… innovation – consolidation – expansion – future challenges – and sharing data
There is a strong pipeline of new development in the next 3 years; can you pick one or two new developments in London and elsewhere in the UK which you believe are particularly interesting for the sector in terms of their innovation?
One that immediately springs to mind, and which is opening almost as we speak, is SACO’s Leman Locke purpose-built aparthotel in Aldgate, which is targeting both the business and leisure traveller.
It’s interesting for a number of reasons, but especially because it’s rooting itself firmly in the local area, like other developments in the Locke brand. It’s creating itself as a guest destination, trendy, designer-led, offering much larger rooms than a conventional hotel as well as communal social space; but it’s also going to offer all-day bars and restaurants that will be open to the public, connecting the guest both figuratively and directly with people in the area.
Another great example is Cheval Three Quays at Tower Bridge. What this development has shown is that the exceptionally high quality standard that it delivers enables it to command a very high RevPAR, well above its competitive set. People are prepared to pay a premium once they buy into a brand – Cheval are showing that right across their properties.
Outside London there are lots of successful developments doing great things. There’s growth across most of the gateway cities in the UK. Staycity in Hayes is one just outside the capital, close to Heathrow Airport. It has nearly 300 apartments and is more of a mid-market brand than Locke and Cheval; and it’s proving popular with both business and leisure guests. It shows that providing a good value option close to an airport does not have to mean cutting back on style or quality – everything from secure parking to wifi is available, but at an affordable price. And it’s innovative in that it has recently expanded adding a guest lounge and café which are also open to non-residents.
Looking ahead to 2017 do you expect we’ll see more consolidation in the sector? And what are the implications for smaller operators? Is the sharing economy having an impact on both the big hotel brands and the serviced apartment sector?
There were always rumours that many of the big hotel brands weren’t taking the rise of the serviced apartment sector very seriously. There’s almost been an attitude of complacency from some, an assumption that the consumer doesn’t want to try something new and different.
But the rise of the sharing economy, especially Airbnb and its ilk, has surely changed that mindset. And as people do get used to trying something different and gaining confidence, so they look elsewhere for new experiences.
I like to think of the serviced apartment sector as being like Amazon, while Airbnb is the eBay in the relationship. Everyone knows that, once in a while, the eBay option can let you down. It can be exciting and cost-effective, but if you’re unlucky it can be a bit flaky and you can feel there’s less control. Whereas, whether you like them or not, Amazon is seen as the super-efficient, consumer-led big brand. Where if you hit a snag, you feel there will actually be someone there to help, everything’s secure and regulated. It may only be a perception, but a decade ago, those big players were just an up-and -coming alternative to the high street. Now they’re often the first place the consumer goes for goods.
There are lots of hotel groups now moving into the serviced apartment/aparthotel space. Examples include IHG’s Staybridge Suites, Marriott with Residence Inn, Accor with Adagio and Starwood’s Element brand. And this is likely to continue as long as the sector continues to grow and investors have an appetite to stay involved. How often, now, do we see dual-branded developments, with customers arriving at the same front desk but turning towards apartments one way and traditional rooms the other?
In Europe we see a new hybrid developing, for instance what Accor are calling ‘combo’ developments – a traditional hotel and an aparthotel being developed at the same time on the same site, side-by-side.
And increasingly we’ll see more mixed-use developments in the future where the investor may sub-divide, for example, a 100,000 square foot development into different products – for example, cleverly designed to offer serviced apartments, residential and an aparthotel all within the one property, but each targeting different market segments who have different product requirements. The key is to have maximum flexibility to be able to adapt to ever-changing consumer trends.
The OTAs in turn are increasingly giving the sector a stronger profile on their platforms with booking.com recently confirming they offer 2 million apartments globally.
How are you anticipating the sector to adapt to new technology and to stay ahead of change?
There are some amazing technological advances that are going to lead the world over the next decade or two – from self-driving cars to delivery by drone, and the hospitality industry is already taking advantage of some of this.
We’ve recently seen operators offering add-ons from luggage collection to keyless entry systems, everything in the room controlled by tablet, and seamless booking/check-in/billing via smartphone apps without human interaction of any sort. Yet a huge trend in the industry is the need for consumers to enjoy an authentic, bespoke, memorable experience – as witnessed by the rise in the sharing economy.
Many things in life can now be done remotely, on screen or via virtual reality, so the demands for real hands-on experience become an issue. The key will be commoditising people’s time. The clever operator will maximise their return by being as flexible as possible offering the guest a wide range of options. Some perhaps more traditional travellers will always look for concierge services, daily housekeeping, and a chat about the weather; others will expect the same instant gratification they find across all aspects of their lives, everything managed efficiently using apps. Being able to offer human interaction, recommendations and physical transport options is sometimes as important as minimising room space, getting clever with technology and keeping hands-off. And of course, the understanding and use of customer data is key to giving everyone a personalised experience.
So the key is becoming smart; utilising smart technology, smart rooms and smart distribution; but still keeping the customer’s unique individuality in mind at all times.
The sector is expanding rapidly and we’re seeing much of the new development focus on the aparthotel model where there is a communal/social space offered and a reception, with slightly smaller room spaces. How do you believe the product will evolve further in 2017? And are we seeing a shift generally to the average size of a serviced apartment reducing?
There is definitely room for serviced apartments alongside aparthotels, but one customer sector as yet relatively untested is the SME traveller. Currently everyone is exploring corporate long-stays, which offer regular repeat business and fulfil a recognised need. Apartments move with the changing economic environment, the need for mid-length stays for employees on contract work moving at regular intervals. So this larger-corporate approach can be turned to a similar but more flexible offering for SMEs. Taking best practice, but accepting that flexibility should be the driver, not simply profit.
In terms of room size, as previously outlined, there is huge take-up of apartments at the 5* end of the market as well as for the budget-conscious. One thing that remains fairly stable to date, though, is the need for space – apartments by their nature require a bigger footprint than hotel rooms. But we see Staycity and Zoku managing their 26m2 or 28m2 space very cleverly, and Locke rooms are around 32m2. A smaller room is probably only comfortable for a few weeks, while a stay of months probably still requires something larger.
The key is managing the needs of living, working, cooking and bathing; if a developer or operator gets this balance right, the customer’s needs will be met comfortably and they’ll be back.
Your recent JLL report talked about the sector attracting an increased share in leisure/bleisure travellers? What impact will this have?
The key to attracting and retaining the bleisure market is to be, and remain, adaptable. We’re starting to see, as standard, add-ons such as bikes available to borrow, comprehensive coffee menus, complementary guest smartphones pre-loaded with local information, and partnerships with complementary services such as menu box deliveries or local experience providers. And many corporate guests are adding on days at the end of a stay so they can be joined by family or friends.
As the sector makes its presence felt, and becomes part of the mainstream, so operators need to adapt to meet the changing need. And as outlined earlier, apartments are being sited beside or even within hotel complexes, sharing some of the facilities. The sector should watch what the consumer uses, and asks for, and see whether their offering is enough.
What do you believe are the biggest challenges for the UK serviced apartment sector post Brexit and looking ahead to 2017?
The biggest challenge right across the hospitality sector is the usual one; supply and demand. There’s still not enough accommodation to meet all needs, and demand, while not always constant, remains high.
It’s time for the industry to take a step back and re-evaluate things. Working together is key. Within the sector is a tendency not to share data. It’s hardly surprising. Serviced apartments are part of a relatively new sector, we may know they’ve been around for a decade or more; but with the changes in public perception, legislation, global security and economic upheaval, everything is constantly changing.
It’s now vital that different elements within the sector work together, collaborate, share best practice and share that precious data. They must develop individual brands within an overall umbrella brand that is known and recognised by consumers.
And they must make sure that by 2020, this sector is completely understood and investable. There needs to be genuine, full, recorded data for future reference. We know this is a sector worthy of investment; and here is the data to prove it. The sector may operate very differently all over the world; but the fundamentals remain the same.
It’s time to share, for the good of the industry, and grab this amazing opportunity right now, before we miss the boat.
ASAP is delighted that Max Thorne will be a panellist at our ASAP 2016 Convention (1 Dec) in our ‘Business Impact’ seminar – click here to see the full Convention programme