By the crazy benchmark of 2021, a 56 per cent February occupancy rate in London for short-term rentals (such as serviced apartments, corporate housing and aparthotels), according to the hotel data consultancy STR, was a singularly impressive achievement.
True, that figure is well down from 65 per cent in February 2020, yet it compares highly favourably with London’s hotels, where occupancy was a catastrophic 24 per cent February 2021, down from 78 per cent a year earlier.
There are several reasons extended stay properties (essentially accommodation with kitchen and laundry facilities) are enjoying their moment in the sun, says Jo Layton, director of CAP Worldwide, a serviced apartment booking agent for the corporate market.
The first is that many hotels have responded to the pandemic by closing either temporarily or permanently whereas serviced apartments are more flexible. “They are normally smaller and can open just a few units in line with demand without having to open the entire property like hotels,” Layton says.
There is also the nature of the accommodation offered. According to the hotel rate re-shopping service Tripbam, the average length of room nights booked by business travellers has risen by one night over the past year. White-collar executives who travel for meetings have stayed at home and interacted via video calls, while those who have continued to hit the road are engineers and others working on location.
“They are that rank-and-file everyday travel,” says Tripbam CEO Steve Reynolds. “They want to stay in a different kind of place. If I’m going to be there two weeks, I’d rather stay in something that’s homely.”
And then there’s the Greta Garbo effect of the pandemic: everyone want to be alone. In a serviced apartment, “guests don’t have to mingle and they don’t have to go down to breakfast,” says James Foice, chief executive of the Association of Serviced Apartment Providers (ASAP). With a dedicated workspace as well as kitchen and laundry facilities, guests can remain in splendid isolation.
Layton adds that apartment providers are offering occupants the opportunity to do their own cleaning and that the proliferation of delivery services for takeaway food and groceries gives apartment guests “locally delivered ‘room service’ at lower prices than hotels. You can have everything delivered to your door. We’ve turned into online purchasing citizens,” she says.
The big question is whether the new-found popularity of serviced apartments will linger even when the pandemic abates. Up to a point but no further, is Layton’s considered opinion. “There will be a period when business travellers continue to feel more comfortable using serviced apartments as they get used to being with other people again,” she says. “But hotels will bounce back. During the pandemic, hotels re-looked at their services and they will fight for market share.”
Layton believes much will depend on whether average length of stay by business travellers remains at its new higher level – a distinct possibility for a variety of reasons, including employees being urged to combine shorter trips into longer ones for environmental reasons.
It’s an important question because Layton considers serviced apartments to be far less viable for stays below five nights. “The price is about the same but the terms and conditions of hotels remain generally more flexible than a serviced apartment and can be more easily booked and amended,” she says.
The ease of booking to which Layton refers is a key challenge. In many ways the extended stay sector fits much less comfortably than hotels into the established eco-system that supports managed travel programmes.
“Now is the second opportunity for the sector to get it right,” says the travel manager Jan Jacobsen. In his view, the first opportunity came when the rise of Airbnb made travel managers realise they needed to offer travellers a wider range of accommodation options than conventional hotels.
Jacobsen believes that moment was not seized, partly because of inconsistency in the product, especially from certain serviced apartment brands claiming to offer large portfolios when in reality they had no ownership of, or control over, many of those properties.
But lack of distribution is another, unresolved problem. Serviced apartments are often unavailable through global distribution systems or online booking tools, and even when they are, large swathes of inventory are blocked from sale through these channels.
Serviced apartments have to get themselves on the same technology as hotels, is Jacobsen’s view. “There needs to be a Clapham Junction that everything connects through,” he says.
However, there are good reasons why apartment providers resist, both for their own sake and those of their customers. Layton compares the difference between extended stay accommodation and regular hotels to that between meetings and event on the one hand and transient travel on the other. Like meetings and events, she says, longer stays need more care with the booking to choose the right property for employees who will live in them perhaps for several weeks.
From the suppliers’ point of view, handing inventory over to third parties for distribution is not only costly but threatens their revenue management. Their ideal length of booking is 30 nights-plus, and they wish to avoid losing such business through an intermediary’s premature sale of smaller chunks of just a few nights of the same inventory.
Foice argues these strategies are beginning to change. “Historically, if there has been a criticism of our sector, it is that it’s hard to access,” he acknowledges. “But we have seen a significant shift over the past year to access through the agency community.
“More brands also mean there is now more flexibility. Companies are spreading their risk and seeking a combination of different guest types. There are going to be a couple of systems launched later this year that will manage the complexity of how serviced apartments are booked.”
A partnership announced earlier this month between Tripbam and the serviced apartment booking agency SilverDoor is another example of trying to move the sector inside managed travel’s big tent.
If a traveller books a hotel for a minimum number of nights defined by the client, “we see this and we look at a cluster of extended stay brands in the vicinity,” says Reynolds. “If we find a lower rate for a nearby extended stay property that saves enough to justify it – and typically you can save thousands of dollars on a 20-night stay – we then notify whoever the company wants us to notify.”
However, there remain differences to how Tripbam normally operates. Manual intervention may still be needed to complete the process of re-booking with a serviced apartment if it does not have GDS distribution.
That’s something Reynolds believes will eventually have to change, even though the bill for apartment providers is likely to be stiff. “You’ve got to write some pretty big cheques if you want to hit the corporate market hard,” Reynolds says. “In the short term I don’t see how you are going to do otherwise. So many legacy systems are dependent on the GDSs.”