The serviced apartment market in Bangkok relies on both short- and long-stay guests. But in light of coronavirus-related travel restrictions, short-stay demand has plunged as global tourism has come to a halt, according to property consultancy CBRE.
Under the circumstances, operators of serviced apartments are more likely to focus on long-stay expatriates to adapt to new and evolving market conditions. This is not the first time the sector has been challenged by changing market needs.
"The exponential growth of Thailand's tourism industry, from 10 million [foreign arrivals] in 2003 to almost 40 million in 2019, caused serviced apartment operators to gradually focus more on the daily-rate market to maximise revenue," said Theerathorn Prapunpong, head of advisory and transaction services (residential leasing) with CBRE Thailand.
"Long-stay guests provide consistent occupancy at a lower average rate per night, whereas short-stay guests provide variable occupancy but at a higher average rate per night. This explains why most new serviced apartments are now applying for hotel licences to access both markets and diversify risk."
The slowdown in the economy, further exacerbated by the outbreak of Covid-19, has negatively affected long-stay demand in addition to short-stay demand.
Nevertheless, the long-stay rental market has shown much more resilience to the effects of Covid-19 as ongoing yearly rental contracts are often covered by expatriates' companies.
"The combination of long- and short-stay guests is likely to continue as a trend in the future, especially with Covid-19 highlighting the needs for adaptation by potentially tapping into more diversified markets," Mr Theerathorn said. "However, not all serviced apartments will have the necessary flexibility to tap into both markets."
Older serviced apartments often have structural limitations that legally prevent a hotel licence from being granted. Even after a hotel licence is granted, there is no guarantee all serviced apartments will benefit from having both short- and long-stay guests.
Focusing on short-stay guests puts serviced apartments in competition with hotels, which might not necessarily lead to positive results. In addition, there are long-stay guests who do not appreciate the increased traffic as well as impact of short-stay travellers on their privacy.
Many serviced apartments that were specially designed for Japanese expatriates are also less flexible. They only allow Japanese long-stay guests and have unique services and amenities for their clientele, such as Japanese toilets and room interiors. The unique standards of these apartments geared towards Japanese tenants might be incompatible with the needs of the average short-stay traveller.
Going forward, the future of the serviced apartment operating model is leaning towards a mix-and-match model between short- and long-stay guests, according to CBRE.
Unfortunately, not all serviced apartments will be able to join this new trend.