How Serviced Apartments Are Redefining the Hospitality Industry

Looking back at the hospitality industry over the past two decades, the growth of serviced apartments is not to be ignored. The concept of apartments for short or long term stays first came into the picture in the 1980s, but they were not an instant success and often remained the last resort for most people vacationing or on a business trip. Recall your trips two decades ago or perhaps even 10 years back and most of these stays would have been at hotels, irrespective of their room tariffs and star ratings. Whether you booked through a travel agent or your business trip was managed by your employer, staying at a hotel was certainly the status quo.

In the past, serviced apartments were merely an afterthought for travellers because they were lacking in many key areas. To start with, they lacked the amenities offered by hotels, and were often undone by their poor locations. Serviced apartments mostly did business by offering jaw-dropping rates or during busy seasons where hotels failed to cater to customer demands. However, the picture has completely changed in the last few years, with more vacationers and corporate travellers preferring to stay in serviced apartments rather than hotels. Privacy, coupled with a home-like experience, are two key factors that are driving their popularity. Check out any of the hospitality review and ratings websites to see what consumers are saying!

Corporate Patronage Changed the Game

In the early days, serviced apartments thrived in isolated places in the world, but couldn’t be counted as serious challengers to the traditional hotel industry. The lack of corporate patronage, which contributed to bulk of hotel industry revenue, acted as one of their biggest weak links. Industry experts believe business travellers provide more value than just revenue when on a business trip. For instance, a corporate traveller who has had a nice experience at a property is more likely to stay there on a family vacation. Understanding and tapping into this concept of corporate patronage helped serviced apartments quickly gain traction in the hospitality industry.

According to the 2016/17 GSAIR (Global Serviced Apartments Industry Report published by Apartment Service), more than 70% of all businesses are using serviced apartments for business travel. From New York to London, from Hong Kong to Melbourne, we are seeing an exponential rise in the number of serviced apartments across the world.

Not Just for Long Stays

A common belief of serviced apartments is that they are most suitable for long stays, as business travelers and vacationers tend to get bored staying in hotels beyond five days.The thinking behind this belief is clear, as hotels are often cramped and usually cannot offer the authentic, home-like experience of serviced apartments.For the past decade, serviced apartments have been preferred by business travellers on long trips, lengthy assignments, or even while relocating. Recently however, we have witnessed more business travellers who now prefer these apartments over hotels when they are on short trips as well. According to one of GSAIR’s earlier reports, the number of business travellers staying in these apartments for short visits has been increasing gradually over recent years.

So what exactly has led to this phenomenon? To start with, serviced apartment providers are constantly working towards narrowing the gap between their offerings and those of major hotels. From online booking to arranging for luxurious chauffeur-driven cars, apartment companies are constantly matching the amenities offered by hotels. Economy of scale is possibly the biggest factor for this transformation, as most serviced apartment companies have increased their number of properties in major cities. 

Evolution Within the Industry

The rise in popularity of serviced apartments is no accident. Over the last two decades, the segment has constantly evolved, often going out of its way to embrace change compared to the large hotels they compete against. In fact, serviced apartments have gained a reputation within the hospitality industry of being able to understand changing customer demands, and being able to remodel their offerings to meet these needs.

Another trend that is slowly taking shape in the industry is the concept of alliances. Over the last few years, we have seen many serviced apartment companies acquired or merging with larger companies to form a stronger entity. These apartments are then re-branded, with the more powerful brand helping to drive sales at apartments that often had great amenities, but lacked the brand equity to attract a large number of guests. The industry has also taken a similar approach to the taxi industry, as many aggregators have joined the bandwagon. This has freed up smaller properties from having to focus on marketing and advertising, allowing them to focus their attention towards offering the best experience to their customers.

In summary, serviced apartments are no longer the poor cousins of hotels, as they have carved out a niche space in the ever-growing hospitality industry. With lower input costs, many smaller players continue to enter the business and thrive on technology adoption and patronage from their corporates. They have also been able to reinvent the concept of hospitality by offering guests a more homely and personalised experience. While this does not write the obituary for traditional hotels, it does show that serviced apartments are here to stay and thrive.