These articles below can also be found in the June 2009 issue of Serviced Apartment Guide:
So what’s new in the serviced-apartment sector? Find out how its prime positioning and increased lexibility is making light of the downturn
In many ways, the serviced-apartment sector has found itself comfortably positioned to deal with the fallout from the ongoing economic downturn. While a number of properties have responded by becoming more lexible about the length of stay they are willing to offer, most have beneited from the fact that a growing number of people are uncertain about their job prospects and therefore unwilling to take out a conventional, two-year residential lease. Serviced-apartment properties are thus continuing to do what they do best: offering people a place they can call home without making a long-term commitment.
This is conirmed by a recent CB Richard Ellis (CBRE) report which states that despite being effected by the large number of multinational corporation layoffs in the fourth quarter of last year, the serviced-apartment sector stabilised in the irst quarter of 2009 after companies completed their restructuring. It also noted that accommodation budgets had been reduced in comparison to last year. However, serviced-apartment operators say that overseas employees have been knocking on their doors again this quarter.
The CBRE report states that rental rates of premiere serviced apartments, the most exclusive category, remained stable in the irst quarter of the year as a result of limited supply; and occupancy rates were a healthy 90 percent. Luxury and standard serviced-apartment prices fell about 4 percent and 6.7 percent quarter-on-quarter respectively. Boutique serviced apartments stabilised in the irst quarter of 2009 with a reported 1.5 percent quarter-on-quarter fall. The average occupancy rate for serviced apartments of all types was high, at about 75 percent.
One way the sector has chosen to deal with the slumping economy and rising vacancies is by giving guests the option of shorter stays. Serviced-apartment operators have traditionally offered monthly rates, with discounts for longer stays of three or six months, or even a year. But now many properties are taking advantage of the fact that they can also offer shorter stays and even daily rates.
“It seems the market is quiet compared with before, so some serviced apartments are starting to rent on a daily basis,” conirms Clara Chu, the associate director of residential leasing at Colliers.
Serviced-apartment properties are able to offer a daily rate if they are licensed as a guesthouse. According to The Home Affairs Department, if serviced apartments offer accommodation for a minimum period of 28 continuous days or longer, they are exempt from having to get a hotel or guesthouse license. If any property startsoffering stays of less than 28 days in a row, they have to get a guesthouse licence.
The government as of the start of last July waived the Hotel Accommodation Tax, a tax that all hotels and guesthouses had to pay on guest stays. And this in itself has led to more serviced-apartment operators opting to offer daily rates. The tax stood at 3 percent but has been slashed to zero by the Inland Revenue Department.
Conident that the government will not crack down on the practice, and encouraged by the tax waiver, serviced-apartment employees say their companies have been keen to offer daily rates, particularly to big corporate clients. Walk-ins may be welcome in fact, even if people don’t have a big company backing them. As the line between serviced apartments and hotels continues to blur, it’s clear that the draw of luxury living in this sector will reach more and more people. Certainly, operators are ensuring that they will be well placed once the economy rebounds.
“There may be a temporary slowdown in new serviced apartments opening in Hong Kong due to a slowdown in economic growth, as well as weaker demand from overseas executives coming to Hong Kong. However, the long-term potential for serviced apartments looks positive due to Hong Kong’s position as a regional inance and trading centre,” concludes Benedict Ma, associate director at CBRE Research.
Ready to rebound
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