Is This A Moment In Time For Serviced Apartments?
We are all navigating challenging circumstances as a result of the recent Covid-19 pandemic. However, I am optimistic and naturally lean towards seeking the positives in people and situations, which I have demonstrated through my 30+ years in the serviced apartment industry.
To that end, and as I reflect on the numerous conversations we have had with serviced apartment operators and investors, it occurred to me the industry continues to stand tall and stable today, even in the face of adversity. More importantly, looking ahead over the next 24 months during the pandemic and as we begin to return to a sense of normality, the outlook for the sector is more promising than other segments of hospitality!
The global consensus is suggesting, that as we try to co-exist with this virus and going forward, we will live our day-to-day lives in a significantly more managed environment. This will continue until we either have a vaccine or the virus dissipates. In both scenarios we are set to be living in a new environment for the foreseeable future. As a result, it is expected to have a profound effect on hospitality and the way in which travellers, both corporate and leisure, behave.
Consider the impact the Covid-19 lockdown has had to date on businesses and consumers. I have noted these in the table below. Fast forward to Phase 2 and Phase 3 of the pandemic, when governments have control of the R0 number (the infection rate generated by one person) and in doing so are able to ease lockdown measures and commence the return to what will be a new normal. This new normal is where I have been considering and comparing the serviced apartment industry attributes versus other hospitality products.
The attributes of the serviced apartment industry addresses ALL the issues raised by the lockdown measures implemented by governments.
|Impact||How Serviced Apartments Mitigate|
|Social Distancing||By nature, serviced apartments are more individualistic. Guests are typically more distant and have little need to engage with the outside world other than to obtain substance.|
|Enhanced Sanitation||An apartment offers an environment whereby not only can you clean the apartment yourself, you can also with the use of the included washing machines and dryers, wash your own clothes and linen, ensuring your contact with the outside world is limited. Operators should consider placing complimentary hand sanitizers within their apartments.|
|Face Coverings||A limited requirement when you are living independently. However, operators should consider placing complimentary masks in their apartments.|
|A More Independent Way Of Living||By nature of a self-sufficient apartment, any guest will automatically be independent and if so, desiring can self-isolate from the outside world and in effect be almost 100% self-sufficient.|
|Preparing A Significant Amount Of Our Own Food||With fully operational kitchens, serviced apartments offer a travelling guest the ability to avoid contact with restaurants, take away etc, by enabling the ability to prepare and cook all your own food.|
|Learning To Work In Isolation||As most of us have experience over the last few weeks, getting to work from home and independently of a workplace, has not been as challenging as we thought. Most serviced apartments have a table and chair with super-fast Wi-Fi. Again, this allows any traveler to stay connected in a comfortable home office without having to engage in co-sharing areas.|
|The Increased Use Of Technology||Most operators supply within their apartment super-fast Wi-Fi. To this end the ability for a traveler to work effectively within their apartment is perfect.|
Traditional forms of hospitality including hotels, hostels and shared accommodation (such as AirbBnB) are faced with several challenges that serviced apartments just do not see. In particular, I believe hospitality products that require guests to share sleeping and living spaces will be under substantial pressure in the tail end of this pandemic. It is my view only, but I believe that for a sustained period (if not forever) travellers will be resistant to sharing a bedroom or indeed a living area.
This brings me on to traditional hotels, whereby the guest is almost reliant on the use of shared spaces. The primary challenges and implications, as I seem them, include:
- The rooms must be cleaned, and linen changed frequently – this involves unnecessary interaction between guests and staff.
- No kitchen causing guests to seek alternative solutions – this involves unnecessary interaction with the outside world.
- The higher level of footfall in a hotel is significantly more than a serviced apartment – shorter length of stay, more staff, more amenities – collectively probably increases the number of persons interacting per week within the building by 2 -3 times; this allows for a higher risk of interaction.
All the above factors have led me to the conclusion that is likely to be a defining moment (and importantly an opportunistic one) in the serviced apartment product lifecycle. The impact and opportunity will become even more apparent as we begin to see the unavoidable adaptation of working habits (e.g. less office space needed) and unfortunate collapse of so many businesses. The resulting critical challenge for investment houses will be repurposing and finding occupants for millions of square footages.
An interesting, challenging and opportunistic time ahead for sure. Our new way of life is likely to be with us for many months if not years AND if I am right, I think this will change the way we travel for decades to come. However, I really feel this moment in time will become significant AND defining for the serviced apartment industry. The question is can operators and owners, collectively reinforce and deliver this message to the consumer to win over the modern-day traveller. I, for one, do not see why not.