Make Money Starting Serviced Apartments Business

A serviced apartment is a type of furnished apartment available for short-term or long-term stays, which provides amenities for daily use. Serviced apartments typically include soft-furnishings and cooking utensils so that short term tenants need not bring their own, and have cleaning services included in the rent. Serviced apartments therefore include some of the convenience of hotel rooms but can be less expensive than equivalent hotel rooms for longer stayers. Because of the beginning of the boom in longer stay international travel as well as the corresponding increase in the level of sophistication of international travelers, interest in serviced apartments has risen at the expense of the use of hotels for short stays. Benefits may include more space and privacy, convenience when travelling with a family, and the savings associated with cooking one's own meals in the apartment. The Global Serviced Apartment Industry Reports (GSAIR) by The Apartment Service show the operators and their brands, numbers they operate and other information in this varied sector. The term 'Serviced apartment' is an umbrella term covering all the brands models, some with high levels of service and others with a no frills approach creating savings for guests and operators alike.

Types:

The term "serviced apartment" is used when referring to an alternative for hotel accommodation for short and long-stay leisure and business travelers, but distinctions can be made between the different types:

First is the extended stay hotel or "apart hotel," which generally offers a 24 h reception, is located in city centers, and attempts to give the guest a home away from home feeling, within a hotel-like environment. It can range from budget to deluxe, and rooms range from studio apartments (one room that can be used as living area and sleeping area, a little kitchenette and a separate bathroom), to two- or three-bedroom apartments, which offer a separate living area, a kitchen, one or more bathrooms and separate bedrooms.

Because of the availability of kitchen facilities in the apartments, extended stay properties and apart-hotels usually offer no extra services, such as restaurants and bars. However, some extended stay properties have been built as an annex to existing four- or five-star hotels, and the guests in the apartments can make use of the hotel's facilities at no extra charge.

Second is corporate housing. These are residential properties that have been upgraded for shorter term rentals and packaged together with services such as cleaning, utility charges, local taxes, telephone and television for stays of 30 days or more. They can be in city centers but are more often than not on the outskirts of town, within easy access to main business areas.

What both types have in common is that the units are all fully furnished and equipped, including conveniences expected in hotel rooms such as television, DVD, and internet access, but also catering facilities. High end serviced apartments may have luxury features such as European-style gourmet kitchens, generous closet space, full-sized washer and dryer, ceramic tiled bathrooms, over sized tubs, and high-tech wiring/networking capabilities.

If you have the right experience or property in good location, starting serviced apartments business is a profitable proposition.

According to a recent global survey of serviced apartments operators, business is already improving, boosted by steady recovery after the recession of 2008- 2009. Even operators in slow recovery economies felt that the 3rd quarter of 2010 would see rates and occupancy return to 2008 levels.

If you have worked in the hospitality industry, whether in marketing, food or housekeeping department, or in company running the administration including catering and housekeeping, you would have the skills to run or market serviced apartments.

If own apartments near business districts or airport, rather than let them out for rent, you can convert them into serviced apartments and make more money. If you have the time or interest, you can run it yourself or hand it over to an operator.

Market Segment for serviced apartments

Decide what Market Segment or segments you want to target :

leisure travelers
people looking for extended stay (e.g., expatriate managers, corporate needing long lease to use as guest house for employees on business trips)
business travelers

This will decide your marketing strategy and how you need to furnish the apartments. Business travelers need internet access, proximity to conference venues, trade fairs, night life, etc. extended stay customers need homely meals, a quiet residential locality, proximity to public transport, ATMs.

Sales channels

Website optimized with SEO techniques
GDS (global distribution system), such as Amadeus, Sabre, if you afford it. The GDS companies, make their systems accessible to consumers through Internet gateways
Personal selling
Online PPC ads (Google Adwords)

Financials

The major investment would be in furnishings to match the standards of a business or budget hotel :

Luxury furniture, linen
Fully equipped kitchen with refrigerator, microwave, crockery, cooking utensils
Air conditioning
LCD TVs in each room
Safety locker
Security systems

Running costs consist of staff salaries : admin manager, reception, cooks, housekeeping staff, food provisions, toiletries.

Business Plan

Make a business plan comprising marketing strategy, recruitment plan, investment, sales projects, financials (Profit & Loss statements) for at least three years.

Calculate the break even occupancy levels at multiple price points and decide your rentals. Bench mark it against competition, both other serviced apartments and hotels in equivalent category.

If you are in North America, UK or Singapore, do consider becoming a member of the appropriate Association :

Corporate Housing Providers Association in U.S.A

Association of Serviced Apartment Providers in UK

Serviced Apartments Association in Singapore.

Agreeing to the Association’s code of conduct is mandatory and includes a requirement to partake in a quality program to ensure the continual maintenance and improvement of the service that they provide. This will boost customer’s confidence in your quality.

Demand:

India

The global slowdown from 2008 and prevailing high room rates, have reduced hotel occupies by 57% in cities like Bangalore, Hyderabad and Pune’s four-star hotels. Serviced apartment entrepreneurs are re-looking at the market. Demand for serviced apartments in Bangalore, Chennai, Hyderabad and Pune, and rest of India is increasing, due partly to the growing number of IT parks and multinational corporations operating locally. The growth in serviced apartments supply growth is expected to bridge the demand for hotel rooms in India, and to continue into the next decade.

UK

Association of Serviced Apartment Providers (ASAP) was setup as a fully independent Association. According to the ASAP, during 2009 occupancy levels held up well. Average occupancy across the sector was 83% in London for the first 6 months of 2009, and 69% in the rest of the UK

USA

Many corporate housing providers saw business as flat or decline during 2009, with several cutting expenses. However the Corporate Housing Providers Association predicts that 2010 will see an up-turn.

Tips:

Find out about one of the areas of property that is making money at the moment: the booming serviced apartments market.
Serviced apartments are properties let out on a short-term basis, typically to business visitors, that come with a range of services provided by the landlord, such as laundry or food.
Users of serviced apartments like the flexibility of staying as a tenant in what feels like their own home, plus the significant cost savings that can be made. With savings of up to 25%, staying in a serviced apartment can be a much cheaper option than a hotel.

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