SilverDoor's Market Update - May 2024

SilverDoor's Market Update is a comprehensive review of the global travel landscape using our own booking data, wider economic context, and our experts' experience and predictions to build a picture of serviced apartment trends worldwide. Reflecting on the past quarter and forecasting for the year ahead, the report advises corporates on rates, supply, demand and traveller preference to inform booking practices.

SilverDoor captures more than 127,000 datapoints from an average of 593,000 enquired room nights each quarter, the largest and most extensive sets of data available in the sector. This means we can provide the most accurate trend commentary and forecasting for global mobility professionals.

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|SilverDoor Snapshot

2023 travel volumes were exceptionally high, so if we compared YoY numbers alone, it’s unsurprising that the market is slower than this time last year. Pricing during major global events, supply pressures in hot new locations and shifting workforce preferences influencing demand, we dissect the stories behind the numbers affecting your travel programme in 2024 so far.

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|The Numbers

Pricing fluctuations are evident in core global markets, and SilverDoor booking data shows YoY reductions in average daily rates (ADR) in top locations around the world. These are Jan-Apr 2024 ADRs by apartment type compared to the same period in 2023:

Global ADR is 4.98% higher YoY (from £140.57 to £150.11) but 4.75% lower QoQ.

YoY, global average length of stay (ALOS) has dropped significantly by 18.75%, but compared to last quarter, global ALOS is a week longer – coming up from 32 nights this time last year to 39 nights.

We can see big regional differences in ALOS for Jan-Apr 2024.

When drilled down by apartment type, people generally use studio apartments for shorter stays and one- and two-bedroom apartments for extended stays.

Interestingly, compared to EMEA, ALOS is 80% longer in APAC and 69% longer in the Americas. These regional differences are driven by a number of factors: local legislation means that many US operators require longer minimum stays, for example, and we’ve seen several long-term group moves to developing APAC regions where large numbers of assignees are required for the opening of industrial or manufacturing plants.

|Enquiry Trends - Frequently Requested Amenities

Our Account Management team have noted these requests more frequently:

  Business travellers want a shorter office commute

There is an evident shift lately (or attempt to drive a shift) back towards more office working. It could be that companies are wanting to regain some of the internal connection that an office culture helps to foster, or it could be that businesses want to encourage their employees to use the office space they pay for, but it’s clear from our enquiries that the focus has moved slightly from home-working capability to office proximity.

Studies show that 71% of business leaders say hybrid working is important and 55% of 18-30s prefer hybrid working (Ipsos UK Market Research 2024), so work-from-home space is certainly still a requirement but less critical than this time last year. This preference perhaps reflects the broader industry focus on sustainability and well-being: a shorter commute time not only reduces transport emissions, but also maximises the downtime assignees have to relax at their apartment after work.

  Relocating guests need apartments close to schools for their children

Interestingly, a recent Serviced Apartment News webinar on transforming buildings into aparthotels cited a focus on social impact and a sense of community in planning permission criteria. It’s increasingly important that the local community benefits from a renovation project, which in turn benefits guests looking for a sense of belonging in their temporary accommodation.

One example would be partnering with local amenities like schools and opening property facilities like gardens, playgrounds or gyms for students to use. These arrangements are often driven by ESG agendas and policies, and help to make regeneration projects successful for both investor and end-guest.

  Relocating guests need an address for local registration

As the use and requirements of temporary accommodation continue to evolve with the modern business traveller, more flexibility is needed in building restrictions. Relocation guests in particular have been reporting that it can be difficult to complete local registration in a new city while staying in a serviced apartment because they don't yet have a permanent address to register with. This can mean they're unable to set up a local bank account, for example.

Emphasis on local registration is increasingly evident in certain European countries and guests will often only book a property which allows them to cite the address for residency registration – suppliers should be receptive to supporting guests with the process.

  Traditional apartment models are more popular for extended stays

Greater emphasis is being placed on in-unit facilities that can accommodate a self-sufficient and autonomous lifestyle. Aparthotels are typically more popular with transient business travellers, but many aspects of traditional serviced apartments suit extended-stay guests booking accommodation for seven+ nights.

A more considered blend of in-unit and on-site facilities in aparthotels is challenging in terms of booker demographic and pricing, but the focus for business travellers is certainly on in-unit, fully-equipped kitchen and laundry facilities.

|Enquiry Trends - Reserved Housing

Block booking is an accommodation solution we’ve used for some time, but we’ve recently been receiving more of these requests. Reserved housing is where multiple units in the same building can be block booked for longer periods (entire seasons or even full years) in a company’s key destinations. Rooms can be rotated between assignees as needed during this period, with the property managing check-ins and checkouts.

Not only does this guarantee a consistent accommodation standard for assignees in the same area, but units are booked at one set price for the period meaning rates are protected against seasonal spikes. Business travellers who may frequently go to the same city are also comforted by staying in a property they’re familiar with.

Reserved housing can be an effective way to secure quality, policy-compliant accommodation that your assignees like in locations with guaranteed booking volumes. If you send 30 employees to an annual overseas conference every year, have an internship intake every summer, or run a large secondment scheme to an international office every winter, reserved housing might be something to consider.

|Regional Industry Insight - EMEA

As we move towards peak season in the northern hemisphere, demand and rates are generally on the up. Nowhere is this truer than in Paris, where the city is preparing for an influx of visitors around the Olympics and Paralympics.

“There’s certainly been a notable increase in demand for Paris accommodation, particularly in central areas. Interestingly, though, business travellers are seeking apartments on the outskirts to escape busy areas and more open to commuting into the city during the Olympic period. During the 2012 London Games, we saw more requests for long stays and extensions, with guests looking to soak up the atmosphere of the city for longer. In Paris, licensing regulations mean there’s a split between properties that can offer 30-night minimum stays and those than can accommodate short stays. Although Paris rates are heightened during the Olympic period, accommodation with longer minimum stays can often offer more reasonable pricing. Bookers should also expect to pay an increased city tax brought in ahead of the influx of tourists.” - Chris Lyon, Head of Client Services

ADR in Paris is due to experience spikes of up to 60% over the Olympic period – jumping from €208.26 at the end of June to their August peak of €331.82. Our data does forecast ADR to stabilise quickly after the Olympic period ends, and ADR is expected to level out before ending the year at around €200.

As for other EMEA destinations:

• London ADR started 2024 at £180.54 and is forecasted to decrease 7.7% to £166.59 by the end of the year. The trend for the next quarter starts to pick up before the annual peak of £182.51 that’s expected in July – a slight increase of just 1.1% – after which the trend steadily declines.
• Dubai ADR started the year around 628.12 AED with a 2.62% rise to 644.65 AED seen in February. ADR is predicted to steadily decline for the next quarter as the intense summer heat culls demand compared to other EMEA destinations.
• Amsterdam ADR trends look much the same as London’s, albeit sitting generally around 9.17% lower than the British capital. Starting the year at €190.67, the annual peak of €199.25 is expected also in July before a gentle downwards trajectory as we come out of summer. By December, ADR is looking to decrease 9.21% from its summer peak – ending the year on €180.90.

We’ve seen more enquiries for Spain, Italy and the Netherlands recently, and supply is struggling to keep up with the demand for areas like Cork, Florence and Rome.

Saudi Arabia’s Tourism Minister reported a growth in tourism for the first quarter of 2024 and emphasised the importance of travel for a diverse economy that doesn’t rely on oil production. This does mean that the Saudi economy may generally grow at a slower pace than recent years, but the Kingdom’s appetite for accommodating inbound visitors is strong – pricing might become more negotiable to boost occupancy and we might see an increase in accommodation construction projects.

|Regional Industry Insight - The Americas

Biden recently signed a bill and set aside $50 million to help reduce visa wait times and application backlogs. Backlogs for first-time visa applications are causing delays of up to 400 days in some cases, delays said to have cost the US upwards of $12 million in travel spending in 2023. The new law has perhaps come in preparation for the travel boom guaranteed for the 2026 FIFA World Cup and could help to boost travel demand and spend in the US.

“There is a general atmosphere of caution and cost containment at the moment, which is not unique to the Americas market but evident worldwide. We’re seeing more requests for lower rate caps and there can sometimes be a misalignment between budget and expected accommodation standards. The industry is evolving in the US, and property providers are trying to be agile and reactive to changing market trends. I’ve heard from several operators this year that they’re refocusing their concepts and reevaluating their approach to pricing and inventory. A degree of give and take is crucial for mutual benefit between supplier and buyer: using an agent allows for more negotiation and provides more leverage to achieve market rate savings.” - Stephen Homsey, Vice President - North America

We would typically expect QoQ increases as we move into the busy summer period, but here’s how Americas ADR is shaping up for the next quarter so far:

• Rates in New York City have been picking up since March, experiencing a 15.5% increase from then to now. The trend into summer is generally positive, with the annual peak of $331.27 coming in mid-July before a sharp fall is predicted down to $269.24 in September.
• Chicago ADR has been climbing steadily since the start of 2024, starting the year at $149.31 and currently sitting around $165.49. The summer high is also expected in mid-July, with an annual ADR peak of $199.38, before dropping and plateauing from the end of September onwards.
• Rates in  Dallas, whilst they have been gradually increasing as we move into summer, are expected to peak later in October. Dallas ADR is predicted to start at $146.69 in June, experience a slight drop down to $141.67 for July, then climbing up to $156.72 for September.
• The ADR outlook in Toronto is the flattest, increasing 8% from the start of 2024 ($117.57) to the predicted peak in July ($127.95). ADR is forecast to come down to $120.33 in August and remain here for the rest of the year.

According to The Highland Group’s 2024 Extended-Stay Hotels Report, revenue per available room (RevPAR) declined by 1.6% in Q1 – the first decrease since 2021. Extended-stay hotel demand is up overall, the Group reported, but high construction costs mean new supply will be limited. Occupancy is consequently predicted to increase in this kind of accommodation, an opposite forecast to that of the general hotel industry.

|Regional Industry Insight - APAC

The FCM projects that India will experience an 18% growth in business travel spending in 2024 as India is still a hot topic in the market. Incentive travel has been noted by Skift as a current Indian travel trend – a perk incorporated into travel programmes to boost motivation and productivity. The war for talent evident around the world is forcing companies to rethink employee benefits, with Karen Hutchings recently suggesting that candidates see a business travel programme as a reason to apply to new jobs, so this kind of trend may continue to pick up this year.

India is a changing and growing market, and the current general election could see a shift in government and incite further changes. Around 969 million people are eligible to vote in the ongoing elections, making it the biggest democracy event in history – a governmental change might be reflective of the younger generation demanding more employment opportunities, so the result may see a shift in workforce and corporate landscape.

“In India, demand is increasing and accommodation rates remain high as economic growth remains buoyant. Looking at major locations specifically, while Hyderabad was previously a top destination, there's been a shift in focus, with Bangalore, Pune, and Mumbai emerging as primary locations. Much of this increased demand is down to the growing investment in the region, largely from technology companies as well as energy and financial services companies. Clients are frequently asking us about the Indian market – what the current serviced apartment scene is like there and how it may evolve. Currently, there’s a short supply of good quality serviced accommodation, so availability is a challenge as all clients are interested in the same options. We’re working to raise the profile of corporate housing in the area and broaden our portfolio, some clients even enquiring for reserved housing agreements in cities like Pune to protect themselves against supply shortages.” - Sophie Brinsley, Executive Vice President - APAC

• ADR in Singapore peaked in February and April (S$291.49) and started May down at S$276.23. The rates are set to fall in the next quarter, but the outlook is dynamic with some peaks and troughs predicted. June ADR peaks at S$282.73 before dropping to S$275.41, and July ADR jumps from here to S$278.43 before gradually declining until October.
• Australia is still busy at the moment, and  Sydney pricing reflects this southern hemisphere seasonality. Rates here are set to drop from their peak of A$277.50 in March down to A$242.12 in September.
• Melbourne ADR on the other hand is looking steady for the remainder of 2024 – starting the year at A$209.05 and set to end the year around A$185.65, with only a marginal peak of A$212.18 in March.

The Singapore Dollar is strong, particularly in comparison to the Japanese Yen, so rates may be more attractive in places like Japan and Korea. We might start to see a reduction in Singapore leisure enquiries as people look towards more affordable alternative destinations nearby.

|Trade and Travel Disruptions Are Ongoing

Since our February Update, maritime trade and shipping are still experiencing the consequences of Houthi attacks in the Red Sea. The Red Sea and Suez Canal remain closed for commercial vessels, which continue to reroute around Africa, but the backlog of the initial diversion has cleared.

The shipping of household goods and possessions for a relocation, in particular, is being impacted meaning the process takes longer, costs more and is more environmentally harmful. Delegates at a 2023 EMEA FEM Summit suggested that it’s often easier and more cost effective to provide a lump sum for relocating employees to purchase the bulk of their required items when they arrive to their new city rather than shipping everything over. We’d recommend, particularly during these disruptions, to offer paying for extra aeroplane luggage for assignees to bring more possessions with them, then supporting them to replace non-personal items instead of shipping them.

This is a key benefit of serviced accommodation for relocations – apartments are fully furnished and equipped with everything a guest would need to settle in and feel at home in the potential temporary absence of personal belongings.

In the last Update, we wondered how ALOS would change this quarter as a result of supply chain disruption and certainly it would appear that perhaps longer stays have been required while waiting for delayed shipments. Compared to last quarter, global ALOS is a week longer – coming up from 32 nights in Q4 2023 to 39 nights for Q1 2024.

• 35 nights in EMEA (compared to 30 nights last quarter)
• 63 nights in APAC (compared to 44 nights last quarter)
• 59 nights in the Americas (compared to 53 days last quarter)

Flights have resumed following storms in the Middle East, but Dubai and Oman in particular are feeling the impacts of heavy rainfall and flooding. With more rain forecast and potentially adding further strain on supply chains for household supplies, it’s recommended to take precaution and check the current situation before travelling here. 

We’re monitoring the disruption to travel in southeast Asia after the Indonesian volcanic eruption caused seven airports to close and can support with displacement accommodation for impacted travellers.

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|Events impacting supply, demand and pricing

Major annual and one-off events can increase rates and reduce availability. With bookings already being made for events throughout 2024, SilverDoor can advise on how to secure suitable accommodation at the best price.

If you would like specific topics or trends to be discussed in a future SilverDoor Market Update, get in touch with us at [email protected].