The long game

The serviced apartment sector was one area of the business travel sector which seemed to flourish during the pandemic, benefiting from the ‘work from anywhere’ and flexible living trend, as well as ticking the CSR box by offering travellers the option to have limited contact with other people.

According to the Global Serviced Apartment Industry Report (GSAIR) 2022, at the tail end of the pandemic, 15 per cent of UK businesses had increased their overall use of serviced apartments during 2021. Fast-forward a year and with the ‘work from anywhere’ and bleisure trends still very much part of corporate life, the outlook for the sector remains positive.

The GSAIR 2023 report found serviced apartment usage by corporates has grown by 53 per cent for business travel and by 38 per cent for assignment work since last year. The report also noted it was the tenth consecutive year the sector has grown.

One buyer quoted in the report says: “We utilised apartments quite heavily during the pandemic through our safe passage programme. Our crews needed to get to certain locations for ships, refineries, or oil rigs, so we used serviced apartments for quarantine provision, and as medical centres because of their flexibility. That traction has continued post-pandemic.”

The Apartment Network’s director of marketing & ESG, Sam McMillen, agrees when asked if the increased use of serviced apartments was here to stay. “Absolutely, and it’s still growing. What Covid gave [many] employees was the introduction to a new way of working – a new level of flexibility. The pandemic also gave the serviced apartment sector visibility and credibility.”

The Apartment Network, whose network incorporates 55,000 apartments across 50 countries, also carried out a survey of travel managers this year, which found 19 per cent of supplier respondents expected an increase in requests for serviced apartments over hotels, and that figure is expected to increase in 2024.

Carol Fergus, director, global travel meetings and ground transportation, at Fidelity International says: “There is now dynamic working and people do want it. During Covid people wanted to have their own space and not be surrounded by lots of people, so there’s been a shift around hybrid working and having that home-from-home [experience], and that's the attraction to use serviced apartments over hotels.”

However, Fergus says that serviced apartment usage depends on the type of traveller. “Serviced apartments seem to be for those with more non-client-facing roles and those who are client-facing seem to want hotels as opposed to staying in a serviced apartment and having to cook dinner. Companies are asking people to stay longer so that is an attraction.”

The trend of fewer, but longer trips has also helped find a permanent place for serviced apartments on corporate accommodation programmes.

Pauline Houston, vice president of business development at SilverDoor, says: “The length of corporate business travel stays has certainly increased compared to pre-pandemic levels. The inclusion of serviced apartments into what have historically been hotel-focused accommodation programmes and itineraries pre-pandemic has seen significant growth.”

LONG-STAY TRENDS

The GSAIR 2023 report found 87 per cent of serviced apartment agents reported an increase in the average length of stay.

“We have heard of corporates mandating that stays over five nights should book serviced apartments and we expect this trend to grow,” says The Apartment Network's McMillen.

Fidelity International’s Fergus says: “We say [if it's] five nights, [then] stay in a serviced apartment but we don't mandate it. It’s in our policy and they will be advised to use them if they are available.”

This aligns with what SilverDoor has seen too. Houston says: “The faster growing trend we have seen from clients is for travel buyers and managers to recommend, rather than mandate, their use for stays of four or more nights, so it is at the traveller’s discretion.”

But can the sector keep up with the demand? According to property specialist Savills, based on what is under construction and with final planning, the supply of serviced apartment stock across Europe is set to expand by 21 per cent over the next three years.

According to Rebecca Hollants Van Loocke, COO EMEA, at Frasers Hospitality: “Europe remains the epicentre of serviced apartment demand, and we have seen rates rising in the UK’s major cities including London and Edinburgh, likely influenced by the rise in energy and labour costs.”

Frasers Hospitality said it had seen transient travellers pacing back slightly, while business travellers have returned stronger than pre-pandemic.

SilverDoor noted that at the start of the year Dublin and several German locations were in particularly high demand, however that has reduced slightly. Amsterdam rates and demand have remained high with its popularity as an international hub, as well as a location for conferences and meetings, and the agency expects this to continue into 2024. And of course France will see rates shoot up next summer when it hosts the Olympic Games between July and September.

Hollants Van Loocke also says relocation has been an important part of the increase in demand for serviced apartments with London experiencing a significant resurgence following the lifting of travel restrictions in the Far East, and a substantial increase in demand for serviced accommodations in the earlier part of this year.

“This surge can be attributed, in part, to large corporations addressing the relocation backlog caused by Covid-19,” she says.

Frasers Hospitality has seen occupancy in the UK increase 13 per cent versus 2021-22 and has seen a decrease in corporate travel for conferences and events, while sporting events have been driving demand.

Hollants Van Loocke says: “There has been a parallel trend in Germany, where the decline in business travellers attending fairs and conferences can be attributed to the slow recovery and transformation of this market.”

RATE MOVEMENT

Mark Harris director at Travel Intelligence Network and contributing editor of the Global Serviced Apartment Industry Report, says: “In the aftermath of the pandemic the serviced apartment sector saw a huge rise in demand that has levelled off in 2023.

“The impact on rates has been a Europe-wide reduction in average rates of around 20 per cent, however rates in key destinations like London, Dublin and Paris have remained stable.”

Fidelity’s Fergus says she has seen serviced apartment rates going up in the same way hotel rates are going up “although not as much as hotels, but they are going in that direction.”

Fergus says that having the partnerships, tariffs and agreed contracts with serviced apartments helps, whereas hotels are more inclined to go down the dynamic pricing route.

She believes that the accommodation market – particularly hotels – has been taking advantage of the post-Covid surge in demand and that the serviced apartment sector needs to be careful: “The accommodation sector is definitely taking advantage of the way the market is at the moment but that’s going to change and they need to think about the decisions they are making.”

But while SilverDoor’s report found pricing remained the “ultimate decider” for corporate bookings of serviced apartments, there is also a growing demand for access to more sustainability data as a way to “encourage staff to make better informed accommodation choices and support reporting for travel programmes in more depth”.

The company's Amy Pammenter says two of the biggest trends she has seen in business travel, not just in Europe but globally, are the increased focus both on sustainability and rise in the demand for, and development of, online booking tools.

Travel Intelligence Network’s Harris says part of the reason serviced apartments are now being included in many travel programmes is because more TMC technology stacks are drawing down content from non-GDS providers. “These travel managers also want to empower their travellers to minimise direct bookings with suppliers and therefore invisible spend.”

With high demand and increased buy-in on corporate accommodation programmes, plus the prevalent work from anywhere trend, it seems the serviced apartment sector will continue to reap the rewards.