Editors George Sell and Eloise Hanson share five trends they think will resonate throughout the sector in 2024.
Generation AI
Is the extended stay sector doing enough to cater to younger cohorts of travellers, the digital natives, or Generation AI as they are beginning to be known. David Wright of Mansley Serviced Apartments says there is a fundamental issue stemming from young people’s distrust of business, particularly with regards to sustainability and environmental issues. Transparency over ESG policies is the key, says Wright, as is using the most effective marketing channels – 85 per cent of Gen Z find new products through Instagram, says Wright.
Mansley has embarked on an AI-powered targeted marketing campaign on Facebook and Instagram which has produced “huge ROIs”. It has enabled the company to pace its ads in the feeds of people who have shown a genuine interest in travelling to the destinations where it has apartments.
And there is no doubting Gen Z’s appetite for travel, not just for leisure, but also for work. Research from Hilton found that Millennial and Gen Z employees (53 per cent each) account for the largest demographic travelling for business in 2024. This is followed by Gen X (38 per cent) and Baby Boomers (26 per cent). Additionally, more than one-third of Gen Z and Millennial business travellers said they plan to extend a business trip in 2024.
In fact, there’s a case for stating that Millennials place more importance on travel than any generation before them. A study by Business Insider, in collaboration with YouGov, surveyed more than 1,800 Americans spanning five generations. Some 49 per cent of millennial respondents said travel is an important goal for them in the next five years, which was a higher percentage than any other generation. They placed travelling higher in their priority list than advancing their careers, owning a home, being debt-free, or being in a relationship.
There is clearly a big opportunity here for extended stay brands to adapt their offer in order to cater for younger travellers – the post-pandemic travel trends which edyn Group observed in a 2022 report have since become even more pronounced.
Blended stays
Changing work habits have had a major impact on how operators service different lengths of stay. Corporate travellers are flying less frequently but staying for longer, whereby the reduction in business travel volume has prompted operators to pivot towards transient leisure stays. As a result, flexible living options are growing in popularity, blending varying lengths of stay under one roof.
Property management systems will need to evolve in order to meet the demands of operators and their guests. This is especially true for payment and billing processes, whereby short-stay guests will typically pay up-front compared to the need for contract management of longer-stay guests. “Providing a consistent guest experience across the different stay lengths is crucial for brand loyalty. Enabling an integrated journey for the customer to book is also key,” advises Giles Horwitch-Smith, CEO of Res:Harmonics. “For example, there’s great scope within short-stay for web portals to answer questions around what’s in the neighbourhood, whereas for longer stays a resident app would be suitable for guests to report maintenance, participate in events and so forth.”
He added: “When developing your strategy, consider the customer journey – from look to book, to what they are going to do during their stay. Segment your guests, think about what services you offer and how amenity spaces can vary throughout the course of the day, then align this with your technology. Avoid lots of different tools; I’d recommend one platform such as an operating hub that can integrate with additional tools around it.”
As technology platforms are developed to feature expanded capabilities, it will present new opportunities for operators to attract a wider demographic. Flexible living companies such as Placemakr and Habyt have launched aparthotels which offer a mix of short, medium and long-term stays, and I suspect we’ll see similar additional openings throughout 2024.
In some jurisdictions such as Singapore, regulations are even being flexed to accommodate a new class of serviced apartments with a three-month minimum stay. National development minister Desmond Lee explains: “Serviced apartments today can cater to those who wish to stay for longer durations. But their seven-day minimum stay requirement means potential tenants – both Singaporeans and foreigners – must compete with those in Singapore for short stays, including tourists and business travellers. We need to maintain a healthy rental supply to cater to those who need to rent… as well as those who are here to work or study.” The clamp down on short-term rentals – which has seen limits placed on the number of nights a property can be rented out, as well as the introduction of a licensing scheme – may well encourage hosts and property managers to partner with flexible living platforms.
Sustainability
“As a sector, there’s a lot of good intention, but we haven’t cracked it yet,” says Situ’s Phil Stapleton, when asked about the extended stay segment’s performance around sustainability. “I’m not sure the hotel sector has cracked it either, there’s a lot of talk about paper straws and not enough about the meatier stuff such as carbon counting per night,” he says.
It is often the agents who finds themselves at the sharp end of the sector’s sustainability evaluation issues. Corporate clients have a large and growing ESG check list that accommodation providers need to satisfy, and it is the agent who is generally responsible for monitoring the operator’s performance.
To this end, Situ has joined the sustainability data company Sedex to improve the management of ESG factors within its supply chain. Sedex’s technology supports businesses such as Situ to source and manage supply chains sustainably. Sedex provides practical tools, data analysis, and operational business insights. Situ will utilise Sedex to conduct a broader assessment of its global supply chain. This will allow it to analyse and improve its ESG performance as well as provide detailed reporting for clients.
Elsewhere in the industry, SilverDoor has launched a carbon calculator sustainability tool for the global corporate housing sector. The calculator will collect carbon emissions data to allow clients to set, monitor and report on their business travel sustainability goals. It has been built with a specific focus on water and energy consumption, including a per-night CO2 emission estimation for each apartment and the wider building. Electricity, gas and oil use, as well as the total area of climate-controlled space, water consumption and laundry management will be measured.
And AltoVita has unveiled its new free-to-use EcoStats tool to accurately estimate the CO2 emissions for each night’s stay in any of the accommodations listed on the platform. The launch of EcoStats is designed to offer a “transparent and reliable measure of environmental impact”. When searching for corporate accommodation on the AltoVita platform, the user inputs the specifics of the stay, including location, duration and accommodation type. EcoStats then assesses various sustainability metrics such as: certifications; renewable energy usage; carbon tracking; efficient lighting; single plastic use; recycling; responsible sourcing; and more. The search results [property profiles, quotes, and booking confirmations] will all show the calculated volume of CO2 emissions per night.
Lifestyle brands
There’s only a small handful of lifestyle operators within the extended-stay sector, which in itself demonstrates the vast potential for new players and brand entries into the market. Largely acknowledged as the pioneer of the lifestyle aparthotel, Locke will operate a portfolio of 18 properties by the end of 2024. Recent news that its co-founders Merzak Kaddour, Andrew Fowler and Eric Jafari have departed the business certainly grabs our attention and makes us question what might be on the horizon.
In recent years however, competition within the lifestyle sector has increased. Amsterdam-based July Group, which last month rebranded from City ID, has revealed three aparthotels “coming soon” including the group’s overseas expansion into new markets: London, Dublin and Lisbon. When asked to explain why now is the right time for lifestyle brands to flourish, Ben Russell, acquisition and investment director at The July, says: “Whilst a label can come with an expiry date, we’re creating a brand that’s relevant for the time and the moment. As a small player within a big pond it gives us the benefit of being adaptive and to build something personal that people can relate to.”
“The lifestyle sector is under-represented, especially in Europe,” he added. “After Covid, we recognise that everybody travels differently… aparthotels allow guests to tailor their experience, and within the label of lifestyle, offer great amenities such as welcome lobbies to work, meet and socialise. Hotels may have had their expiry date which means we’re on to the next thing.”
Elsewhere in the world, Cheval will launch its urban lifestyle brand MY Locanda in Glasgow Q1 2024 with plans to roll out the product across Europe and the Middle East. Àterre, a new long-stay brand under lifestyle hotel group Sircle Collection, is set to debut in Athens next year. And a mixed-use lifestyle cluster housing nearly 50 brands, including an 86-unit serviced apartment building, is due to launch in Singapore Q2 2024. All the signs indicate further growth for lifestyle brands in the year to come and beyond.
Investment and finance
Will 2024 be the year that we get a semblance of financial stability and the extended stay transaction market picks up?
Vedrana Riley, founder of Ciel Capital thinks we might see a measure of improvmenet. As background, she says: “The continuing changing environment, starting with Covid, moving through inflation, wars, interest rates rising – there has been a huge amount of pressure on the markets generally. Anyone who can afford to hold on to an existing asset is doing just that. Any transactions have been due to an element of distress, whether that’s from a bank applying pressure or a seller needing to recapitalise their portfolio. Buyers and sellers are not on the same page right now.”
This trend could be exacerbated in 2024 as a wave of finance matures and owners look to sell rather than take on a significantly greater debt burden through expensive refinancing deals. We could see more individual asset and portfolio sales. But due to the fragmented nature of the serviced apartment market, Riley believes some consolidation is inevitable. “The sector is behind hotels in this respect – hotels have been better at marketing themselves which has led to excitement about buying a specific brand,” says Riley.
This year ended with a significant deal, which could set the scene former of the same in 2024. NUMA Group’s acquisition of YAYS, for an undisclosed sum, demonstrates the attractiveness of buying operating platforms for brands which are in a hurry to grow. NUMA certainly fits in to this category – in 2022 it partnered with LaSalle Investment Management for a €500 million pan-European urban hotel aggregation strategy. And in September 2023 it raised €55.5 million [$59 million] in growth equity capital in a Series C funding round led by Verlinvest. Expect to see more significant moves from them in 2024.
Click here to watch our trends webinar for more detail on each of these five predictions.
