This article is taken from the Autumn 2024 issue of

Think Global People magazine

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The rise of remote and flexible work models has sparked a huge increase in demand for extended-stay accommodation. Now more than ever, travellers seek home comforts such as kitchens and workspaces in addition to traditional hospitality amenities, like gyms and on-site restaurants, says Carrie Hartman, president of global corporate travel and relocation platform, 3Sixty.“We’re also seeing a big rise in demand for pet-friendly accommodation,” she explains. “With companies facing increasing cost containment pressure, employees are travelling less frequently, but staying for longer periods, making serviced apartments more cost-effective compared to traditional hotels.“This is where the rise of 'bleisure’ has really accelerated in recent years – where travellers add recreational activities to business trips – fuelling demand for accommodation that better supports work-life balance.”

Rapid growth predicted in the United States

She believes the serviced apartment sector is therefore poised for rapid growth over the coming years. The United States, where the market has historically been slow to catch up with the pace of Europe, faces a turning point. Here, 3Sixty is seeing a growing demand for personalised, home-like accommodations among business travellers who want to stay for longer periods.“The United States’ extended-stay market is at a pivotal moment,” she says. “The rise of digital nomads and bleisure travel is having a huge impact on work patterns and travel behaviours, with travellers now placing more emphasis on flexibility and efficiency. In many cases, this makes serviced apartments a more attractive proposition compared to traditional lodging.”The switch to hybrid working has brought new business to some US cities, while others are seeing lower occupancy rates because employees are choosing to work from home more often. “We are seeing tier-two hubs like Austin, Miami and Denver becoming increasingly attractive for extended stays,” she explains. “The surge in remote and hybrid work has led to office markets in tier-one cities, like New York, experiencing 20% vacancy rates and a shift towards decentralised workplace norms, potentially permanently.” In other words, driven by economic pressures and the need for a distributed workforce, companies are now looking for more cost-effective locations in more expensive cities.
For the serviced apartment market impact, this shift may be part of a longer-term trend where travellers are craving comfort, a better work-life balance and the convenience of amenities that support remote work. This includes flexible booking options, high-quality accommodation and a seamless experience from booking to check-out. “This is where 3Sixty’s HomeMatch technology addresses travellers’ ever-evolving demands by curating tailored housing options according to individual preferences, with each rigorously vetted for safety and financial health,” she says.Yet while the serviced apartment sector is rapidly evolving to meet growing demand, challenges remain regarding pricing, availability and location. “Many providers are enhancing their offerings, but high demand continues to far outpace supply, leading to price increases and limited availability in prime locations,” Carrie says. Additionally, ensuring compliance with safety and quality standards is crucial, but can add to operational costs. 3Sixty addresses these issues by leveraging technology for efficient sourcing. It maintains strict vetting processes and offers transparent pricing models.

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Asia shows growing demand for serviced apartments

Outside the US, operators in regional markets face their own unique challenges and drivers for growth. In Europe, demand for flexible accommodations is rising due to increased business travel and remote work. Conversely, conflict in the Middle East is creating safety challenges in previously stable areas.“In Asia, we are seeing a big uptick in demand for longer-term stays and relocations, as more companies move to establish business hubs in the region,” Carrie says. “India is becoming a top destination for corporate relocations and business travel, surpassing China and its more measured approach to easing Covid-19 restrictions and cooling US-China relations.”India's stronger position is attracting an increasing number of foreign businesses eager to tap into the country's robust talent pool. This has led to a significant rise in demand for business travel accommodation in key cities like Bangalore and Hyderabad.“What’s really interesting when we delve deeper into the data is the noticeable drop in expat travel and rise in intra-country moves,” she says. “Our data indicates a 30% decrease in international relocations and a 35% increase in intra-country relocations among our largest clients over the past two years. This shift demonstrates how international companies are now prioritising local hires over international expats, largely due to the high-quality talent pool in key markets like India, which excels in technology, engineering and medical science sectors.”

A bright future for Europe?

The 2024 Global Serviced Apartment Report GSAIR, published in June, depicts a sector that is facing challenges, but also has great opportunities. It points to increases in interest rates, building rates and rising regulatory demands, which are impacting margins and discouraging new builds. In addition, the report says the relocation market remains subdued and corporate travel demand has softened. Post-pandemic reviews and a focus on sustainability have led to fewer but longer stays, while environmental, social and governance (ESG) considerations are increasingly important.Nevertheless, as Philip Grace, chief development officer at tech-driven serviced apartment operator Bob W, says there is an enormous opportunity for the serviced apartment sector across Europe right now. Bob W is a technology-driven serviced apartment operator that has expanded rapidly over the past few years to operate across 29 European cities today. A recent joint venture with Osborne+Co Investment Management means the company is now acquiring and converting outdated office and hotel buildings into serviced apartments.As a sign of their confidence in the growth of serviced apartments, the new joint venture announced the launch of a £120 million equity raise to acquire and repurpose hotel and office assets into high-quality short-term serviced apartments. It will target key European markets including Ireland, Portugal, Spain, Poland and the UK and plans to transform 20–25 buildings into 1,500 to 2,000 modern apartments with the first apartments open within 18 months.Philip says the serviced apartment sector is one of the fastest-growing asset classes in the European Union as both leisure and business travellers increasingly seek alternatives to traditional hotel rooms.“Travellers now favour amenities like kitchens and laundry facilities and are looking to extend their stays to align with the ‘travel less, stay longer’ mindset,” he says. This means well-located serviced apartments are experiencing growing demand.“This trend sits against a backdrop of a property landscape comprised of secondary outdated offices and hotels that would require significant investment to modernise,” Philip explains. “These ageing assets cannot deliver the returns to support the cost of debt and alternative investment opportunities. Demand is on the up, lack of supply is fuelling growth, and owners of assets – developers and investors – can achieve healthy and sustainable returns with serviced apartments.”While converted office space can provide a great location for a new serviced apartment block, Philip says that not every office can be converted. “Converting and modernising old offices and hotels that meet the right criteria is the way forward to achieve a high financial bar and the returns required by investors,” he says. “In some European countries, office rents have become more affordable post-pandemic, but many have remained the same.”For example, in Germany, offices in the top six cities remain prohibitively expensive, so the financials for conversion would only work with inflated rental sums. Operators therefore need to tread with caution. However, there are significant opportunities for those who know where to look. “In London – one of the most expensive cities in the world – we continue to source amazing opportunities to transform tired old assets into cutting-edge buildings,” he says.In Europe, the pressure to find flexible short and long-term accommodation in budget for relocating individuals and families is still a challenge, with relocation experts finding difficulties across a variety of regional markets. In its latest report on the European housing market, Crown World Mobility reveals that price rises and supply shortages are adversely affecting Switzerland, Sweden, the Netherlands and the UK in particular.“Across Europe, the housing market continues to present challenges for anyone seeking to relocate or for organisations coordinating assignments on the continent,” it says. “In Switzerland, we’re seeing a tough market for both temporary and permanent housing due to skyrocketing prices. We see Sweden having similar pricing and demand issues in all of its main cities. In the UK, clients are met with dizzying prices as they shot up by 11% in London over the last 12 months.”

Serviced apartments raise their game to compete with hotels

“Serviced apartments are winning over hotels by offering more spacious, home-like comforts, which are ideal for extended stays,” Carrie Hartman says. “Amenities like kitchens and living areas that cater to the needs of long-term guests offer a much better value for money.”Providers are also looking at ways to provide greater inclusivity for different types of guests, as well as offering the highest standards for employer duty of care. Travel managers can leverage technology to access real-time safety information about serviced apartment locations worldwide.“Our partnership with GeoSure provides a detailed overview of various safety metrics, including women's safety, LGBTQI+ inclusion, political freedoms and more,” Carrie says. “Similarly, our collaboration with Dun & Bradstreet allows us to conduct weekly supply-chain assessments to identify any 'red flags' that could affect an employee's stay, such as issues related to the financial health and business practices of our suppliers.”Markus Feller, CEO at employee and guest experience tech platform Like Magic, says it is crucial for serviced apartments to cater to diverse guests to remain competitive. “This can be as simple as incorporating accessibility features such as ramps, wide doorways and automated systems for guests with disabilities,” he says. Additionally, AI-driven personalisation and guest-messaging platforms can address specific preferences, dietary restrictions and cultural considerations, ensuring every guest feels welcome.“Serviced apartments win on flexibility and practical comforts compared to hotels, offering a home-like environment, but with the quality guests expect from hotels,” he says. This appeals much more to mid- to long-term guests and to business travellers seeking comfort and efficiency.“Serviced apartments that have been able to maintain operations with minimal staff – all while maintaining exceptionally high service standards – are without doubt winning over traditional hotels when it comes to appealing to those looking for extended stays.”

Why technology is a game changer for the sector

While technology offers huge cost savings and efficiencies, few guests are ready for the fully remote experience, especially when moving into a new city for an extended length of time. This is why Bob W has chosen to blend technology with human interaction to use its workforce most efficiently while still delivering a good guest experience. There’s no queuing for passport checks and customers can reserve an early check-in or late check-out months in advance.“We’ve all endured queuing at a hotel reception lobby – why is this still happening?” says Philip, who also sees AI as “a game changer”, but says it is too early to offer a completely remote technology solution. “It should come as no surprise to hotels that guests will actually turn up in person, so why not streamline the process by allowing pre-check-in that grants direct access to your room, eliminating the need for redundant queuing? This makes even more sense when we consider the cost of employment has outstripped the increased daily room rate charge.”Roughly 75% of Bob W’s apartments have kitchen facilities while around 25% of the inventory have shared kitchens. Room-only options continue to be appealing, with a strong market presence. However, for longer stays, such as business trips, the added flexibility of having kitchen and laundry facilities becomes increasingly important. In addition, location is of critical importance to meet guests’ needs.“We take a very granular view at every level, from the country and the city right down to the individual neighbourhood and street,” he says. “This thorough analysis guides us in thoughtfully designing to meet our guests' needs, ensuring our spaces cater to a diverse customer base.”

Smart technology and ESG impact

Like Magic’s Markus Feller says for properties like serviced apartment buildings, which typically operate with low numbers of on-site staff, AI and automation technology are revolutionising workflows and maintaining a high-quality guest experience.

“More often than not, serviced apartments use simpler tech stacks compared to hotels, making it easier to integrate smart-home technologies that streamline operations,” he says. This means simple yet important features like smart locks and digital keys are more quickly implemented in serviced apartments, allowing for a more seamless guest journey.“Platforms like Like Magic enable guests to perform most tasks online, such as checking in and out, ordering amenities and accessing rooms via a digital key — all on their smartphones via a progressive, no-download web app and without any human interaction or staff assistance,” says Markus. He argues that this digital journey enhances convenience, reduces wait times, and keeps staffing costs low, leading to high levels of efficiency.Environmental and sustainability considerations are also increasingly important to guests, client companies, investors and relocation providers. “Our commitment to upholding high ESG standards drives everything we do,” says Bob W’s Philip Grace. “It’s why we became the world’s first international climate-neutral hospitality provider. We hope others will join us in committing to transparency by publicly disclosing their greenhouse gas (GHG) emissions per guest night, making their overall climate impact clear.“When taking on a project, many debt providers see a solid ESG strategy as key. But this should not be a forced issue – we have only one planet and it should be a key consideration for operators, developers and investors. Not yet, but at some point, guests will seek to rent rooms not just on price and location, but also driven by the footprint they leave behind.”Markus says the beauty of new technology running in the background is that it can help to optimise resource use, reduce energy consumption and promote sustainable practices. “For example, automation can adjust heating, cooling, lighting, water and even food consumption based on occupancy predictions, significantly cutting energy use and waste,” he says. “These sustainable practices not only directly reduce costs, but also appeal to eco-conscious travellers while improving the credibility of sustainable properties.”Taken together, these trends, innovations and future focus mean the sector’s growth looks to continue its upward trajectory.

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