It’s an opinion endorsed too by PPHG’s Tan, who added that “the rise of the sharing economy has created unprecedented awareness in the accommodation space”.
“At the same time, lines between accommodation categories have definitely ‘blurred’, with home-sharing options, aparthotels and branded residences joining serviced apartments and hotels, not forgetting the proliferation of blended spaces, such as co-working spaces that double up as co-living spaces and vice versa.
“To capture this group of travellers, serviced apartments will need to better segment their markets to drive revenue and profitability, and employ a different strategy given shorter stays and higher guest turnaround,” said Tan.