Serviced apartment specialist Ascott has signed a strategic alliance with Chinese property developer Beijing Vanke.
Ascott has targeted China for further expansion at a time when the serviced apartments market is seeing global growth.
The initial agreement sees Ascott taking on a 157-unit Citadines and 198-unit Somerset branded block in Beijing, strengthening the group’s position in China, with over 10,800 apartment units in 60 properties across 20 cities.
Worldwide, the company has over 23,000 operating serviced residence units in Asia Pacific, Europe and the Gulf region, as well as over 10,000 units under development. The group has a target of 40,000 apartment units globally by 2015.
Kevin Goh, Ascott’s managing director for North Asia, said: “China remains our key growth market. Besides expanding through management contracts and investments, strategic alliances with leading developers like Vanke will enable us to combine our expertise and industry knowledge to create a mutually beneficial partnership for both Ascott and Vanke.
“In China, Ascott will continue to seek opportunities in gateway cities and high growth cities with strong demand for serviced residences.”
Ascott followed the announcement in China with news of its first franchise agreement, for two properties in Indonesia. Lee Chee Koon, Ascott’s CEO, said: “Franchise will be one of Ascott’s growth drivers for the future. It will allow us to build our scale rapidly in our existing markets and expand into new markets.”
Lee added: “While most of our guests are expatriates and business travellers on extended stay, more leisure travellers are also choosing to stay in Ascott’s serviced residences.”
Ascott is not alone in seeing growth opportunities in its domestic market of Asia Pacific. Banyan Tree Group recently launched a serviced apartment brand under the name Cassia and announced plans to launch new projects in Phuket in Thailand, Beruwala in Sri Lanka, the Australian Gold Coast, Indonesia and Lijiang, China.
“It is a 100% real estate, but [with] a very strong hospitality element to it, and that is bringing our expertise in both areas to launch this new brand,” Ho Kwon Ping, executive chairman of the Banyan Tree Group, told Channel News Asia. “The extended stay segment has been overlooked in recent years so we took the opportunity to innovate and create a hospitality product that meets the demands and needs of today’s travellers.”
Unlike most serviced apartments, there will be no minimum stay period. The global hotel operators have also been expanding into the region with their own products: Marriott International with a site in Beijing, InterContinental Hotels Group in Jakarta and Kempinski in Bangkok, Jakarta, Shanghai and Beijing.
Carole Morard, GDS product & services deputy director, FastBooking, said: “There is increased talent mobility in Asia right now which has created a strong demand for quality accommodation including serviced apartments. Twenty five per cent of our portfolio is located in Asia, where we have a long history and strong commitment. Unique content like this reinforces our steady engagement in the region.”
Reported elsewhere in Hotel Analyst this week, Frasers Centrepoint will be hoping that investors share its enthusiasm for the serviced apartments sector, as it pre-markets its IPO, which will include a mix of hotels and serviced apartments.
Outside Asia Pacific, Europe is forecast to be heading for expansion in the sector, with Savills forecasting 50% growth in the next two years, as growing demand for the product helps persuade institutional investors into the sector.
Part of the growth in demand comes from changing guest expectations and habits. New ways of managing bookings make it easier to tap into shorter term lets, while leisure travellers are becoming a growing influence in the market.
“Some of the larger operators are moving away from a reliance on the traditional long stay corporate market and are tapping into shorter stay guests, particularly as businesses’ reliance on travel management companies wanes,” said Marie Hickey, director of research at Savills. “As a result, developing a branded product that appeals to a variety of guest segments and which raises customer awareness has become all the more important to operators.”
Ascott is opening a property in Frankfurt this year and faces competition in the city from Frasers. The competition is growing in the region, with StayCity planning to expand to 5,000 units by 2019 with Venice, Lyon and London in its pipeline.
In London, operator Cheval Residences has just opened its seventh unit, which has 159 apartments on a site close to the Tower of London. And UK operator Roomzzz, which has six aparthotels in regional cities, has won permission to convert an office building in Chester, while planning openings in Liverpool and London.
HA Perspective [by Chris Bown]: The hotel alternatives are building up. Serviced apartments are growing in scale and in consumer awareness, and a new breed of operator is positioning the serviced apartment as not only a long stay home for the business person on assignment, but also as a flexible accommodation unit for families or groups of friends away for the weekend. Late booking apps such as Hoteltonight are now listing serviced apartments alongside hotel rooms, for those companies whose management systems can cope with short as well as long stay guests.
Among new entrants to the sector who are taking this new view are Union Hanover, whose Urban Villa concept is designed to appeal equally to the leisure market as to corporate guests. The company has recently secured private equity backing to take its portfolio up to GBP1bn in size, with a scaled up development team. April saw the company acquire a 100 unit project in west London that will open before the end of the year.
Market penetration is still low in key markets, notably across Europe, when compared to established markets such as New York and Hong Kong. A recent report from Savills predicts the supply of branded serviced apartments will increase by 50% in the next two years, as supply across the continent rises to meet demand.
The sector is also at the point where institutional investors are starting to understand the product, and take notice. European pioneers such as IHG with its Staybridge brand found it hard to gain traction, as developers and investors saw the product as new, and therefore risky. The pioneers have been vindicated, however. Cycas and Patron Capital, which completed the Staybridge in Stratford ahead of the 2012 Olympics, subsequently sold on to an Asian investor less than a year after opening.
While the education process is far from complete, the latest barometer report on the hotel sector from German investor Union Investment suggests headway has been made. It found serviced apartments the second favourite sector, with 21% of respondents believing they offers the best returns, against 44% picking the favourite, budget hotels.