How business travel is driving Asia’s serviced apartment boom - JLL Real Views
Since serviced apartments fill the gap between leased residences and hotel rooms by offering flexibility, strategic locations, up-to-date modern conveniences and value-added services to tenants, many Asian business travelers on short-term work assignments prefer to choose serviced apartments.
For the business travelers spending weeks, if not months, away from home it's presenting something of an accommodation rethink. Staying in hotels may work for a few nights but ultimately many prefer a different type of space to call home over longer periods of time – one which comes with comforts such as private outdoor space for hosting friends or an oven to cook their own dinner.
This is where serviced apartments come in: In Asia, they're increasingly the preferred housing option for the region's business travelers on short-term work assignments.
"Serviced apartments fill the gap between leased residences and hotel rooms by offering flexibility, strategic locations, up-to-date modern conveniences and value-added services to tenants," says Tasos Kousloglou, who leads JLL's Hotels & Hospitality Group's asset management arm in Asia.
Asia's business travel boom
The business travel market in Asia is thriving. According to Global Business Travel Association (GBTA), Asia Pacific has the largest share of the business travel spend market followed by North America and Western Europe. GBTA expects that Asia Pacific will have gained another 5 percent market share by 2018, while the US and Western Europe will lose three percent and two percent, respectively.
This business travel boom, combined with the war for talent in the region and rapid economic growth is fuelling demand for serviced apartments across the region.
According to PWC's Talent mobility 2020 and beyond, the need for companies to shore up skills in key disciplines, regions and projects is creating a sea change in short-term international assignments. In contrast, the number of relocations that last three to five years and are followed by a return to headquarters are falling.
For the modern business executive, being away from home doesn't mean completely changing their lifestyle. Modern conveniences such as high-speed internet connections, iPod docking stations, up-to-date kitchen appliances and state-of-the-art home entertainment systems at serviced residences help business executives with work-life balance while they are out on short-term assignments, according to Kousloglou.
Rising demand has led hotels to install kitchens and convert hotel rooms into serviced apartments. "Many hotels are now hybrid properties as travellers on work assignments are increasingly looking more for home-style living while overseas," says Kousloglou.
Indeed, an audience at the Hotel Investment Conference Asia Pacific, held in Singapore, in March was told that time-deficient professionals on short-term work trips to the region prefer a quick bowl of cereal for breakfast to the lavish buffet style breakfast provided by hotels. One request from embassy staff from the U.S. on short-term assignments in Beijing over the December period was for a serviced apartment with a fully-equipped kitchen.
Across China, serviced apartments are booming as staff on short-term work contracts make the most of home living without the need to spend time or money kitting out their new abode. Serviced apartments also tend to be located in key business districts, which helps to cut commuting time to work.
Flexibility is another key reason why serviced apartments are so popular, says Kousloglou.
"A noticeable trend is that the average length of stay is shortening and increasingly one-bedroom apartments are becoming very popular as business travellers are predominantly single travelers," he says. "Changing social-economic trends such as the increase in the number of dual-income families where both spouses work are contributing factors to more travellers embarking on work trips without their family."
Airbnb – friend or competitor?
While some serviced apartment operators regard Airbnb as a competitor, others are increasingly looking to Airbnb to drive bookings. BridgeStreet Global Hospitality Group, for instance, plan to make its serviced apartments available through Airbnb's recently launched corporate travel portal, Airbnb for Business.
Singapore's Ascott, CapitaLand's serviced residence business unit, wants to have 2,000 units under its new Tujia Somersetbrand of serviced residences in China by the end of the year. Tujia Somerset is the product of Ascott's joint venture company with Tujia.com, China's largest online apartment sharing platform equivalent to Airbnb.
"Branded operators are tapping the Airbnb platforms to widen their distribution network," says Kousloglou.
With the rising popularity of serviced apartments, hotel operators are increasingly looking to include serviced apartments as part of their offerings. Others are expecting increased demand for one-bedroom and studio apartments as a slowdown in the global economic leads more companies to cut back on longer-term assignments and relocations.
"The serviced apartment industry in Asia looks set to grow in the coming months as the region continues to drive global growth, leading to more overseas assignments and work projects," says Kousloglou.
It's also providing a good opportunity for investors. "The serviced apartment asset class with its high profit margins, stable cash flows, high space efficiency, conversion flexibility and lower development cost provide investors more flexibility in their hospitality real estate investments," Kousloglou concludes.
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