Viewpoint
Ian Daniels on City Marque and the evolution of serviced apartments
How would you say the serviced apartment sector has changed since you joined City Marque?
It’s been exceptional. When I joined five years ago there were similar players in the market, but since then a lot of new players have come into the market. You have the big hotel brands such as IHG launching Staybridges Suites and the Accor Group introducing their Adagio brand in London. The overall interest from investors, developers, and above all from guests, who are starting to understand more what serviced apartments are about, has been significant.
There’s a bit of a disconnect between the UK and the rest of the world. Serviced apartments are a very developed market in Asia and the US, where it originated, but even in the Middle East, whereas London and to an extent Europe have lagged behind. That’s starting to change and the demand is growing in the UK.
What do you think is fuelling that growing demand?
We started at the depth of the recession – it was a time when corporate which would have previously gone through hotels had to tighten their belts and analyse how they were spending their money. On a like-for-like basis if you had a team of two to three plus people staying at a location on a medium or long-term basis, it was quite cost-inefficient to have them stay in a hotel.
Serviced apartments were able to step into that breach, and consequently that’s been a big reason why London in particular has seen that take-off.
Do you see the big hotel chains coming into the market as a threat?
Absolutely, but it’s also an opportunity. People would be naïve to say that it isn’t a threat to existing companies, but at the same time it’s a good thing for the sector because it is bringing brand diversity and awareness.
It’s still relatively unknown so those bigger players coming into the market and investing in PR are very positive. And ultimately it keeps us on our toes and forces us to better perform and make sure we have USPs, which is fundamental for guests.
What are you doing to tap the ‘bleisure’ sector mentioned at the Serviced Apartment Summit?
It’s interesting actually because we started out with about 90 per cent of our clientele in the leisure market, so our re-orientation in the last few years has been to ensure more of a corporate balance.
The first places where we advertised our properties were very much leisure portals, and we didn’t have a corporate sales team at the time – we acknowledged the opportunities that corporate brought but didn’t have the means to leverage that.
We’re now coming to 40 per cent corporate, and we hope to reach about 50-50, whereas our competitors started in corporate and are now turning towards the leisure market – which is shorter stay but higher yield and room rates.
Would you say it’s easier to move from leisure to business than the opposite?
Yes, predominantly in terms of operations. It’s a bigger challenge to serve the shorter-stay leisure guests because their expectations can be very high – they are on the trip of a lifetime. Moreover, you don’t have much time to rectify issues. If a boiler breaks down and someone is staying a couple of days, it’s difficult to take care of those issues there and then.
On the other hand, leisure guests are predominantly one-off business, whereas you want to make sure that you are getting your corporate guests back again and again – that’s been a real learning curve for us.
What is the biggest challenge the sector faces in order to keep growing?
The first thing is supply of new buildings. London has historically been relatively large but flat in terms of building structure. In the US it would be quite common to have a building with 400 hotel rooms, but it’s been difficult to mirror that in London.
It’s a case of government, planners and investors all getting together to understand the needs of 21st century travellers. Demand would more than satisfy new supply.
Interestingly, we are now seeing a lot of mixed-use developments with a bit of retail, residential and a hotel, but also serviced apartments added to that – that would have been unimaginable a few years ago.
There also needs to be a tidying up of the classification in terms of trading and use of serviced apartments, because at the moment they are between C1 hotels and C2 residential, and there could be a bit of a grey area there for investors.
It’s also important for the sector to help guests know what to expect from each venue in terms of room size, amenities and services. At the moment people self-classify themselves so the actual grading can vary quite a lot. One of the key aspects the ASAP has been working on is introducing grading to give the sector more visibility – something that all members are championing.
What’s in the pipeline for City Marque?
First, we’re pushing ahead with the lease operation for the opco to manage and operate buildings, but we’re also looking to establish a propco, which will enable us to acquire buildings and lease them to the opco.
This is ultimately to secure a pipeline for the opco, because we only get so far by being only an opco. We’re trying to shape our future a little bit more and add more certainty by taking another avenue that wasn’t previously available to us.
Our goal was to open 150 new units in 2014, and we’re about half-way on our target.
Our minimum expectation is 550 units by 2017, but beyond that we’d like to aim for 1,000.
