Accommodation is not only one of the core pillars of hospitality, but as customers have sought options beyond the hotel or the long-term rental, the term now covers an increasingly large range of concepts. This is especially true as the rise of the sharing economy gave birth to platforms (most significantly AirBnB) offering access to a home environment or group stay in a format both convenient and affordable.
More traditional hotels are still somewhat a default for most leisure and business travellers, but a flood of luxury vacation rental and aparthotel brands have entered the market in recent years. The future shape of the market is decidedly unclear – with so many entrants, for example, can the diversity in concepts and price point, plus consumer demand for unique experiences provide enough differentiation for many brands to survive. How many can remain independent and how many will become part of the big accommodation players’ portfolios?
It is something of a challenge to represent the sector diagrammatically. AirBnB quickly became dominant in the home rentals space, largely hoovering up customers looking for cheaper options than hotels, group accommodation, a safer upgrade from sofa surfing or just a connection to a local host and the local community. As home sharing and other less traditional forms of accommodation grew in popularity, their broad appeal brought luxury vacation rentals sites, and many brands in between.
Meanwhile terms like ‘boutique’, ‘design’ and ‘lifestyle’ have been applied to every section of the market. Aparthotels have been especially adept at using these labels to communicate their ethos and focus to customers, whether it be an escape from the cookie cutter approach of hotels through emphasis on beautiful spaces or wellness facilities. Hostels too are increasingly using these labels, as extensive demand for private rooms widens its customer base. Much of the hostel world has smartly pivoted from ‘budget option’ to metropolitan hub, hoovering up visitors wanting to connect to both the city’s culture and to other travellers.
There is also something of a continuum between the serviced apartment and the aparthotel, with substantive variation in the service levels and amenities on offer. For both, their appeal to business travellers on extended assignments and other mobile high wage workers, is obvious: at its core offering a home-from-home with a flexible term and minus the significant administrative burden of a standard rental. Businesses report travel, project work and relocation as key uses.
In many ways the serviced apartment is as old as the apartment itself. Think the iconic Parisian concierge, not just a gatekeeper, but in charge of mail deliveries, rents and other critical services. City apartments have long had shared laundry services and other amenities. In their current iteration however, services like gyms, spas and room service are often included, bookings are flexible and the emphasis on design significant.
The aparthotel on the other hand clearly maintains greater proximity to hotel service levels. While kitchenettes are a staple still, on site restaurants and more are still likely as is a 24-hour hotel-style reception. Such rooms can vary drastically in scale, from family sized suites to cosy studios.
Ownership models are varied here too, with start-ups and more established brands running the gamut from hiring out privately owned spaces, to purchasing every unit in their portfolio. Business owned brands may also advertise their units over sites traditionally expected to advertise private rentals, which likely increases confusion for the uninitiated into what accommodation providers are really offering.
Significant growth opportunities abound here if this can be got right. The global serviced apartments industry report data indicates that during 2016 and 2017 just over 30% of corporates allowed their travellers to use a short-term rental provider. Increased awareness of the sector as a whole and brands in particular, will crucially support such growth, as well as the availability of a tried and tested brand across whole countries, or globally, as many of these businesses operating today have limited coverage beyond key cities close to their original site(s).
Clearly, standardisation is one driving force behind brand loyalty – when away from home, knowing what to expect from your accommodation is both convenient and reassuring. However, the well documented demand for unique experiences that has arisen out of a mass consumer market for travel and tourism may well increasingly filter through the wider hotel market.
How hotel businesses seek to maintain market share will also undoubtedly shape the sector. Many have bought existing brands or built new ones, but other possibilities are hoovering up multiple smaller operators or in fact, that the existing hotel offering itself is adjusted to appeal to modern traveller, and especially business traveller needs, not least with the rise of ‘always on’ working culture. Consolidation make take place outside of bigger companies too – especially if the need for trusted brand names is an essential part of growing business for both aparthotel and serviced apartment concepts.
Aparthotels and serviced apartments may find themselves better placed than hotels and other new hospitality companies to ride out the storm created by coronavirus, with initial indications showing that occupancy rates were significantly more resilient than that of hotels. Various factors may be contributing – evidenced by changes to booking policies, accommodation is being offered to key workers and those stranded by lockdowns and new travel restrictions. Long term residents will have stayed put. Additionally, there is a substantive domestic travel component to the business sector, with travel between major economic hubs a reality in the age of such easy travel.
That said, many of these businesses are still independent start-ups, liable to be operating at a loss, and dependent on successive rounds of seed funding – such capital has for now become decidedly scarce. As with elsewhere in hospitality, some notable names have already furloughed tens or hundreds of employees as a result of the associated financial pressures, with uncertain times still ahead.
Perhaps the inevitably harder economic reality facing a post-virus world will concentrate the minds of owners and investors. Regardless, new and exciting brands look set for strong growth to come before the real fight for supremacy need begin.