2. About The Apartment Service Final

The Global Serviced Apartments Industry Report 2008/09

a TIN report

Contents

2-5 About The Apartment Service

6-9 What is a Serviced Apartment?

10 - 23 Industry Overview

24 - 37 Industry Benchmark

38 - 41 Rates Analysis

42 - 47 Chain of Fools

48 - 50 Duty of Care

51 - 53 Tomorrow’s World

54 - 55 Global Apartment Listings

56 - 60 Ask the Expert

61 - 62 Appendices

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The Apartment Service New Horizons

New Horizons The rise of the serviced apartment By Charles McCrow, The Apartment Service

The corporate market has waited a long time for serviced apartments; just over 20 years in just about every region outside the USA.

Serviced apartments, mainly in the form of Extended Stay Hotels, are now proliferating in countries such as Australia, Singapore, Thailand, South Africa, Germany, Brazil, Dubai, France and India, all places where there is room for substantial future growth. In the USA, which currently accounts for 77% of world stocks, for example, extended stay product is still the fastest growing and a highly profitable sector of the US lodging industry reinforcing the view that a high level of growth is also probable and likely in all these other global regions as well.

To add to this mix, over the last thirty years, the worldwide trend of companies going - and growing - globally has lead to greater staff mobility resulting in the requirement for them to stay away for longer on business trips or on temporary assignments. Expatriate populations have grown strongly too as well due to growth in corporate relocations. The sector’s agency members are reporting that relocation assignments are getting more numerous and also their shorter stay assignments are growing in numbers as well.

Another notable fact is that 86% of the world’s serviced apartments are operated by the top 15 players in the marketplace!

Finally, independent operators started to create larger units to house families relocating or on temporary assignments (at a time, coincidentally, when demand for hotel bedrooms also outstripped supply worldwide) delivering higher yields by using residential property packed up with services. This was sometimes due to lack of extended stay availability but also in respect to the size of the units which tended to be much larger and more suitable for families. Charges and cost savings feature highly. This industry has become known as Corporate Housing in the US and is a concept that is set to also grow rapidly in other regions.

The top serviced apartment brands are operated mainly by mainstream hotel chains who looked to lower their operating costs and to reduce their staff/guest ratios. They did this by adding a lounge and kitchen into the rented space which created a more spacious alternative and also cut away the cost of restaurants or lounge areas which were typically low or non-profit making. Lower costs all round, consumers are delighted and operators are happy a recipe for a perfect growth story!

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Apartments allow people to live as they do at home and with their family

The UK’s first apartments booking service Started in 1981, The Apartment Service was one of the first companies to create a global network of corporate serviced apartments, and today we are the largest European booking agent for serviced apartments. We book apartments all over the world on behalf of our clients, delivering comfort and average savings of 15-30% on the equivalent standard of accommodation in a hotel - stays can be from a few nights to a over a year. The Apartment Service operates in both the extended stay and corporate housing markets recommending options and solutions with expertise built up over the years. Knowing what and where to go for inventory is paramount to get the best option available.

We started purely as an agency, sourcing & booking apartments owned by 3rd parties, setting up a network of sales agents across the globe to help market the service to the corporate market as well as to locally source and inspect suitable property options. It’s taken a long time for serviced apartments to carve a niche in the business travel market for reasons of visibility, availability and bookability. Or rather a lack of it. There is now some accessibility to extended stay inventory via the global distribution systems (GDS) which are used by most travel management companies. However, this inventory is hard to find and not clearly segmented in the GDSs so specialist knowledge is needed to find it.

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The Apartment Service New Horizons

Specialist market The result was that apartments were, until relatively recently, regarded as a specialist market with different systems, standards, rate structures, payment processes and stringent cancellation policies. Although commonplace in the private rental market, payment in advance is not a familiar concept in most forms of business accommodation, however there were – and are – synergies with the meetings and conference market. This, combined with procurement departments increasingly taking hold of previously fragmented spend may explain why more and more companies are using apartments. Now, more and more buyers are beginning to understand how apartments work. Business travel buyers’ principal needs were for one or two night stays, perhaps extending to a week, but many apartments in the 80’s and 90’s required a minimum stay of up to 3 months. So even if a corporate could find an apartment product, there was no information about what to expect, and booking them was even more difficult still. Corporates received little education or encouragement from their TMC’s or HBA’s either. Intermediaries were

reluctant to buy into the concept because apartment booking processes did not conform to the traditional hotel model. Instead, most decided to concentrate on what they knew instead. 2nd coming of the serviced apartment So what changed? Despite the apartment product being in short supply until relatively recently, the 90’s saw increased competition at agency level. High occupancy in hotels began to drive consumers to look elsewhere for alternatives, helping extended stay hotels to become the fastest-growing sector of the US lodging industry. At the same time, demand for corporate housing also took off in the UK, as greater mobility became a more important facet of British workforces. Working away from home on assignment has become commonplace since the late 90’s. The building boom of the last 10 years has seen developers look to the corporate market to fill otherwise empty apartments, resulting in more supply to the market, especially within the corporate housing sector. This period also saw developers join together to create property investment clubs, offering to manage apartments on behalf of their owners. When it was

The building boom of the last 10 years has seen developers look to the corporate market to fill otherwise empty apartments

Whilst every effort has been made to ensure accuracy, The Apartment Service, Travel Intelligence Network nor Creativo can be held responsible for any errors or omissions.

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cheaper to buy, rentals were cheaper, but increased supply demands new and broader distribution channels. Additional impetus for the proliferation of players has been from travel management companies and hotel booking agencies wanting to offer cheaper accommodation alternatives to their corporate clients despite the hurdles of integrating the very different booking processes of apartments with traditional hotels into a total travel management service. Our focus The Apartment Service’s focus has been to meet the needs of those who need accommodation for more than a week at a time. The company was among the first responsible for bringing the corporate housing market to the UK, and therefore a wider range of accommodation options to both the business travel world, and also to the relocation market. Business travel buyers are now being tasked with housing extended stays and long term assignments. At the same time, relocation agents are reporting a proliferation of shorter-term assignments, which in their terminology, is anything less than a year. The year-long stay is an important benchmark, as for instance, longer stays have IRS implications for US nationals. Both ends of the temporary assignment market are therefore converging to create greater demand for the same sort of product, and in some ways things have come full circle and we are once again providing information and reservation services. However we are now creating more strategic, consultancy-style solutions for specific organisations as well. When the Royal Danish Air Force needed to train its pilots and mechanics on the (then) new Hercules aircraft, The Apartment Service housed rotating

groups of personnel in 20 apartments at RAF Lyneham for the two-year duration of the project, effectively providing a facilities management service. In fact, we are now working with relocation agents around Europe to provide a network able to offer this kind of bespoke solution on projects of six months or more. Knowledge and expertise Today the company is developing data feeds that enable clients to access inventory, availability and content through different channels including GDS. Clients and agents are at differing levels of advancement in terms of knowledge and actual integration of apartments into corporate programmes; So we are meeting a real need by providing that knowledge and expertise. A whole new world is opening up to business travel buyers that few knew existed. 21st century corporate accommodation solutions are no longer simply about business travellers staying in hotels. It now encompasses short and long term assignments, meetings, remote working and even commuter travel patterns, whilst Duty of Care has made HR a stakeholder in the travel procurement process. Where have we come to after 27 years in business? I believe that today The Apartment Service is now a ready-made reference source and font of knowledge to companies willing to take a more holistic view of their travel needs.

Welcome by Chris McCrow

A final message from Charles McCrow Managing Director The Apartment Service

“I hope you have found this report informative, interesting and useful from whichever perspective you are viewing it - as a buyer or a provider. This is an exciting time for the Serviced Apartment sector – both in meeting the challenges of the current global economic situation and in capitalising on the growing acceptance that serviced apartments are viable alternatives to hotels especially when it comes to longer stays. We invite you to provide us with your feedback on this report by visiting the blog area of our website and, indeed, if you or a colleague would like to download any of the articles in the report, please log on to: www.apartmentservice.com

At The Apartment Service, we have some exciting plans for the coming year to allow bespoke apartment programmes and data feeds to meet your individual business rules. If you are a Travel Manager; Travel Management Company; Travel Agent; Web Portal; Letting or Relocation Agent or a Hotel Booking Agent, we can offer you real time availability link for online bookings through an XML link to our network of worldwide serviced apartments. In addition to this API we also offer a personalised extranet area. We aim to build upon our position as Europe’s leading booking service for serviced apartments worldwide and we welcome your valuable feedback”.

Charles McCrow Managing Director The Apartment Service

THE BEST OF BOTH WORLDS The comforts of home when you are away on business

The Apartment Service is the largest European booking agent for extended stay hotels and serviced apartments worldwide. We offer cost savings and convenient locations to suit every individual business traveller, many SMEs and large corporate client’s needs. Voted Best Serviced Apartment Company 2007

The Apartment Service is your gateway to a greater world of choice – visit our new look website, call us directly or email: [email protected]

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