Looking to the future: the next five years in the German market
In the fifth of a series of reports from Germany, Rosa Höhn, director of operations, at SMARTments business, outlines the future of long-stay travel and the changes serviced apartments must undergo to adapt.
You don't need to be a prophet to predict that the world in the next five years will change faster and more thoroughly than in any previous five-year period - a rule that is bound to prevail. Digitalisation, significant demographic shifts, new work and business structures plus changed mobility are among the drivers of a dynamic development. Such advancement naturally is also having a major impact on the market for serviced apartments. To identify these changes at an early stage, we at SMARTments business Betriebsgesellschaft and our parent company, the GBI Group - Germany's largest hotel project developer - regularly review our considerations and strategies. We interview trend researchers and futurologists, and we carry out extensive resident surveys in our properties - always with the professional help of the highly respected Moses Mendelssohn Institute. And GBI, as a project developer, talks intensively to all operators and investors in currently more than a dozen serviced apartment properties under development. This dialogue in turn gives rise to a competent, international perspective, since it is above all creative new brands that are pushing into Germany, developing their properties together with GBI, such as Citadines, Capri by Fraser and Adina.
Through extensive and regular research, we find out what the preferences and needs of long-stay travellers are, in which directions serviced apartment concepts are developing and to what market conditions players should adjust.
Much of the change is vital because phases of work and leisure are increasingly overlapping; a separation is hardly discernible any more. Anyone who lives in a SMARTments business for a few weeks or months will therefore want to make as few trade-offs as possible as far as their individual needs are concerned.
Central locations, added benefits.
A good location, of course, continues to be of top importance for the serviced apartments in the future. However, under the changing current conditions, certain shifts in the choice of location are likely to occur in the coming years. Our systematic surveys of guests of SMARTments business indicate: It has now become even more urgent for travellers to have a good connection to local public transport.
This is also due to the fact that the addresses targeted by the serviced apartment guests are becoming increasingly diverse. Some destinations are in the centre, others in commercial areas and still others even in other areas of the respective conurbation. There are also an increasing number of cases in which long-stay guests alternate between several contact addresses during their stay. The project worker who works for a company for several months and has to go to the same address day after day becomes rarer.
Based on these results, we will consider the aspect of good public transport connections even more intensively than before when deciding on the location of our properties. Also absence times of the guests are becoming more flexible. Rigid "from nine to five" working cycles can no longer be presupposed as a rule - a fact that must also be taken into account when choosing a location. After all, guests want attractive leisure and sports facilities to be easily accessible at all times. In the future, operators of serviced apartments are well advised to conclude cooperation agreements with the appropriate companies - especially if they offer attractive prices in the budget category, enabling guests to visit fitness studios or sports clubs on a secured and discounted basis. The same applies to theatre performances and other cultural events if requested by the travellers. The guest shall not miss anything!
Because guests want to live their different lifestyles and preferences more intensely and want different types of stays, an increasing differentiation between brands is foreseeable, namely between "aparthotels" (stays of several days) and "commercial serviced apartment houses" (several weeks or months). A differentiation is also becoming apparent regarding the scope of services, ranging from full service offers to limited service concepts. In the latter case, for example, the reception desk is only staffed by the hour and the range of services is limited.
This is also linked to a progressive segmentation of the sector into budget-oriented products, midscale and upscale offerings that is also reflected in the size and efficiency of the respective projects. In the coming years, smaller units with optimised space utilisation and flexible useable public areas (co-working, lounge, self-service catering, and offers from vending machines or counters) will continue to be in particular demand.
Professionalisation of offerings
Already in the past years a clear internationalisation and professionalisation of the offer of serviced apartments was noticeable. While the segment was initially characterised by many small, individual providers - with facilities of less than 50 units - the projects became larger and larger. Nowadays, the properties usually comprise more than 100 units and more and more chain operators are active in the market. This trend will definitely persist in the coming years.
Inevitable market shakeout
The general conditions for a further growth in the market for serviced apartments in Germany are very favourable, indeed, and there is a considerable development potential. However, this alone does not guarantee success. At present there are some purely "investment-driven" project approaches in the segment - stimulated by the high demand from tenants and investors - that should at least be critically challenged from the operator's point of view. Sustainable developments over the coming years are not possible in this way. In particular with some market entries, a lack of well thought-out concepts can be observed. There is no clear positioning of the project, locations are chosen arbitrarily and without a consistent system, there are no clear ideas about the targeted clientele as well as the appropriate service offer and price structure. In the current boom times this might work somehow, according to the frequent assumption. But only the right concept at the right location can be a model for success - a truism that applies now as before.
Changed customer structure
Serviced apartments will continue to gain in importance for travel planning in large companies, as the significant price advantage over hotels, especially for longer stays, is now well known and in demand in the travel agencies and corporate HR departments. Since multi-local work models are becoming the rule rather than the exception in today's businesses, accommodation planning must be secured by basic and special agreements.
Other motives for long-stay stays are becoming even more relevant than the industry has previously portended, namely the arrival of "digital nomads" and educational enterprises of all kinds.
Digital nomads only need a laptop, tablet and mobile phone to work - and for a few weeks or months they choose the place they feel they like, places also promising interesting contacts. These modern migrant workers prefer to stay in serviced apartments in view of the price advantages, as the costs for long stays often come close to the price level of a youth hostel. And this with a very high quality accommodation standard that can more than compete with budget hotels, promising much more individuality as well.
The reasons for the stays of those hungry for education range from the obligatory software course for the new job through joint further training with colleagues to the self-financed intensive language course.
The accommodation requirements of these increasingly relevant customer groups differ from those of the customary project staff: many of the "educational guests" and "digital nomads" spend more of their time in the house. That is why the cooperation offers mentioned are particularly important to them.
Modified equipment requirements
Today's guests expect a certain office infrastructure in SMARTments business. Even those who see the serviced apartment more as a place to live than as a place to work usually do not want to do without modern office technology. To ensure that this is not provided at the expense of the individual guest room, intelligent concepts are called for in communal areas, for example through a multi-functional device (printer, scanner, photocopier) accessible in the communal areas but controlled by every resident via the internal network. Data protection and confidentiality are guaranteed by an individual print release system.
The furnishing of the room will also undergo certain changes. This includes, for example, an even more comfortable working area. Since work and leisure phases are increasingly fusing, a 1.60 metre wide bed should also be provided as often as possible in the serviced apartment. Even if the partner is present only on a few days a month, the guests want to be comfortable at night, don't they?
The guests expect to have a direct personal contact for their personal concerns during long-term stays. This is also in the focus of our SMARTments business concept. In return, the guests are also willing to forego any personal contact when it comes, for example, to booking, checking in or losing their key card - there, everything runs fully automatically. However, the guest expressly wishes the staff to be clearly visible and accessible.
Progressive digitalisation: Digitalisation is a great challenge for serviced apartments in three technological dimensions, concerning:
- guest requests
- facility operation
- building services engineering
In the coming years, serviced apartments will have to keep pace with the digital upgrading of residents. The average SMARTments business guest already wants to connect between three and four of his own devices - from smartphones, tablets and laptops to several TV sticks (Apple TV, Amazon Fire, ....). This number should continue to rise, keyword: "bring your own device". Mirroring and streaming will require even better Internet quality in the future and the provision of additional technical aids (USB interfaces, cables, etc.). A comprehensive, authentic online presentation of the apartments is important to better meet the high information needs of long stay bookers. Augmented and virtual reality technologies will become far more important alongside social media.
This also means that customers can book exactly the room they want to their satisfaction. If a guest would like to live on the first floor, with the morning sun shining in the room or if the last room at the end of the corridor is desired, then the customers will wish to choose this online. With our SMARTments business series, we are just launching an app that meets exactly such wishes.
A seamless omni-channel booking process must offer communication capabilities beyond telephone and email - e.g. via WhatsApp, various social media channels or video chat.
The automation of processes is indispensable to increase operational efficiency. On the one hand, by automating routine tasks, resources can be released that can be used to provide more personal service to the guests; on the other hand, the cost pressure caused by increasing competition can be addressed. Similarly, the preferences of guests can be precisely taken into account by strategically collecting and evaluating data.
Smart building technology
The Internet of Things (IoT) will help to deliver a level of service that cannot be replicated by manual processes. Through smart building management systems operating with sensors, hotel buildings can be continuously monitored, and data can be used for predictive maintenance to prevent failures or fix issues before they happen or before guests can complain.
For many properties in Germany, energy is one of the larger fixed costs, so increasing efficiency must reduce consumption produces financial savings. Smart Energy Tracking monitors and reports on consumption. With usage reports as the basis, Smart Energy Management can then optimise settings, i.e. through modes that automatically engage lower energy settings, if rooms are not occupied.
The bottom line is that the future prospects for serviced apartments in Germany are favourable, not only thanks to the increasing number of guests. The changes in equipment, concepts and marketing that will take effect in the coming years demonstrate that the market is adapting well to the ever-changing needs of travellers looking for accommodation for several weeks or months. They will find a good offer between Hamburg and Munich, between Cologne and Berlin. And for operators and investors there are many tempting opportunities.
To find out more about the extended stay sector in Germany and beyond, don't miss Serviced Apartment Summit RECHARGE which takes place in Berlin on January 22 and 23.