Hotel occupancy levels plummeted globally during the Covid-19 pandemic as travel ground to a halt, however the serviced apartment sector remained largely resilient. Serviced apartment brands operating in Asia-Pacific adapted their service model to meet end users’ changing needs and saw occupancy as high as 80 per cent, even during the height of the crisis. Michael Roberts, director for hotels, Asia-Pacific at Savills, explains why this sector has delivered healthy returns for owners and investors during one of the most challenging years in recent memory for commercial real estate. “By virtue of offering self contained long-stay accommodation, the serviced apartment sector was well positioned to offer quarantine contracts to various governments around the region and mitigate the lack of business and leisure travellers during the height of the pandemic,” he said. How to put the ‘luxury’ in luxury hotel ... hint: it's not about fluffy towels In addition, Roberts continued, the strict hygiene protocols required by highly regulated branded serviced apartments offer guests more reassurance than Airbnb-style accommodation , allowing the sector to outperform both mainstream hotels and the various alternative accommodation platforms. “It has also managed to survive increasing pressure from the growing co-living operators,” he said. “Major operators responded by evolving and segmenting their brands to appeal to these various audiences with new concepts such as Lyf by Ascott being rolled out.” Serviced apartments are a “very flexible real estate asset” allowing for easy conversion to various alternative uses such as strata titled apartments, multifamily and student accommodation, co-living and hotels, Roberts continued. “We expect as a result that underperforming and tired assets will see renewed investment and conversion to these alternative uses.” By virtue of offering self contained long-stay accommodation, the serviced apartment sector was well positioned to offer quarantine contracts Michael Roberts, director for hotels, Asia-Pacific at Savills Explaining the value proposition for this type of investment in APAC going forward, Roberts continues: “From an investment standpoint, traditionally the operators of serviced apartment assets took long-term lease contracts on the properties. This clearly weighted the operational and market risk to the hotel operator which was great for investors wanting long term secure income.” “However, with the advent of Covid-19, many operators have changed approach and are returning to management agreements or hybrid lease/management agreements, which removes the lease liability from their balance sheets and shifts the risk back to the asset owner. That said, with the sector’s performance, combined with a backdrop of low interest rates, well-capitalised banks and large amounts of dry powder in private equity/debt funds, we expect to see renewed investment interest in the sector however the bid/ask gap seems to remain throughout the region.” For Oakwood, Southeast Asia remains the fastest-growing region after mainland China, with CEO Dean Schreiber citing a strong investor appetite in Cambodia, Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam. “We attribute this to the growth of economic expansion in the region as well as the growing middle-class and affluence in the region,” he said. God of Songs ... and Property: Jacky Cheung’s US$55 million Repulse Bay flat Oakwood’s portfolio includes a balanced mix of long- and short-stay options under various brands, a business model that Schreiber says limits volatility in occupancy across the typical cycles of peaks and troughs in a hospitality asset. “This has been particularly evident during the Covid-19 pandemic, where we have seen the unprecedented closure of thousands of hotels around the world,” he said. “In contrast, at Oakwood, apart from locations where we have been governed by the local authorities to close properties temporarily, all our properties have remained open and operational to date. Across our portfolio globally, our occupancy in 2020 was close to 70 per cent.” During that time, the company has also witnessed continued interest from owners seeking to either convert existing hotels into serviced apartments, or partnering with Oakwood on new development constructions. “In fact, we just signed a management agreement to open yet another new property in Thailand in the next half of the year,” Schreiber said. Throughout the pandemic, Oakwood continued to grow its portfolio in the region opening its seventh property in Thailand, Oakwood Hotel & Residence Bangkok, in May 2021 and its fifth outpost in Singapore in June. “This is followed by additional property openings in Vietnam, Thailand and Indonesia in the second half of the year,” Schreiber said. “We also expect to make our brand debut in Cambodia by the end of 2021. We further plan to double our portfolio of managed properties by 2025.” From a user viewpoint, Schreiber notes a “strong trend” of serviced apartments becoming a preferred form of accommodation over traditional hotels. Erika Jayne mansion misery: why is the RHOBH star’s home up for sale? “In recent years, travellers have recognised the flexibility of serviced apartments in meeting their individual lifestyle preferences without compromising on hospitality excellence,” he says. “Unlike traditional hotels, serviced apartments are designed for a residential lifestyle providing the luxury of bigger living spaces, well-appointed kitchens and amenities, as well as comfortable and generous workspaces that are hardly seen in typical hotels. With ‘bleisure’ and the trend of remote work here to stay, the offerings of serviced apartments play into the requirements of a work environment with the comfort and ease of home.” During the Covid-19 pandemic ... we have seen the unprecedented closure of thousands of hotels around the world Dean Schreiber, CEO at Oakwood Schreiber also believes that intraregional travel will take the lead over long-haul post Covid-19, further fuelling demand. “According to GlobalData, intraregional travel accounted for a total of 32.3 per cent of all travellers in 2019, showing the importance of regional links,” he said. “There will certainly be an appetite to travel but closer to home once the travel barriers are lowered.” Similarly, Wong Kar-ling, managing director for Southeast Asia and head of Strategy & Global Operations, The Ascott Limited, says the pandemic has further validated the strength of Ascott’s business model. For example, from April to June last year, during the peak of the outbreak, the brand’s Lyf Funan Singapore had an average occupancy of over 80 per cent. Why the Ritz-Carlton Maldives, Fari Island tops our post-pandemic travel wish list “In 2020, our serviced residences maintained a robust occupancy and revenue per available unit, outperforming our peers in the hospitality industry,” Wong said. “Recognising our strong brand reputation, property owners continue to sign new management and franchise contracts with us.” In 2020, she added, Ascott added more than 14,200 units across 71 properties globally. Despite Covid-19, this exceeds the number of units secured in 2019, marking a fourth consecutive year of record growth for Ascott. Tonya Khong, senior vice-president, head of Asia-Pacific at Frasers Hospitality, agrees that Southeast Asia is pivotal to Frasers’ brand growth trajectory. “The region is home to more than 650 million people with combined GDP of US$3 trillion, and a middle-class population expected to more than double [in size, to] 51 per cent by 2030,” she explained. “These factors, coupled with how economies in the region are performing, means many growth opportunities for us to leverage.” Frasers Hospitality currently has 17 properties in the region operating across Indonesia, Singapore, Malaysia, Thailand and Vietnam, making up 14 per cent of its global portfolio. Khong expects that when international travel resumes there will be renewed demand for serviced apartments. “If all goes according to plan, we aim to have at least seven new properties across Singapore, Kuala Lumpur, Penang, Jakarta and Hanoi by 2024,” she said. Want more stories like this? Sign up here. 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