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Thanks to the arrival of some major international players from
both the residential and hospitality sectors of the real estate industry,
serviced residences have quietly achieved an elevated level of status
and prosperity in Bangkok in recent years.
And according to industry analysts, they are poised
to reap the rewards of their unique appeal for several years to come.
A serviced residence – or serviced apartment – is generally a residential
establishment held under sole ownership and with a single management entity
providing accommodation with communal amenities such as a restaurant,
laundry services, kitchen, recreational facilities and a business centre. To
put it in simpler terms, it’s a hotel with more space but without all the
extras.
Because the market caters to the whims of tourists and long-stay
residents alike, serviced residences have access to the advantages – and
pitfalls - of both the hospitality and property sectors.
”In terms of operations, serviced apartments are a very attractive
investment because the profits that they generate are higher than hotels,”
says Graham Laird, CEO of real estate services firm NAI Andrew Park. “Mainly
it’s a trimmed down hotel and therefore you have less overhead and you have
less staffing involved so from an investment point of view it’s
interesting.”
According to CB Richard Ellis Thailand Research & Consulting Services,
serviced apartments in Bangkok enjoyed a strong year in 2005 thanks to high
occupancy rates and increased rental rates, and this is expected to carry
over throughout 2006. Vacancy rates in the fourth quarter of 2005 were low
-12 per cent – with rental rates at 994 baht per sq.m. for an average grade
A rental, with 8,241 sq.m. of total supply.
”The total supply of serviced apartments in downtown Bangkok [is] 8,565
units at the end of 2005, a 10 per cent increase compared to 2004,” says the
firm. “In 2006, supply is expected to remain healthy, with 854 new units or
10 per cent located in four new serviced apartment projects.”
Laird says one event that impacted the market recently was a change to
the Hotel Act, effective May 2005, which requires serviced apartment
projects to obtain hotel licenses if they intend to target tenants that will
stay with them for less than 30 days.
”There has been a lot of pressure from the traditional managers and
owners – more the owners – [of hotels] to stop serviced apartments from
taking short-term clients,” Laird says. “Therefore they all have to get
hotel licenses. The view was that the serviced apartments were eating into
the traditional hotel market. You can say, ‘well that’s right to a certain
extent’, but I think what was happening was that serviced apartments were
delivering a product that the market wants.”
Given that serviced residences are ‘homes away from home’ for countless
executives and businesspersons for extended periods of time it’s not
surprising the competition in Bangkok is fierce. Fortunately for renters,
this has translated into a high quality product, with each residence
fighting to keep its share of the market.
Bangkok´s serviced apartment market is led by three major players: The
Ascott Group, the President Group and Centre Point.
The Ascott Group – headquartered in Singapore- is perhaps the best known
of the pack, given that it owns over 15,000 serviced residence units in
Europe, Asia Pacific, and the Gulf region. It pioneered Asia Pacific´s first
branded luxury serviced residence in 1984 and operates three brands – The
Ascott, Somerset and Citadines.
The Ascott Group recently launched its first Citadines serviced
residence, Citadines Sukhumvit 16, as part of its joint venture with
Thailand’s Thakral family. The launch coincides with Ascott’s plan to roll
out five Citadines properties with about 500 units in Thailand by 2010.
Citadines Sukhumvit 16 is slated to be opened in the second half of 2006,
while Citadines Sukhumvit 23 and Somerset Grand Sukhumvit are set to be
opened in the first quarter of 2008.Citadines Sukhumvit 23 will have
140-units. Upon completion, Ascott will manage the property for a period of
10 years with an option to renew for another 10 years, subject to agreement
from both parties. The project will offer studios and one-bedroom units as
well as ala-carte services where residents can choose from a menu of
services to suit their needs and pay for what they need.
And according to Laird, this is why many are choosing serviced apartments
over traditional hotels: “[Guests] want a little bit more space and they
don’t necessarily need to be overwhelmed with all kinds of extras services
that end up costing quite a bit of money,” he says. “I remember several
years ago asking a client who was staying in a serviced apartment who had
been staying in the Sukhothai [a high-end Bangkok hotel] before and I said
why are you moving from the Sukhothai to a serviced apartment? His reply was
‘I don’t need all that service. Give me the suite or the apartment, let me
have service when I want it but don’t send somebody knocking on the door
every 10 minutes…He was ‘all hoteled out’. And I think that is a trend,
where people obviously want maid services and so on but they don’t
necessarily need to be pestered every 10 minutes with something else. I
think serviced apartments on the whole are doing extremely well…occupancy
rates are very high.”
Ascott’s Chief Executive Officer, Mr Cameron Ong, also noted that the
country’s high number of expats is fuelling the success of serviced
residences. “Thailand’s positive prospect as an investment location would
ensure a steady supply of expatriate demand for serviced residences in the
country, especially in the capital Bangkok,” he said. “Sukhumvit, being a
central business district and one of the popular shopping locations in
Bangkok, is a prime location, so it makes business sense for us to establish
our footprint there quickly. The opening of these three new properties in
the Sukhumvit area will enable us to capitalise on economies of scale, and
offer greater options in the types of rooms and services to cater to
business executives working in that area.”
With the addition of Citadines Sukhumvit 23, Ascott has over 2,100 units
in nine properties in Thailand. These include one Ascott-branded property,
four Somerset-branded properties, two Citadines and the Omni Tower in
Bangkok, as well as another Somerset in Pattaya. Somerset Nusasiri Pattaya
is expected to be opened in the second half of 2006.
Another well-known international brand that has entered the Bangkok
market is Fraser Serviced Residences. In July 2005 the company opened Fraser
Langsuan, which features 125 apartments comprising studio, one-, two- and
three-bedroom units as well as penthouses. It is located along Langsuan Road
(Soi Langsuan), just off Phloenchit Road and in the city centre near
Bangkok’s business nexus.
Mr Choe Peng Sum, Chief Operating Officer of Fraser Serviced Residences,
summed up their interest in Bangkok as follows: “Today’s astute business
travellers want more than just a comfortable apartment to live in. Given
their diverse lifestyle needs, expatriates want facilities and services that
cater to all members of the family. This is exactly what Fraser Place,
Langsuan will offer.”
But, from the prestigious Shangri-la brand to internationally-recognized
Marriott, hotels are fighting for their piece of the pie too, amounting to
even greater competition.
“You’re getting a bit of a crossover where hotel management companies are
getting involved in serviced apartments as well,” says NAI Andrew Park’s
Laird. “For example at All Seasons Place [on Wireless Road] you’ve got the
Conrad Hotel and Residences in the same building. Again, I think it’s a
product the market wants and people who are here longer want more space.
You’ve got some people in one, two year contracts because they don’t want to
go through the hassle of fitting out an apartment, and they don’t want to
have to worry about employing a maid. If you’re in a serviced apartment you
don’t have to think about laundry, cleaning, whatever. You arrive with your
luggage and are in business right away. People coming in on three or six
month contracts are certainly not going to rent a condominium.”
According to Khun Maneeporn Koatkhao, Director of Corporate Sales at
Shangri-La Bangkok, they expect occupancy rates in Shangri-La Apartments to
reach close to 90 per cent for the first quarter of 2006.The minimum length
of stay at their apartments is one month.
As would be expected, 80 per cent of the Shangri-La Apartments’ guests
are executive corporate clients, and 20 per cent retirement and leisure.
What is surprising is the average length of stay: 55 per cent stay over one
year, 15 per cent stay 3-6 months, and 30 per cent stay 1-3 months.
One reason serviced apartments that are linked directly to hotels do so
well in the market is that guests have the benefit of full-hotel services
with the added convenience of a fully-equipped kitchen. Maneeporn says their
apartments offer value as well, as their rates are on average 50 per cent
cheaper than a long-stay rate in a five-star hotel. (Rates at the Shangri-La
apartments range from Bt80,000 to Bt170,000 per month, and include
utilities, cleaning with towel and linen change three times a week and
discounts for food and beverages at the hotel.)
Other serviced apartments worth mentioning that cater to luxury seekers
include Meritus Suites at State Tower, best known for ‘The Dome’ restaurant
and bar on the top floor, Centre Point Thonglor, President Solitaire,
Natural Ville on Langsuan, and Emporum Suites, connected to the high-end
Emporium shopping complex on Sukumvit.
Emporium Suites, owned by local developer City Realty, is experiencing
year-to-date occupancy rates of around 94 per cent. Khun Rudee
Sanguandeelkel, director of sales and marketing at Emporium Suites, says the
overall market is doing well at the moment – for both Grade A & B
residences. As for Emporium’s own success, she attributes this to several
factors.
”Number one is location,” says Khun Rudee. “Next, the services and
facilities we provide for our guests. The hotels have the big lobbies,
outlets, function rooms, etc. We don’t have as many outlets as the hotels.
We have pros and cons; different services.”
Rudee says Emporium has a good balance of clients, with 40 per cent
short-term and 60 per cent long term – meaning one month and up. Of those
figures, 80 per cent are corporate clients, and 20 per cent leisure. The
reason a long-term guest would choose Emporium Suites over a condo rental is
obvious, she says. “[Long-term guests] don’t need to find a maid, no need to
buy the cooking utensils, we provide them everything. We have room service
24 hours a day. Our concept is exactly the same as a five-star hotel…we
provide the same services.”
Since opening in 2000, Rudee says the market has changed a lot, as there
are more competitors, new serviced apartments and new hotels. But,
succeeding in the face of all this competition is clearly not an easy – or
cheap - task. “We need to update our services every month, she says. “We
want to be the leader, we don’t want to be the follower. When the [new
serviced residences] arrive, we upgrade our property. This year we plan to
restore all the rooms to look brand new, last year we updated the carpets,
TVs, and added high speed internet. When the customer comes to stay at
Emporium Suites they will see our improvements every time. This is our
strategy.”
So, while competition in the serviced residence market is likely to get
even tighter with the arrival of more developments over the coming few
years, it would appear those with the right combination of facilities,
services and locations will continue to prosper.
 Emporium
Suites Serviced Apartments Bangkok
With a prestige location on Sukhumvit
Road, Emporium Suites places residents in the heart of one of Bangkok's
major business, shopping and entertainment districts. The hotel's
location offers easy access to the Phrom Pong BTS Skytrain station and
the green oasis of Benjasiri Park. The facilities at the Emporium
include a swimming pool, fitness centre, spa and many more. |
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