The apartment hotel model is proving attractive to corporate travellers looking for an alternative to traditional hotel accommodation, as Kate Kennedy finds.
Accommodating staff when they travel for business can be a costly endeavour. Even mid-scale hotel rooms start becoming expensive when booked for weeks at a time. And they’re not always the best for workers either, with minimal space and sometimes sub-standard amenities. Which is why it comes as little surprise that apartment hotels are gaining favour among business travellers and their employers the world over.
In 1996, Andrew McBurnie, an Australian who has built and opened hotels around the world, predicted the slow demise of the long-stay hotel business. “Serviced apartments are definitely hurting luxury hotel occupancy,” McBurnie told the New York Times.
Given the findings of the 2016-2017 edition of the Global Serviced Apartments Industry Report, it would seem McBurnie was on to something. Between 2008 and 2016, the global volume of serviced apartments doubled, swelling to nearly 827,000 units worldwide. Clearly, serviced apartment operators are aggressively expanding, due to increased demand.
“Many hotel chains across the world are now offering both the rooms as well as serviced apartments to their guests to avoid losing out to the competition,” says Neelma Maru, Director of Sales & Marketing at Moevenpick Hotel & Residences Nairobi, which is a new addition to the Kenyan
capital’s hotel scene. Of course, there are players in the market who are focusing solely on serviced apartments, but it seems that many of the world’s big hotel groups are also moving into the space and seeing it as a brand extension.
“We have hotels, resorts and now apartments,” says Andrew McLachlan, Carlson Rezidor Hotel Group’s Senior Vice-President, Business Development, Africa & Indian Ocean. “Ongoing segmentation and awareness of the brand portfolio that Best Western has for hotel owners and operators to choose from allows us to compete for business for our hotels at all levels,” says Karl de Lacy, International Development Director at Best Western Hotels & Resorts.
Best Western clearly see the opportunity in this space, specifically as it relates to the African continent. The past year saw the opening of The Executive Residency by Best Western property in Nairobi – the first project of this type on the continent – and the group has another agreement in place, also in Nairobi, for a ‘dual brand’ establishment with an Executive Residency by Best Western and a Best Western Plus as part of one project development.
WHAT IS IT?
Serviced apartments, also known as apartment hotels, apart-hotels and long-stay hotels, bring together the best of both a hotel and an apartment. You get the privacy of a furnished and fitted apartment and the convenience of hotel services. ‘Rooms’ generally consist of four distinct areas – bedroom(s), bathroom, kitchen and living room – and are more spacious than traditional hotel rooms.
This means travellers can prepare their own meals or order in, as opposed to being forced to dine out, saving money and possibly being more time-efficient (think working lunch, or dinner). Guests can do their own laundry, relax in front of the TV, or enjoy a drink on their balcony.
“They have a homely feel and are spaciously designed to cater for long staying guests,” says Maru. “For those who love privacy, hotel apartments come with peace and quiet. Such places are not disturbed by the sound of too many people or vehicles, as they are primarily located in residential areas.”
They are also an affordable option for frequent long-staying business travellers. On average, a booking at a serviced apartment is 15-30% cheaper than a booking of the same length at a hotel, according to The Service Apartment, one of Europe’s largest serviced apartments booking agencies.
“We are on average 25% more cost-effective than other hotels of comparable size and quality,” said Marc Wachsberger, Managing Director of South Africa-based The Capital Hotels & Apartments, speaking to Bizcommunity. com in February.
“We have eliminated unnecessary costs typical of the hospitality industry and we focus on the things that really matter. We remove the unnecessary frills, keep aesthetics simple and sophisticated without compromising the guest experience – we limit the services but not the quality of service. We offer value-added services that business travellers really appreciate such as complimentary high-speed wi-fi, secure parking, and laundry services.”
The Capital Hotels & Apartments also have an interesting commercial model. “We design our buildings backwards – we start by researching what a corporate client is prepared to pay per night, then decide on what we invest in the hotel or apartment,” said Wachsberger.
Services differ from establishment to establishment, but it is generally accepted that wi-fi and parking are provided, and housekeeping and laundry services are available if they’re not included in the rental rate. Many places have in-house gyms and restaurants and/or bars. “The service philosophy for an Executive Residency by Best Western is the same as our other hotels, but how it is delivered can be different, as guests will stay longer and staff will get to know the customer’s wishes and likes over that time in the hotel,” says De Lacy.
According to the Knight Frank Africa Report 2015, the growth of Africa’s cities is creating a need for increased volumes of good quality commercial and residential real estate of all types. Increased numbers of multinational companies are seeking offices in African cities, generating demand for high quality space, particularly in key regional hubs such as Nairobi and Lagos. By the year 2015, there were 8,802 serviced apartments in 102 locations in Africa. By 2017, the numbers had increased to 9,477 serviced apartments in 166 locations, a rise of 7.6% and 62.7%.
This shows the rising level of interest in the sector, according to The Global Serviced Apartments Industry Report 2016/17. Despite this growth, there’s no denying that Africa is late to the game and lagging behind the rest of the world in the serviced apartments arena. Much of this has to with the continent’s underdeveloped economies. “Luxury residential-style lodgings are still in their growth phase, and as such work well in markets where hospitality infrastructure is well established and the full mix of lodging options are well represented,” says Saurabh Rai, Executive Vice- President of Preferred Hotels & Resorts.
“Many African economies are currently developing their luxury hotel infrastructure, particularly in secondary and tertiary destinations, and this is where the majority of operators and owners are preferring to focus their investments.” Preferred’s African portfolio includes two properties that fit into this category of lodging – the Fiesta Residences in Ghana and Essque Zalu Zanzibar, a luxury resort on the northernmost tip of Zanzibar island, made up of 40 individual suites and eight residential-style villas.
“This category of hotel is relatively new and it was important for the brands to establish in the various markets across Africa before the opportunity came to delve directly into this calibre of hotel,” says De Lacy. “The option for dual branding, in our case with a Best Western Plus, offers developers flexibility to compete in more than one field within one development.”
According to Wayne Ward, Marketing Manager at the Radisson Blu Hotel & Residence, Cape Town, and specific to the market he operates in, he believes South African travellers are just “not yet fully used to the concept of self-catering while on a business trip.” As African economies grow and develop, demand for long-stay accommodation is expected to rise. This highlights the opportunity for international operators to enter partnerships with local and regional developers to foster and improve the quality of long-stay accommodation in Africa.
“Business to properties within the Preferred Residences Collection is growing from a cross-section of travel consumer groups, including corporate travellers,” says Rai. “Our city residences are increasingly focused on the needs of corporate travel guests as they become a larger part of their client mix and with the segment favouring repeat business.”
Much the same as standard hotel philosophy, it is widely agreed that location is the key in making serviced apartments work, so it’s interesting to see where in Africa there is significant activity. The Radisson Hotel Group currently operates 14 extended stay properties across the EMEA region with a further 17 signed and under construction. The strategy has been to offer a brand extension to Radisson Blu, Radisson and Park Inn by Radisson rather than create a new stand-alone hotel apartment brand. In sub-Saharan Africa the group has two Radisson Blu Hotel & Residences in Cape Town and Maputo.
“We also have further hotel and apartment products or standalone serviced apartments in the planning within Johannesburg, Lagos, Lusaka, Nairobi, Abidjan and Addis Ababa,” says McLachlan. “We aim to capitalise on the market demand in capital cities and financial hubs for this type of accommodation, where there is already a well-known and established Radisson.”
The Capital Hotels & Apartments has a substantial presence in Sandton, Johannesburg, with five serviced apartment offerings. The group also has properties in Durban (see pages 14 & 15) and Cape Town, but Johannesburg is their base and the area on which they are focused. “Rosebank and Melrose are coming in a good second and third place respectively, but Sandton still has the corporate demand and lifestyle,” says Wachsberger.
“Sandton is mostly driven by conferencing and transients these days. Sandton demand has been steadily building since the oversupply of the 2010 World Cup, and it’s still the key business node.” If the number of huge new corporate offices in the vicinity is any indication, Wachsberger has a valid point. An outsider might think Sandton’s hotel supply is saturated, but Wachsberger disagrees.
“STR Global shows Sandton occupancy now north of 70%,” he says. “Compared to other national nodes, this is excellent. Remember that besides for The Capital, almost no other hotel groups have been building new hotels for the years since the World Cup. Demand has definitely caught supply, particularly for new products.”
So, what does it take to ensure success for a Sandton hotel? “Firstly, don’t bring ego into the equation,” says Wachsberger. “Ego hotels get the price on leisure travel, but Sandton is all about business. Focus on the things that matter, like high-speed wi-fi, location and vibe. Keep the price points in check for the corporate traveller and shield the weekend shoulders as best as possible.”
“As a group, we deliver hotel rooms at a lower price and we continue to see project-based business in our apartments. So, the range of business travel is vast and hence our flexible offering of hotel rooms, apartments and conference is seeing countercyclical demand.”
While Sandton may be untouchable in Wachsberger’s eyes, he does see potential elsewhere in close proximity to Johannesburg. “Watch out for Menlyn – that’s certainly the new Sandton of Pretoria with corporates flocking in,” he says. “Waterfall Estate in Midrand is also hotting up, but let’s see if they can build a true lifestyle surrounding business too.”
A bit further south in South Africa’s Western Cape province, in the town of Stellenbosch, Quiver Tree Apartments is looking to take advantage of the lack of alternatives to the hotels in the area. It has created a product that it believes is all encompassing. “Everything is moveable, which means we can keep up with international global trends and update design constantly,” says General Manager Jeanne Campbell-Miller.
“We are catering for the urban hub traveller and have created a platform to change designs to keep up with current trends.” Quiver Tree’s clientele include tourists, university lecturers and film crews, and Campbell-Miller has a rather interesting outlook on accommodation. “I believe we are entering an era where accommodation will focus on community and co-existence,” she says.“Our guests represent a diverse spectrum of humanity, but everyone finds it highly rewarding to be integrated this way.”
“You have to understand your corporate travellers’ needs from all angles – their work environment, their stress levels – and tailormake the experience for them. We will, very soon, be offering our guests a handset on arrival, fully loaded with places to see, free data, free calls, contact numbers, geo mapping, and access to our 24/ security. It’s all about making life easy and convenient for travellers.”
Looking elsewhere in Africa, Nairobi is considered a market brimming with opportunity for the hospitality sector and an increasingly important regional hub, attracting international companies engaged in long-term projects in East Africa. The city is also a preferred destination for conferences and business meetings in the region – hence the appeal for Moevenpick.
Due to open soon, Moevenpick Hotel & Residences Nairobi is an international upscale hotel offering 276 rooms, 54 of which are fully serviced one-bedroom and two-bedroom residences of 97m2 and 121m2 respectively. They contain a living room, dining area, twin bedrooms with one or two king sized beds, a balcony, a fully equipped kitchen and laundry facilities.
“Our long-staying guests have their own entrance as well as access to all the hotel facilities, including the reception, the gym, swimming pool, restaurants, bar and wi-fi,” says Maru. Best Western are also, obviously, betting big on Nairobi. “The room-count breakdown and how it can fit into the market and where the demand will come from within the city are all aspects that need to be taken into consideration when looking at this type of development,” says De Lacy.
The apartment hotel/serviced apartments space remains relatively virgin territory in Africa, with only a few significant players stealing a march on their rivals. All of which means that opportunity exists, particularly as corporate travellers continue to look for cost-effective solutions and alternatives to traditional hotel accommodation.