The line between hotels and serviced apartments has softened in recent years. Branded hotels have begun expanding into the terrain of extended stays, while some serviced apartment players are now offering daily room rates. The Grand Millennium Beijing is a case in point. Traditionally a hotel brand, it will begin leasing its first serviced apartment properties in China – physically connected to its existing hotel – in December. Guy Feest, general manager of Millennium Residences, the serviced apartment half of the Grand Millennium Beijing, talked to CHINA ECONOMIC REVIEW about how the trend of multinational companies localizing is unlikely to keep his residences empty.
Q: How has the relationship between hotels and serviced residences changed?
A: All of the major hotel companies have begun looking at a piece of land and saying, ‘I can build a hotel, which is subject to occupancy peaks and troughs that can be quite volatile, or I can build a mixed-use property that has a hotel, a serviced apartment building, perhaps also a shopping center, and maybe even offices.’ This means that when a hotel is not doing so well, perhaps the apartments are consistent in their occupancy and can generate a baseline of revenue. [Guests] are coming to understand that, whether it is for two weeks to a month, or three, six months or longer, someone could stay in a hotel room that is very comfortable and has all the services and facilities, but it’s still a hotel room. You know that you’re in a temporary space.
Q: How do room rates compare between serviced apartments and hotels?
A: There are some serviced apartment companies that do lease out their serviced apartments on a daily basis just like a hotel. In those situations, because they don’t have a hotel attached to them, they can do that. Their prices will generally be lower than a five-star hotel because they don’t have some on-site facilities. There would a price difference of about 20-30% on a daily basis. But for us and other serviced residences with hotels attached, it doesn’t make sense to compete on a daily basis.
Q: What do you think clients are looking for most in a serviced apartment?
A: There are people who are looking for a lot of personal care and attention, just like you would have in a hotel. You will get to know the person who cleans your apartment on a first-name basis. Serviced residences allow us the luxury of getting to know our residents much more intimately than someone who stays in a hotel for two or three days. Then there are people who don’t want that personal care and attention and just want everything to work. Because they’re busy people, the last thing they need is to come home to issues and challenges.
Q: How big a part do you expect Chinese clientele to play for the Millennium?
A: There’s a lot of potential from Hong Kong, Taiwan and the mainland as well. In the past, there have been a lot of foreigners coming here, but I see budgets of a lot of Southeast Asian travelers coming to Beijing getting to the point where they can afford to stay in a five-star hotel or a serviced residence. I see lots of multinational companies (MNCs) and offices around us in the central business district (CBD), and if the process of localizing positions happens, then [those employees] are right next to us. And [the companies] are going to need somewhere for these people to stay, and have expectations of an international standard of living. We expect quite a lot of our business to be Asian.
Q: What supply and demand trends are you seeing in Beijing?
A: There has been a huge amount of development in serviced residences in the past few years. When I first came to Beijing a decade ago, you could count the number on one hand. Now, serviced residences seem to be popping up everywhere. The challenge for us is not that major brands are doing them, but the non-branded serviced residences are competition to us, especially if they have a little bit of experience. That’s why I think looking at this market of Asian corporate guests, instead of purely concentrating on American, Japanese or European expatriates, is probably the way to go. There is so much supply of serviced residences in Beijing, I don’t think the traditional pool of expatriates has expanded anywhere near the rate the space availability has. Looking into the market of Asian expatriates employed specifically by MNCs will help us achieve the kinds of occupancies we want to.