Demand for serviced apartments weakens as hotels muscle in, says GSAIR report

The serviced apartment sector has lost traction among corporate travel programmes as hotels stake their claim in the extended-stay market, according to the Global Serviced Apartment Industry Report (GSAIR) 2024, released today by Ariosi Group, part of the Habicus Group and sister company to serviced apartment agent SilverDoor.

The report, which included a survey of some 3,000 corporates, serviced apartment operators and agents, along with a series of interviews conducted between March and April 2024, revealed that corporate demand for serviced apartments has levelled off following the post-pandemic spike of recent years. 

Corporate usage of serviced apartments has dropped 11.2 per cent year-on-year, with 63 per cent of buyers currently utilising this accommodation type for business travel, compared to 74 per cent in 2023.

However, the number of corporates booking serviced apartments for assignment or project work has increased slightly to 63 per cent, up from 58 per cent in 2023.

Usage for relocation is also down year-on-year, with 56 per cent of corporates booking apartments for this purpose, compared to 74 per cent in 2023.

Although corporate booking volumes are down in two out of three purpose categories, the GSAIR report found that volumes for business travel are falling in fewer companies (10 per cent) this year than the same time a year ago (13 per cent).

The report pointed to several macro trends driving this shift. Namely, a corporate compliance imperative to book accommodation via approved online channels and a strategic move by several hotel chains to launch or expand their own extended stay brands. 

This includes aparthotels such as Staycity, which is growing its Wilde brand across Europe. Native Places is also adding properties in the UK and Accor’s Adagio Access is expanding its footprint in the region.

The competitive advantage enjoyed by serviced apartments post-pandemic has been “eroded by hotels” that can provide economies of scale and built-in GDS connectivity, according to the GSAIR report. 

Fragmentation is an ongoing issue for TMCs and corporates alike, with only limited serviced apartment content available via traditional GDS channels.

“Serviced apartments don’t have the ability to get serviceable GDS-equivalent content to the point of sale,” explained Daniel Cockton, VP of global travel services at engineering and consulting firm Wood PLC.

With Wood PLC’s travel programme featured as a case study in the report, Cockton said: “Our people tend to stay in hybrid extended stay hotel suites, rather than traditional serviced apartments because serviced apartment content is not readily available at the point of sale.”

While recently technology advances are helping to connect these dots – SilverDoor in January launched a new API to enable TMCs to access some 2,600 serviced accommodation providers worldwide – the report cautioned TMCs against the growing trend towards direct selling.

“If TMCs and RMCs [relocation management companies] do not expand their inventory and bookability, expect suppliers to ramp up their direct sales too. It won’t be long before TMCs start buying serviced apartment specialist agents, or vice versa,” the report said.

Sourcing trends

Nevertheless, more buyers are booking serviced apartments through TMCs and specialist serviced apartment agents than a year ago, with 63 per cent of corporates now booking via a TMC, compared to 31 per cent in 2023.

Fewer corporate buyers use a specialist serviced apartment agent – 38 per cent in 2024, compared to 50 per cent in 2023 – while 12.5 per cent now book via a bespoke enquiry portal and a further 12.5 per cent book direct.

Most intermediaries (73 per cent) report serviced apartment bookings are made manually, direct with the property, compared to 40 per cent in 2023, while just over half (55 per cent) source serviced apartments via a specialist agent, compared to 67 per cent in 2023.

When choosing a serviced apartment over any other accommodation type, the most important factor for travel and mobility buyers, according to the report, is policy compliance, followed by location and traveller safety. In 2023, the top three factors were traveller safety, location and cost.

Most buyers (75 per cent) said their serviced apartment costs have risen compared to 2023, while just 12.5 per cent said costs remain unchanged.

Looking to the year ahead, 80 per cent of buyers said their average length of stay is unlikely to change, while the remaining 20 per cent predict their average length of stay will be longer.

Sustainability in focus?

A sharpened focus on sustainability and many companies’ adoption of ‘purposeful travel’ – resulting in fewer, but longer stays – has also contributed to the overall drop in corporate volumes.

More than half (53 per cent) of corporates now require serviced apartment providers to evidence their sustainability credentials in all RFPs, according to the report. This marks a significant increase on 2023 levels, where 36 per cent of corporates had such requirements.

About a third of buyers (33 per cent) require the same evidence in some RFPs, down from 50 per cent in 2023, whilst just 13 per cent said they don’t require sustainability credentials.

Meanwhile, 44 per cent of buyers said their organisations have calculated their Scope 3 emissions, almost double the number in 2023 (21 per cent).

Just under a third (31 per cent) of corporates have not calculated their greenhouse gas emissions to any degree, compared to 64 per cent a year prior.

Progress in this area among serviced apartment operators, however, is slow. According to the GSAIR 2024 report, the bulk of serviced apartment operators have made no progress at all. In 2023, 68 per cent had not yet calculated their GHG emissions, and in 2024 that figure sits at 64 per cent.

Less than a quarter (22 per cent) of operators said they have calculated Scope 1 emissions, fewer (9 per cent) have calculated Scope 2 emissions (down from 16 per cent of operators in 2023), and fewer still (5 per cent) are tracking Scope 3 emissions (down from 14 per cent in 2023).

While the report stated that some brands have “cottoned on” to the importance of CO2 emissions reporting, smaller operators “risk being left behind”.