Oversupply fails to deter players
Newcomers continue to enter the serviced apartment business in Hong Kong despite warning signs that rentals are being squeezed downwards by oversupply.
GR8 Leisure Concepts, the latest player in the industry, acquired an old serviced apartment building for more than HK$64 million in 2005 and has renovated it into boutique serviced apartments called Knight on Wyndham, which opened for business this month.
The development offers nine serviced apartments with a net lettable space of 357 square feet each. Monthly rents are HK$30,000.
Michael Tiplady, a senior vice-president at GR8 Leisure Concepts, said the rents were about 15 per cent lower than other serviced apartment projects in the area.
'We charge the project slightly below the market level as we are new in the market. We want to establish our brand name and give incentives to the first round of tenants,' he said.
Target clientele will be young professionals staying in Hong Kong for two to three months.
Mr Tiplady said rentals in the industry were under pressure but he foresaw no problem for his project.
'In our case, we don't really see a problem. Our product is unique in the market as each unit has a different theme. People are always willing to pay for something different,' he said.
GR8 Leisure Concepts is meanwhile developing its first project in the mainland - the Hotel Soul in Suzhou in Jiangsu province.
The seven-storey hotel in downtown Suzhou provides 220 guest rooms with room sizes ranging between 44 and 69 square metres.
The company targets the room rate at 600 yuan per night, the same as other medium to high-end hotels in the city. The hotel is scheduled for opening in April next year.
Mr Tiplady believes the hip hotel could attract young business travellers. 'Most of the hotels here are very much the same. All hotels are five-star grading. There is only one hip hotel in the city currently,' he said.
He said the company was actually looking for development projects in Shanghai before the development in Suzhou, but the land price and development costs in Shanghai were higher than they expected.
GR8 Leisure Concept was set up in 2004 and launched its first hotel project in Hong Kong. Last year, the hotel was renovated and relaunched as a boutique hotel called the Luxe Manor in Tsim Sha Tsui.
The Luxe Manor at Knutsford Terrace is a 14-storey hotel that provides 153 guest rooms and six suites. It opened for business in December last year.
Mr Tiplady said the company was focusing on the hotel and serviced apartment business currently and was preparing to expand to Thailand, Vietnam and mainland cities such as Shanghai and Hangzhou.