SAN talks to David Graham, principal of New Zealand apartment provider Quinovic Viaduct, about the NZ serviced apartment market, and ‘flipping’ units between long- and short-term rentals.
• Can you give us a brief career history and tell us how you came to be working in the serviced apartment sector?
“I started my career with NAC ( National Airways Corporation ) – a domestic airline for New Zealand – working in freight, reservations and ticketing. NAC was incorporated into Air New Zealand – which operated both domestic and international services. With the change, opportunities were limited with the new staff all looking at how they would fit into the new company – some would lose their job. I was proactive and saw an opening with QANTAS Airways in Wellington and moved into their ticketing office where I worked from the late 1970s to early 1980s.”
“At the age of 22, I purchased Union Travel in Porirua City and started my self-employed career. Over the next 27 years I owned up to four travel agencies and sold them all over those years – two of them are still trading today over 30 years later. I also purchased commercial property and today still have an investment in commercial real estate.”
“I moved into serviced apartments in 2008 working for the franchisor for the Quinovic Group, Ross Davey. The Quinovic Viaduct franchise was losing money and needed a major change of focus, a higher level of customer service and communication to owners. It also needed a review of stock and an urgent increase in numbers to make the franchise profitable. Over the three years I turned the company around to make it the top performing office in growth, profitability for its size, within the franchise. I felt I had done my job and asked the franchisor for a reference as it was time to look for my new challenge. He responded ‘why not buy the franchise off him’? This I did in 2011 and have since grown the business by more than 300 per cent since then in value, and increased the profitability considerably.”
• Please tell us about your business – its concept, locations, number of units etc
“We supply serviced apartments and townhouses for the Auckland Central City, Viaduct, and city fringe suburbs. Some apartments are in residential buildings and we also have a range of apartments in well established four- and five-star hotels in Auckland. You could say we were the first to invent the Airbnb model – as we don’t own any stock of apartments and represent multiple owners. We are a marketing/booking company – we take owners’ private apartments, lift them to a presentable level, with a uniform level of services, and market them for rent from one week or longer. We also help owners find investment apartment opportunities, and once purchased will arrange all the refurbishments, chattels purchases, professional photos and so on, then bring the apartment to market for rent.”
“We have 193 apartments/townhouse spread over 42 locations – all privately owned. Most of our owners live overseas and will occasionally use their investment apartment when they visit Auckland. We are on a growth plan to reach 250 apartments/townhouses under management.”
• Can you explain your concert of ‘flipping’ units from short to long term rentals according to seasonality? In which locations does this work, and how does the guest demographic change?
“As all apartments/townhouse are not equal in quality, views, facilities etc, we look at how we can get the best possible return for the owner – so we started doing flipping. This is when we operate the apartment as a short-term rental over the peak summer months and then flip them into a six to nine-month rental over the spring/winter/autumn months. Flipping came about due to a desire to get the best return for the owner and ourselves – empty stock over the winter months was not earning money for the owner or ourselves.”
“So we look at what the apartment offers in location, transport, quality of views, furnishings, facilities in the building also if they were within a hotel or not. We know all apartments will rent over summer, but over winter those without great views, locations, or which don’t have facilities will not rent as well over the winter months. Also we know the larger apartments/townhouses, while they will rent well over summer, families and business users don’t travel in the same numbers over winter. So we try to get most of our three-bedroom apartments/townhouses and two-bedrooms on the fringe of the city into a long-term rental pool from March to October of each year.”
“We have found during the winter months companies will send one staff member on a trip, but over the summer months they will send two or more. They also tend to run training courses which require larger apartments of two or three bedrooms. During the summer we supply apartments to the marine industry, movie industry, shows and events – they require apartments to be serviced and require them for one to six months. Our clients are around 60 per cent corporate and 40 per cent leisure – over the winter months we are around 80 per cent corporate – so will do shorter stays down to three nights to accommodate this market. Locations are vital – close to the CBD, waterfront, transport, are all desirable, and facilities such as car parking, views, and also a reasonable sized deck is very important – offering either morning sun or afternoon sun.”
• How well known is the serviced apartment concept in New Zealand, among leisure and business travellers?
“It is a growing segment – with Quest and Waldorf Apartments offering a selection – and the the hotels are moving into serviced apartments, such as The Sebel, Heritage Hotels, Quay West Hotel, The Standford, Pullman Hotel and more. In New Zealand we have had motels for a very long time – so the next step up is the serviced apartment – which is taking off as the option of choice. We are seeing hotels moving into this sector as travellers are wanting a larger room and the ability to prepare simple meals.”
• How big an impact has Airbnb had on your business, and on the more traditional serviced apartment/aparthotel operators?
“Airbnb is just a channel marketing tool – we use it as a distribution and marketing platform. The issue is more the quality of apartments that they are now hosting and the issues of those owners whom don’t understand that they are in a service industry and need to be professional by offering quality and service. We get issues with people overbooking their apartments, and also not being available to assist their guest. In New Zealand we are experiencing building owners making decisions not to allow apartment owners the opportunity to list on Airbnb, due to problems with owners taking responsibility for their guests.”
“We have had issues with Airbnb – in getting payment from them – when a guest extends they are not good at collecting the additional payments. We also have had issues with Airbnb agreeing to refund money due to people cancelling their bookings – We have a strict cancellation policy and travellers should be making claims against insurance if they cancel bookings. Have you ever tried to ring Airbnb ? – they are a faceless organisation – which doesn’t provide very good service at times.”
• What are your plans for Quinovic Viaduct over the short, medium and long term?
“Quinovic Viaduct is in a growth plan. We are on target to reach 250 apartments/townhouses under management. Over time we hope to expand with apartments on our website in Rotorua, Taupo, Wellington, Nelson, and Christchurch. Queenstown would be the one market we would like to enter – but this will come in time once we are firmly established in the other main business and tourist centres.”
