The SilverDoor Market Update - June 2023

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SilverDoor Snapshot

Cost reduction is a priority in travel and mobility programmes, with businesses looking to value engineer their accommodation programmes. We are seeing a greater willingness to compromise on quality, location, and trip length to reduce spend.

Sustainability and ESG compliance targets are also increasingly influencing corporate decision-makers with increased pressure on the whole supply chain to demonstrate targets, commitment, and progress in these areas.

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Asia Pacific

Demand for business travel grows as relocations ease off

Hiring slowdowns in the global banking and technology sectors have reduced demand from Relocation Management Companies (RMCs) globally. We’re seeing tighter budgets and more scrutiny of the bottom line – including travel allowances.

This could be leading to more careful travel planning and the longer lead times our data is showing. Average lead times (March-May 2023) in APAC have extended to 41 nights representing a 17% increase from the 35 nights we saw in the same period last year.

Despite the downturn in some sectors, overall demand in APAC remains healthy. We’ve seen unprecedented demand for serviced apartments in Sydney and Perth as supply of long-term private rental stock in these cities is low and many are turning to temporary accommodation.
 
Hong Kong has been a hot ‘bleisure’ destination as its economy rebounds with a real GDP growth of 2.7% (March – May 2023) versus the same period in 2022. Additionally, travel visas for both leisure and business purposes for the rest of China are experiencing significant delays which is driving further demand into Hong Kong.

Accommodation supply in APAC is improving but some cities still face challenges

Sourcing accommodation is now less challenging than it was in late 2022, however, Singapore, Tokyo and Sydney are reaching capacity, especially for two- and three-bed apartments. Our booking forecasts suggest that this high occupancy will continue. There is a general shortage of accommodation supply in Singapore, in part due to rising property costs, construction delays, and competition with investors buying up property.

Dynamic pricing models remain popular as demand fluctuates

Although rates have stabilised across the APAC region since their peak in 2022, we anticipate they will continue to fluctuate and remain high compared with pre-pandemic levels. The APAC region is following a similar recovery trajectory to EMEA and the Americas, but roughly six months behind.

While traditional, static corporate rates are still popular, many operators are looking to adopt dynamic pricing models in response to rising costs and uncertainty of supply and demand. We would urge caution when committing to dynamic pricing models as it can lead to rates spiking when supply is low or demand is at its highest.

Rates in Tokyo are at an all-time high, with demand outstripping supply and the cost-of-living crisis compounding this. Rates in Australia are also high, largely due to the country-wide housing crisis which is driving up rental prices and demand for temporary accommodation. Contrastingly, rates in Hong Kong have remained relatively stable.

Busy events schedules drive demand

In contrast to the EMEA and Americas markets, we are seeing more appetite for co-living accommodation in APAC as corporates look to money-saving options.

Some companies are also trialling ‘lump-sum initiatives’ in which assignees are given a fixed budget to organise their own relocations. As a result, SilverDoor is receiving an increase in direct enquiries from assignees. Whilst these initiatives may have a short-term cost-cutting benefit, they do require a significant amount of work from assignees, so we’d advise clients to tread carefully here.

We are seeing more travellers requesting accommodation close to their offices and workplaces, pointing towards a preference for convenience and short commutes. This is a revival of a pre-2020/21 booking norm that was suppressed with the increase in work-from-home and work-from-anywhere practices. Indeed, according to HR Magazine, global firms are putting increasing pressure on employees to return to the office.

Corporate business travel has started taking up a larger share of our client split versus relocation travel. SilverDoor is seeing a notable increase in Travel Management Company (TMC) requests in the region, with postponed events and pent-up demand now translating to more bookings.

Europe, Middle East and Africa

Travellers continue to take longer trips as rates are scrutinised 

Much like in the APAC region, there is increased sensitivity to cost in the EMEA market, however clients here seem to be more willing to commute to get better quality accommodation and lower rates. Clients are reintroducing stringent budgets to their travel programmes, and some projects are being postponed while budgets are reviewed, and accommodation rates are benchmarked.

Travellers continue to take fewer trips but of a longer duration. Within our direct corporate segment, the average length of stay increased by 25% to 31 nights from March to May versus December to February.

Booking volumes from Travel Management Companies (TMC) are buoyant, however business travel is beginning to bump heads with growing leisure demand for temporary accommodation. Lead times are extending which will help to mitigate this. Average lead times are up 29% on the same period last year and 12.5% from December 2022 to February 2023.

Demand varies by city as emergency moves decrease

The pent-up demand and emergency travel we saw in 2022 has tailed off, with a mixed picture across the Eurozone; where we’re seeing good rates, we’re seeing healthy booking volumes. We have seen strong demand in Milan, Zurich, Stockholm, and Amsterdam – while Dublin, Prague, Warsaw and Berlin have cooled off. Rates in these lower demand cities have become more competitive as the emergency moves driven by the Ukraine crisis have settled. 

Cork remains a popular destination for business headquarters, especially the major pharmaceutical companies, and this is driving significant corporate traveller demand for an area of its size.

Accommodation supply remains healthy

Our booking data shows supply in London and Amsterdam is strong, and although high interest rates are undoubtedly quelling longer-term investor appetite, we have a number of new properties in the pipeline in both cities. Generally, supply is improving across Europe, but there is a notable shortage of supply in some of the secondary and tertiary German and Netherlands towns as popularity amongst corporates from different industries expands.

Demand for sustainable accommodation will only increase

Interest in sustainable temporary accommodation continues to grow, a trend which we do not see slowing down. Indeed, Google worldwide search data shows searches for ‘sustainable travel’ has increased by 70% – with Ireland, United Arab Emirates, and the UK having the greatest percentage of searches on the topic.

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Spotlight on: Iberia

New providers are taking advantage of government schemes

Iberian temporary accommodation providers are keen to attract corporate guests. This includes the increased provision of business services and amenities including workspaces, business centres, and superfast Wi-Fi.

Government incentives in major cities are encouraging property providers into the region. We’re seeing more investment in temporary accommodation and more new providers in Madrid, Barcelona, Lisbon, Porto, Malaga, and Seville, so the outlook is good for clients who need to be in these locations.

Accommodation standards improving across the region

Travellers in Iberia want their accommodation to be close to their offices. Traveller expectations are high, and there is a trend toward booking accommodation with additional services such as gyms, swimming pools, and outside space.

Rates have yet to settle after spiking in 2022, however, the significant rise in serviced apartment quality standards over the past 12 months has attracted increased corporate interest in the temporary accommodation market.

Business and leisure markets compete for accommodation availability

Typically, the Iberia market sees demand spike from March through until October, and we anticipate 2023 will follow this trend. This is largely due to the influx of leisure demand for accommodation through this period, and the busy business and leisure events calendars during the summer season.

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Americas

Lead times are extending as corporates seek lower rates

In the Americas, interest rates continue to climb with several banks experiencing varying degrees of difficulty, so economic uncertainty continues to be a key theme in business travel and corporate relocation.

Generally, demand picks up by March as we come out of the slower winter season. Enquiries and bookings have increased since late 2022, as business travel, conferences, and events ramp up for the summer. Overall demand for temporary accommodation has begun to settle after the post-pandemic surge but remains healthy.

Corporate travel decision makers are making more considered booking choices. Cost reduction goals are more stringent than ever, and sustainability targets more prominent. Our clients are extending their lead times on bookings to secure better rates and preferred accommodation. Average lead time from March to May 2023 has extended by over 25% versus the same period in 2022 – from 35 to 44 nights.

Cost saving measures are key and companies are exercising caution

Companies are taking a conservative approach to employee relocation, with reservations down 45% from March – May versus the same period last year. As previously mentioned, tighter budgets and hiring slowdowns have contributed to these reduced booking volumes.

However, there is a more positive booking trend among TMCs and direct corporate clients, seeing increases in reservations of 96% and 10% respectively versus last year.

Corporate behaviours are changing as priorities shift toward cost-saving and sustainable practices. This is evident in some annual programmes, such as summer intern and new hire systems. Some corporates are choosing to deliver their 2023 programmes remotely, but plans for 2024 remain uncertain, as organisers await a clearer financial outlook. 

Operator rates need to align with corporate budgets

As always, rates are increasing into summer, but we are seeing a disparity between the rate expectations of accommodation providers and those of budget-sensitive corporates. The high rates and high demand of 2022 have reduced, and operators would be advised to adjust their rates accordingly. Although rates are higher than 2019 levels, we anticipate these will begin to reduce toward the end of 2023.

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We want to hear from you! Whether you're a business traveller, a property provider, mobility and relocation manager, or simply have an interest in the sector, leave a comment below and offer your own insight.

Corporate travellers - have you noticed any of these trends in your own booking habits? In what ways have any of these trends affected the booking process in 2023 so far?
Property operators - do these trends reflect your 2023 figures so far? What do you predict for the next quarter?
Mobility managers - what trends do you forecast for global mobility and relocation? What would you like to see in the market going forward to align the sector offering with client demands?

Answer our quick poll question here - In your opinion what should the corporate housing sector be focusing on in the next 12 months? 

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] to have your say.