All-day convenience still in demand
Serviced apartment operators believe there is still demand for 24-hour concierge properties for business travellers and couples amid financial instability and overall economic uncertainty.
'Demand may be softer but, at the end of the day, Hong Kong is still a financial hub and companies will still bring in employees even though they may be more stringent in their spending over the next 18 months,' said Pilar Morais, executive director of Chi International, a relative newcomer to the scene which only started operations a year ago.
Average serviced apartment rents dropped 2.9 per cent quarter on quarter in the third quarter of the year, with research from Colliers International estimating average prices at HK$51.44 per sqft per month as at the end of August.
But the drop in rents had not deterred Ms Morais who said her company, which runs three serviced apartment properties - two on Shanghai Street in Yau Ma Tei and another on Connaught Road West - has plans to launch another on Nathan Road in Jordan next year.
The project, on the main thoroughfare of Kowloon, will offer 52 serviced apartments.
'In view of the market slowdown we will be holding off after the opening of our fourth property and won't be looking to open any more,' Ms Morais said.
Operators whose monthly rates broadly range from more than HK$10,000 to HK$60,000, depending on size and location, expect the downturn to have some impact on profitability.
Heddy Li Suk-fan, director of operations and project development at home2home, said: 'The climate does have an impact on profit, but we still expect to make profit this year because the economy was very good in the first and second quarters of the year. Even if it slows a bit there is not a big impact on us.'
Ms Morais believes the slowdown in the economy may weed out some smaller operators but is confident that the sector will continue to be resilient.
'The serviced apartment segment might be able to weather the volatility a little better than the rest of the market because there will always be people who need a place to live, which is the reason why serviced apartments have been so popular in Hong Kong,' Ms Morais said.
The knock-on impact of the global economic crisis, which could send capital values of luxury residential units in Hong Kong down 15 to 20 per cent over the next year, according to Colliers, may be a blessing in disguise.
Ms Li said: 'Given the uncertainty in the market you may actually see people opting for serviced apartments as they would rather have the flexibility of short-term accommodation than committing for a long period.'
Though the size of a serviced apartment varies from a few hundred to more than 1,000 sqft they are almost always designed as either a studio or a one- to two-bedroom flat to meet the needs of single business travellers or a couple.
Operators stuck with sites on Hong Kong Island initially but many, including Shama Serviced Apartments and Chi International, have made a recent push into Tsim Sha Tsui to capture business from the International Commerce Centre offices.
There are now fewer than 10 serious contenders in the high-end boutique serviced apartment space. Each of them owns several properties in or near key areas of business with some of the established names, for example home2home, posting occupancy rates of 95 per cent for its properties in Central.
Value is increasingly being added to their properties through personalised services.
Ms Morais said: 'Our properties have a 24-hour concierge service team trained to answer and assist all of our guests' requests. We look after the small things so they don't need to worry about them.'
Home2home offers a free grocery delivery and small quantity storage service for its tenants. The firm also seeks to enhance the experience of its guests through technology.
Ms Li said: 'We are focused on providing guests with practical technologies that can enhance their everyday lives.'
She said that the company was the first to provide iPod docks in its rooms. There were also plans for Apple TV.
As serviced apartments grow in sophistication, operators have seen a shift in client mix in recent years. 'Young professionals, especially bachelors, are increasingly staying at our serviced apartments for the long term. They just don't want the hassle of renting and would rather stay in a place where everything is taken care of,' Ms Li said.
Long-term tenants now comprised about half of home2home's client pool, she added. The serviced suites at Four Seasons Place has observed a similar trend and has seen its client base widen.
Belinda Kuan, assistant general manager at Signature Homes, Sun Hung Kai Properties luxury residential leasing arm, said: 'Young professionals, eligible singletons and retired baby boomers are considering serviced suite hotels an attractive option for luxury private space or opulent homes for retirement.'
Sun Hung Kai was one of the developers of Four Seasons Place. 'These new clients tend to be wealthy and are all the more willing to pamper themselves in luxury living with professional caring services. In time they may prove, as a group, as vital as business travellers,' Ms Kuan said.