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Tue 31 Oct 2006 08:00 PM

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From serviced apartments to extended stay

The Gulf’s serviced apartment market is relatively immature compared to that of the US and Far East, but it is vast nonetheless, and developing fast, according to hotel industry consultant,Guy Wilkinson

The Saudi authorities estimate that in 2003, there were almost 2500 informal furnished apartments buildings containing 54,000 units in the Kingdom alone, most with few, if any, amenities and precious little service.

Similar situations exist in the other Gulf States, where there are estimated to be several hundred more serviced residences.The regional market is characterised by dependence, not on global chains, but on either individual owner-operated serviced apartments, or small local chains without global reach.

Properties are often converted from existing residential apartments buildings and vary widely in their age, condition, building and unit size and configuration, and the extent and quality of furniture, fittings and equipment, front and back of house amenities, and above all, service.

Ironically, it is the very ‘home-grown’ nature of many privately run apartments that seems to appeal to some guests, rather in the same way that traditional family-run bed and breakfast guesthouses appeal in Europe.

There are 20 international or regional hotel chains currently operating some 34 serviced apartment or serviced villa operations in the GCC, which obviously, represent just a fraction of the total supply.

Brands such as Hilton, Le Meridien and Sofitel operate a number of hotels that contain a proportion of serviced apartments in the region, as well as some dedicated properties, although they much prefer the former arrangement. Abu Dhabibased chain, Rotana, is currently the leading regional operator,with eight GCC serviced apartment operations.

There are only two dedicated serviced apartment brands in the Gulf to date — Marriott Executive Apartments, with two properties in Dubai, and Singapore-based Ascott, which has recently opened the Somerset Jadaf in Dubai.

Many more serviced residences are now under construction across the Gulf,with Dubai alone known to be adding more than 12,000 new apartments within almost 50 new dedicated serviced apartment properties or hotels containing them, by 2010 (and those are only the ones that have been publicised).

Elsewhere, the Holy City of Makkah will see two vast serviced apartment properties, each with more than 1000 units, opening in the next few years and operated by Accor and Le Meridien. Meanwhile, the twin Bavaria Suites opening next year in Dubai Media City and Doha will have 2100 and 2300 units respectively.

New dedicated operators are also expected. In the next five to 10 years, specialist extended stay or all suites brands, including the InterContinental Hotels Group’s Staybridge Suites, Fraser Serviced Residences from Singapore, Oakwood Worldwide from the US and Accor’s Suite Hotel, are expected to secure a widespread presence in the region.

Together with Marriott and Ascott, these brands can be expected to add a new sophistication and


extra levels of segmentation to the Gulf’s current, somewhat rustic serviced apartments market.

The extended stay sector of the global lodging industry is said to have been born in the US during the 1980s when, during a recession, unsold condominium apartments were rented in desperation, as hotel suites.

They were expected to appeal mainly to longterm guests, but with living, dining and bedrooms, as well as full kitchens, these economically priced suites in fact attracted all types of travellers, including many overnight walk-ins knowing a good buy when they saw one.

The jargon for defining the main sub-genres of accommodation that have developed within the sector has been developed largely in the States, but also has regional variations around the world.

According to the US definitions, there are three main varieties of serviced apartment accommodation now available in the market:

Extended stay hotels, called serviced apartments in the Gulf and Australia, serviced residences in the Far East and aparthotels in Europe, offer a fully equipped kitchen in each guest room, suite or apartment, and discounts for extended stays, which are defined as five days or above.

All-suites hotels are similar, but do not have a full kitchen and usually do not offer discounts for extended stays.

Corporate or temporary housing comprises fully furnished and equipped apartments designed to suit company employees, rented for a minimum stay of 30 days.

The US extended stay market is the world’s best developed,with more than 250,000 apartment units in 2005 and very healthy growth rates, based on an average of 76% occupancy and an average stay of 15 days, or 33 days in the economy sector.

There are some 28 extended stay hotel chains and 16 all-suite hotel chains in North America, with more than seven properties each, according to .Their properties are built to formula for the upscale, mid-range or economy markets, with studio, one- or two-bedroom apartments, as well as convenience stores and self-service laundrettes.

The all-suites hotels offer more conventional hotel-style facilities and services, such as restaurants, room service and daily housekeeping, while the extended stay properties have no restaurants, but offer more features that will appeal to longerstay, self-catering guests, such as full kitchens, more homely room furnishing, free video lending and help with grocery shopping.

The US market is led by Marriott, with four extended stay and all-suites brands, Choice Hotels International, also with four brands, Hilton,with four brands, and InterContinental,with two extended stay brands.

The Ascott Group is the extended stay market leader outside the US,with more than 100 properties in the Far East and Europe, including the group’s Citadines brand.

Extended stay accommodation is popular in dynamic, fast-growing cities with buoyant economies and suits corporate executives who are on assignment or relocating, as well as tourists looking for more space and better value.

The US design formula for extended stay hotels means that a typical new build, two-room serviced apartment costs only 20% more than a typical hotel room, while more compact and efficient front and back of house areas mean staffing levels can be as low as 0.5 per unit, compared to 1.5 to 2.0 for a five-star hotel, thus reducing overhead costs significantly.

Look out for the various types of extended stay property — they could soon be coming soon to a dynamic, fast-growing city near you.