Stay… just a little bit longer
Anyone who has stayed in a hotel for a prolonged period of time will know that however efficient the service and however welcoming the staff, there is a time when baked beans on toast beats anything on the restaurant or room-service menu. It's not that you don't appreciate the finely crafted menus, the nightly-turn down service and the grand-reception welcome, it's just that the freedom to enter your room with anonymity, make yourself a cup of tea without fiddling with milk sachets and look in your fridge rather than at a menu before deciding what to have for dinner becomes something of a luxury when you're deprived of it for any length of time.
In the USA and Asia, operators have been quick to make businesses out of providing accommodation that offers longer-stay guests more space and freedom, but fewer services than a hotel. The result is the serviced apartment: a unit of self-contained accommodation with a flexible letting period and an element of service. While serviced apartments still lack brand awareness in the UK, there is no doubt this relatively young sector has been growing in both size and strength for some time.
The Ascott Group has 11 UK serviced apartment properties in the UK (8,300 units worldwide), and will open its largest to date, a 202-apartment development in what was formerly a Crowne Plaza hotel, in Bayswater next month.
House of Fisher, the leading operator of serviced apartments in the Thames Valley is also expanding its portfolio this year with the opening of a 32-apartment building in Reading, Berkshire, in June.
The Cheval Group, which already has five properties with a total of more than 250 serviced apartments in London, is due to open its sixth development, Phoenix House on Sloane Street, this spring. The 33-apartment block is firmly aiming at the top-end of the market: Fox Linton, designer of One Aldwych, is creating the interiors.
51 Buckingham Gate, London, part of the Taj Group, is less easy to define in terms of genre. It sits alongside properties such as the Athenaeum, and 47 Park Street (now owned by Marriott and run as a time-share operation), also both in London, in the increasingly grey area between luxury hotel suite and serviced apartment.
The rising popularity of serviced apartments is being driven, according to operators, by the changing nature of business. "Many corporate businesses are looking very carefully at costs and serviced apartments can be better value than hotels," says John Hampson, corporate development manager at House of Fisher. "Business in the Thames Valley is expanding very quickly at the moment, which means a lot of people are relocating or on project work and need somewhere to live temporarily."
Ian Merrick, general manager of the Hyde Park Residence on Park Lane, which has more than 100 rooms, concurs. "Companies are changing the way they do business," he says. "They're using their workforce more effectively by sending existing employees on secondment or project work. Smaller companies are using apartments as a presence in London rather than setting up a permanent office. Rent an apartment rather than a hotel room and you can hold a meeting there instead of hiring a conference facility."
Research conducted by London First, the business campaign organisation, in 2000, investigated future demand from the corporate sector for serviced apartments in central London. It discovered that most companies they spoke to (67%) were already using serviced apartments. The most commonly cited reasons for this were cost-effectiveness and price advantage over hotels.
Guests also favoured apartments for flexibility, the provision of facilities and services and the home-from-home comforts and atmosphere.
Increasing demand
When asked about future intentions, most of those surveyed (63%) also said they believed demand for serviced apartments would increase. This, they said, was because of increasingly global operations, company mergers and the growing use of secondments. Employees were also increasingly keen to stay in an apartment rather than a hotel.
While serviced apartments might be both desirable and good value, they are not necessarily cheap. Room rates vary depending on length of stay but profit margins are maintained because long-staying guests keep occupancy levels high, while low levels of staffing and a significant absence of food and beverage operation keep overheads low.
"Hotel clientele pay for services such as restaurants and bars even though they may never use them," says Brian Leong, managing director of both the five-star Ascott and the four-star Somerset, Ascott brands. "We are conservative in the number of staff we employ and we put a big focus on multi-tasking. We also keep non-functional space - such as lobbies - to a minimum."
While Ascott allows guests to stay only one night if they choose, and offers a complimentary Continental breakfast service at many of its properties, the near absence of food and beverage operations cuts out what is deemed a costly and unnecessary overhead.
Overheads are also controlled by limited room-servicing. While operators ensure that the quality of apartments is high by stocking kitchens with amenities such as dishwashers, microwaves and washing machines, maid service can be as infrequent as once a week.
Even in the case of properties such as 51 Buckingham Gate - which are not serviced apartments in the traditional sense and where little service or comfort is spared - it is still possible to see a similar financial grounding. While about 60% of guests are transient - staying one to seven nights and paying high rates, the other 40% are longer-term guests who pay only slightly less but ensure a vital occupancy base. While rates are never that low, general manager Bernard de Vilèle, points out that taking a two-bedroom apartment at the RAC blue-ribbon property, will cost less than two bedrooms in a five-star London hotel.
Food and beverage offerings are again kept to a minimum, as are staff numbers. Only about 12-18 butlers are on call to serve the 82 apartments, although there is some flexibility should an increased workforce be needed, thanks to a relationship with the Ivor Spencer School of Butlers.
Crucially, 51 Buckingham Gate is also located beside the Crowne Plaza, London, St James' hotel, which offers the necessary supporting services such as food and beverage, a spa and a gym should guests want them.
The relationship a serviced apartment has with its surroundings at either end of the price spectrum is vital to the success of the business. While 51 Buckingham Gate leans on a neighbouring hotel, businesses such as House of Fisher and Ascott rely on city-centre locations with good transport links, nearby late-night supermarkets, gyms and restaurants.
This dependency, however, is a restriction on the growth of serviced apartments because potential locations are limited. "Serviced apartments are not a form that will work throughout the UK," says David Bailey, director of TRI Hospitality Consulting Research. "They need a reasonably significant financial, media and IT sector to support them. They also need a relatively mature location where there are lots of different types of accommodation."
Serviced apartments may be restricted by location, but they still present a threat to hotels. According to a report by international property consultantcy FPD Savills, the rise in short-let activity in central London is evidence enough that demand for long-stay accommodation is still unsatisfied.
Fact file
House of Fisher
Studios to three-bedroom apartments from £55 to £120 plus VAT a night.
Minimum stay: 1 night
www.houseoffisher.com
The Ascott Group
Somerset studios to three-bedrooms from £95 to £250 plus VAT a night
The Ascott studios to three-bedrooms from £205 to £595 plus VAT a night
Minimum stay: 1 night
www.the-ascott.com
51 Buckingham Gate
Suites and apartments from £315 to £1,500 plus VAT a night.
Minimum stay: 1 night
www.51-buckinghamgate.com
Phoenix House
Studios to two-bedrooms £900 to £1,850 plus VAT a night.
Minimum stay: 7 nights
Extended stay America
What do you get when you combine two former Blockbuster Entertainment bosses with a group of builders and real estate experts? The answer is one of America's fastest-growing hospitality companies, and the leading light in a sector that just decade ago was practically non-existent. Extended Stay America (ESA) was launched in 1995 when Blockbuster executives Wayne Huizenga and George Johnson found themselves looking for a new venture after the company was bought by Viacom. They spotted a gap in the hotel market - rooms for people who wanted extended stays and who didn't need the add-ons of a traditional hotel.
Growth has been at lightning speed, helped in 1997 by a merger with a chain called Studio Plus Hotels. Today ESA has 457 hotels in 42 states and 2002 sales were $547m (£341m). Thrice named by Fortune magazine as one of America's 100 fastest-growing companies, the North Carolina-based firm now claims to be the fastest-growing company-owned and operated hotel chain in US history.
ESA puts its success down to a tight-knit executive team - none of whom have a hospitality background - and a strategy that owes more to retailing than hotels. "Most of our executives are from real estate and construction," says Mike Wilson, vice-president of marketing. "We have people at regional vice-president level and operating level from hotels - brands such as Holiday Inn, Hampton Inn and [Accor's] Red Roof Inn. But none of us [at executive level] are. We're used to operating a market unit with cookie cutter expansion - the same operating model and the same business product."
ESA has three brands: 323 Extended StayAmerica Efficiency Studios (from $249 (£155) a week); 39 Crossland Economy Studios (from $179 (£112) a week); and 95 StudioPlus Deluxe Studios (from $299 (£186) a week). Overheads are kept low because there are fewer staff (sometimes just seven or eight employees are needed per property), and the offer is basic: a room with bed, kitchen and workplace, TV and telephone. There are no on-site restaurants or cafés, only a few properties have swimming pools, and long-stay guests get their room cleaned just once a week.
ESA's executives prides themselves on what they see as a maverick approach to hospitality. "We have been able to do things people in the hotel business said couldn't be done," Wilson says. "We said we would build 20 hotels in the first year and they said it couldn't be done - we built 40. We've found that when we've brought in hotel people they've tried to turn the properties into hotels, with shampoo, soap, shoe shines. The tendency is to keep adding to the offer and all of sudden you've got to raise your price and that varies your model." Average occupancy, though hit in the past two years because of America's ailing economy, was 60% last year, and is consistently about 15 percentage points higher than a normal hotel, the company says.
About 30% of ESA's trade is personal and leisure - people visiting family or accompanying family members who have a stay in a hospital, or people on holiday - while 70% comes from businesspeople, many of them training or relocating. ESA has considered overseas expansion, but prefers to concentrate on the USA for now, where research shows there are 230,000 extended-stay rooms and demand for about 130,000 more. Other brands to join the mid-price extended-stay market in recent years include Marriott's TownePlace Suites (99 units) and Six Continents Hotels' Staybridge Suites (51 units). Extended stay hotels have been the fastest-growing sector in America's hospitality industry for the past decade, according to hotel consultancy The Highland Group in Atlanta.
But with America's economy unstable and the threat of a war in Iraq, ESA is for the first time treading cautiously. Twenty new hotels will be built this year, but all other construction projects are being deferred indefinitely.
By Gillian Drummond in the USA
