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How Strong Is The Corporate Housing Sector?
By Mark Wilson of Globe Apartments
It is not rocket science to anticipate that corporate housing budgets and their employees’ disposable income for rents are falling. What will be the knock-on effect to the serviced apartment sector? The volatility of the corporate housing market is like any other cyclical business; the peaks and troughs have to be managed and, similar to 2002, operators might be looking seriously at their own commitments and depleting their stock levels. Globe Apartments has been a Serviced Apartments Operator for 25 years, managing a portfolio of apartments in Marylebone and the surrounding districts in W1. They report that occupancy levels have suffered during the course of 2008 resulting in adjustments in corporate tariffs and direct marketing activity to encourage Corporate Tenants to try a new service provider. There are a number of high profile, international serviced apartments operators whose quoted tariffs are significantly higher than Globe’s and other private operators, and at times where budgets are under downward pressure, HR departments are starting to shop around, looking for better terms. The sector has experienced huge growth on the supply side in the last 10 years and operators who have relied on large marketing budgets and international sales networks may well have to look at their costings and margins, as smaller providers similar to Globe are expecting an increase in demand as the business world downsizes and looks for better value. Mark Wilson of Globe Apartments (www.globeapt.com, mark@globeapt.com) reflects on the downturn in the corporate sector in the early 1990s, which led to a significant period of growth for Globe as they built new relationships, providing housing for a number of city businesses. He says, “They found us, we provided them with accommodation, and they liked the service and value. Smaller providers offer a certain type of personal service and drive to retain the business that once experienced, the users like and stay. It is on the back of these service levels and value that a number of ongoing relationships have been created, nurtured and retained.
Our own marketing is fairly low key but proving successful in some quarters as businesses are budgeting lower housing costs and looking afresh at this cost centre.” Mark concludes that for procurement departments not to be shopping around at these times means existing corporate housing providers remain in a state of unbridled joy. |
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