Bangkok serviced apartments faring better than hotels: JLL

Bangkok serviced apartments faring better than hotels: JLL

Serviced accommodation faring better than hotels, while mixed-use format gains traction, writes JLL

Staybridge Suites Bangkok Thonglor is among the developments catering to short- and long-stay clients.
Staybridge Suites Bangkok Thonglor is among the developments catering to short- and long-stay clients.

Thailand's hospitality industry has been hit hard by the Covid-19 pandemic and serviced apartments in Bangkok are no exception. However, a recent study by the property consultancy JLL shows serviced apartments have generally fared better than hotels in current and past times of distress.

JLL expects the pandemic to boost the growing trend towards a mixed-use format offering hotel rooms and serviced apartments in a single development, as well as continuing interest from local and regional developers in developing standalone serviced apartment buildings.

A JLL study of international-grade hotels and serviced apartments across Bangkok between January and April 2020 showed over 80% remained open at the end of April, albeit with average occupancy down 30% year-on-year. During the same period, the majority of hotels across the city were shut down and those that remained operational saw occupancies drop by nearly 50%, many into single digits.

"While the ongoing tourism slump has forced the majority of hotels across Thailand to close their doors to lower fixed costs, most of Bangkok's serviced apartments have remained open to serve long-stay guests," said Pimpanga Yomchinda, vice-president for investment sales in Asia with JLL Hotels and Hospitality Group.

"Tourists or short-stay guests represent a smaller demand source in Bangkok's serviced apartment sector. Though we have seen serviced apartments shifting their guest acquisition strategies by increasing the portion of short-stay guests in recent years, long-stay guests, most of whom are expatriates, have remained their top source of demand. This explains why the serviced apartment sector has felt a relatively smaller impact from the Covid-19 pandemic than hotels that rely more on short-stay demand from tourists."

Historically, the average distribution between short- and long-stay guests in serviced apartments has been 25/75, with a gradual shift in recent years to 40/60, JLL has found.

While the majority of hotels do not have long-stay guests, there has been a recent trend in hotels expanding into the extended-stay market. Examples include Bangkok Marriott Hotel the Surawong and the upcoming Novotel Living Bangkok Sukhumvit 34.

"With core demand from a long-stay customer base, serviced apartments have proven to be more resilient than other hospitality segments in the time of crisis," said Alex Sigeda, vice-president for strategic advisory and asset management at JLL Hotels and Hospitality Group.

"A similar pattern was witnessed during past events that had major effects on Thailand's tourism industry, such as the great flood in 2011, political unrest in 2013-14 and baht appreciation in 2019."

In the basket of hospitality developments that JLL monitors, there are over 90 serviced apartment developments with more than 9,500 rooms across Bangkok, accounting for 7.5% of the city's combined stock of serviced apartments and hotel rooms.

While many of these developments are unbranded, a large number are managed by international and domestic operators such as Marriott International, InterContinental Hotel Group, Ascott, Oakwood, Onyx, Chatrium Hotels & Residences, and Jasmine Group.

JLL expects the current pandemic to accelerate the emergence of a hybrid accommodation development format that combines hotel and serviced apartments.

"As investment asset classes, serviced apartments and hotels have their respective advantages and disadvantages," said Mr Sigeda. "The former generally offers a more efficient and stable operation that keeps the operator relatively safe in a down market.

"The latter generally offers more yield opportunities during periods of high demand, given a more flexible inventory without long-stay offerings."

To help bridge the gap between the two models, regional and global operators have been introducing a number of hybrid options into their brand portfolios, focusing on short-stay demand, while still reserving a portion of their room inventory for the long-stay segment, according to Ms Pimpanga.

"We expect this trend to grow further as operators have realised complementary advantages of the two accommodation types," she said. "Among the recent examples in Bangkok are Staybridge Suites Thonglor by IHG and the upcoming Lyf Sukhumvit 8 by Ascott."

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