While great strides have been made towards the recovery of the corporate travel industry in 2021, the market is yet to fully right itself in the post-pandemic climate. With the reopening of travel corridors catalysing a dramatic surge in demand for serviced accommodation across the globe, can operators adjust to facilitate the renewed travel programmes of thousands of international organisations? Join us as we examine the state of the serviced apartment market and shine a light on how you can ensure your and your clients’ travel programme doesn't get left behind.
What are we currently seeing in the market?
Resurgence in demand
The international implementation of vaccine programmes, the adoption of safe-to-travel data technology, and the need to get the wheels of business turning once more, prompted many businesses to re-evaluate their travel programmes earlier this year. With the vast majority of international and national corporate travel programmes on hold for the majority of 2020, the opportunity to reconnect with clients and colleagues was tentatively embraced by organisations when it was safe to do so in the first part of 2021. As the situation continued to improve, so too did levels of optimism regarding business travel - along with renewed corporate interest in serviced accommodation as a safer alternative to hotels. However, the issues which brought about the current disparity in supply and demand originated prior to the resurgence of business travel.
When business travel (and indeed, all international travel) came to a standstill in 2020, some serviced accommodation operators were forced to cease trading. This not only resulted in a swathe of landlords abruptly losing a reliable source of rental income, but also impacted the level of confidence property owners had in the sector - the effects of which are still being felt. Many landlords, having leased their properties for other uses during the pandemic, are now distrustful of operators due to the (seeming) instability of their revenue source in a post-pandemic world. This has prevented surviving operators from occupying previously used serviced accommodation units as they have been moved to assured shorthold tenancies. Consequently, when business travel re-emerged, stock capacity had shrunk considerably in most major cities, which in turn resulted in rapid rate escalation. October 2021 saw significant rate increases: compared with 2019, single bedroom properties increased in cost by up to 10%, two bedroom properties by up to 30%, and three bedroom properties by up to 40%.*
*SilverDoor booking data 2020-2021
Rates escalation
Our most booked European city, London, has been hit hard by the supply shortage. Of all London districts, Canary Wharf has had the biggest shakeup, as many buildings with up to 15 years' heritage in the serviced accommodation industry have closed their doors while new buildings are just beginning to get off the ground. As a result, rates in London have increased sharply, with average nightly prices for one bedroom apartments rising from £120-£140 to £160-£190. Conversely, cities such as Glasgow and Edinburgh have seen rate increases driven not by supply shortage but by the reintroduction of major corporate and international events which have bolstered the sector, such as COP26 2021. As a consequence, average nightly rates have increased from £110-150 to £125-£180. Broadly speaking, cities experiencing oversupply prior to COVID have retained relatively unchanged rates. One exception to this rule is Dublin, where rates have increased sharply despite the city being flooded with stock prior to COVID. Due to a surge in demand, average nightly rates are reaching €160, having previously settled at around €125.
In Singapore, where availability is scarce (and will likely remain so until early 2022 at the earliest), rates have remained stable despite demand. Having been hampered by a slow reopening of travel corridors compared with other regions, Singapore is not as pressurised as other cities in the market such as New York. Rates in the 'Big Apple' are very high and demand is exceptionally strong, meaning choice is less abundant - particularly as we move through December which is traditionally the city's busiest month. These factors, combined with the demand for larger properties and longer stays (and the provision of additional work space and room for families etcetera) means even less availability is coming back onto the market.
The consequence is a mixed bag for the corporate housing market. Operators are reaping the rewards of maintaining their operations and adapting to new health and safety measures following the booking drought of 2020. However, the impact on stock availability means that the industry remains somewhat imbalanced as we enter a new year. Taking everything into account, we remain very optimistic for the sector, as speculation on investments in new property blocks for the serviced accommodation industry is rife, meaning the market has every chance of correcting itself so that supply meets demand in the near future.
What you can do
- Many clients are finding that they can no longer afford extended periods of time to review booking options. Our advice is to secure your desired options as soon as possible; the luxury of a four day review period simply doesn't exist in the current climate. More often than not, presented options will be taken within a matter of hours if not secured by the client; acquiring approval for your travel options sooner rather than later is crucial.
- Similarly, booking as far in advance as you can will greatly improve your chances of securing an option in-keeping with your requirements. As mentioned, demand for larger properties with home-working suitability is very high, so getting in the queue for these in advance is the only way to even the odds. This also means that, with your request in mind, we can get back to you if options become available due to a cancellation.
- That being said, managing client expectations and maintaining a flexible approach is the most realistic way to ensure your travellers are able to get their bookings secured. Studio serviced apartments, while less capacious than single bedroom options, still offer a multitude of advantages over a hotel room. In a bind, booking a few studio apartments, rather than a difficult to source three-bedroom group apartment, is a viable workaround.
- Finally, we recommend you stay in close contact with our expert teams. Calling ahead for an overview of the market in your chosen destination can better enable you to manage expectations and keep plans on track, or come up with alternative plans if necessary. Whatever the situation, we can help ensure your business trip goes off without a hitch.
What's on the horizon
The main takeaway from the current state of the market is that the serviced accommodation sector is bouncing back. The appetite for apartments is growing - their advantages over alternatives making them the number one choice for corporations conscious about their guest wellbeing and their CSR commitments. While the stability of the market is still very much intertwined with international travel policy owing to the constantly evolving world view on the COVID virus, we estimate that key markets in cities such as London and New York will level out by mid-2022. Recent months have once again demonstrated the sound investment opportunities the serviced accommodation presents to existing and new operators (outside the COVID anomaly), and we are already seeing a number of new and scheduled properties opening to the market as well as many big brands looking to invest in new properties in the UK and internationally.
Below are properties in major international cities that have recently opened or will be opening soon:
- Schwan Locke Munich: opened in April
- Staycity Paddington: 249 units opening now
- Staycity Frankfurt: opening in January 2022
- Citadines Raffles Place Singapore: 299 units opening in January 2022
It's important to remember that on 'the other side of the wave' - which we estimate to be just six to nine months away - the sector will grow in tandem with increasing demand, and a more stable, predictable, and attainable market will prevail, along with the beginnings of a greater sustainable property offering.
