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Serviced apartments a growing market in economic downturn

(chinadaily.com.cn)
Updated: 2008-12-12 16:56

Fraser Suites Top Glory, a new five-star serviced apartment complex in Shanghai's Lujiazui District, opened its doors in late October, just as news of the economic downturn began to worsen.

The impending slowdown in China is not a worry for Choe Peng Sum, CEO of Singapore-based Frasers Hospitality.

"My strategy is to grow deep into the recession," says Choe. "We are optimistic, and maybe that sounds a little too bullish, but frankly, a lot of residential property developments are not selling as fast right now.

"So, you get a lot of owners and developers who are converting their properties to serviced apartments rather than selling them, especially if they are in very prime locations, and that is exactly our market."

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During every economic downturn, certain businesses prosper. The current downturn, which began in the third quarter, has placed the spotlight on serviced apartments' short-term residences that come with furniture and various amenities as an unexpectedly robust countercyclical industry.

Residential property price appreciation in China has been declining steadily and transaction volumes have plunged as the credit crisis has worsened.

Property price increases in 70 major Chinese cities have slowed throughout the year. As the property market slows, developers of residential property are often unwilling to sell their apartment blocks at the new, lower-than-expected prices, but they are keen to lease the blocks to professional serviced apartment management chains.

On the demand side, the serviced apartment business is also recession-resistant.

Serviced apartments are aimed directly at the most lucrative sector of the travel market: the "road warrior" business men and women who spend weeks and even months away from home each year.

The top serviced apartment chains offer most of the perks of a five-star hotel, including maid service, fitness centers, 24-hour front desk service and corporate discounts, and they allow guests to settle in to a home-like living space for months at a time.

In the new economic environment, business travelers are looking for new ways to save money, and serviced apartments are normally cheaper than comparable hotels.

At the newly opened Fraser Suites Top Glory, a traveler can rent a spacious two-bedroom apartment for about $200 per day during the opening period, a rate that is less than a similar five-star hotel.

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