While Sydney may be suffering from an oversupply of city apartments, operators in the serviced apartment sector say demand continues to grow from corporate guests who are on extended stays or who want the flexibility of apartment accommodation.
Paul Constantinou, chairman of Quest, which operates six apartment complexes in Sydney and 83 nationally, says the sector has been growing far more rapidly than hotels.
Quoting Australian Bureau of Statistics figures, Constantinou says demand for serviced apartment accommodation has grown by 83 per cent since 1997, compared to growth in demand for hotel accommodation of 16 per cent over the same period.
"A lot of people are saying that apartments are dying, and there's an oversupply. So long as you build serviced apartments based on consumer demand, there will never be a problem. But if you have built apartments and say that serviced apartments are going to be your saviour, that isn't going to work."
Quest targets its properties at extended stay corporate travellers, with around 70 per cent of its bookings being for five or more nights. It has opened new properties predominantly where clients indicate a need for long-stay accommodation.
"Large corporations who manage projects Australia-wide are finding it more cost effective to have their managers travel, rather than open several office bases all over the country," Constantinou says.
Companies wanting to cut their travel budgets may also send their executives away less frequently, but for longer periods of time. Executive relocation is another substantial source of business, particularly with defence staff who may be relocated every three years.
Quest has few properties in city centres, but Constantinou says its spread of 48 locations around Australia is more important for its target market.
Long-stay demand in the city or city fringes typically comes from banks and insurance companies needing to accommodate staff who are on project work or involved in training programs. Industrialised areas, such as Cronulla with its motoring industry and towns near refineries, generate substantial business.
Constantinou says Quest has taken business from guest houses, apartments and motels, rather than the hotel sector.
Rates are similar to motels, and while apartment complexes don't include restaurants or bars, guests can eat out nearby, bring takeaway food back to their apartment or cook for themselves.
Medina Apartments, whose 11 NSW apartment complexes are all located in Sydney, generally attracts stays of one to four nights and is competing directly against four and five star hotels, according to managing director Allan Vidor.
Properties fall into three categories: the three to four star Medina Classic, the four to 4.5 star Medina Executive and the five star Medina Grand. Apartment rates in the 19 complexes across Australia are comparable with hotel rooms.
Corporate clients account for 70 per cent of Medina business, although the leisure, group and family markets are contributing a growing number of room nights.
Medina promotes its central, secure locations, the independence and privacy of apartments, and the range of appointments including full-sized refrigerators, microwaves, dishwashers, TV, in-house movies and CD players. Apartments have work stations that may include high speed internet access.
The group has also pitched itself at the small meetings market, with venues suitable for boardroom meetings, training sessions, small conferences and cocktail parties. Larger apartments can be used for breakout rooms and small fashion shows.
Ascott International, which bought the Oakford Apartments group two years ago, is also targeting the upper apartment market, branding its 4.5 star Somerset complexes ‘serviced residences' rather than serviced apartments.
Ascott has three Somerset properties in Sydney, including the Somerset Darling Harbour which received a $2 million upgrade as part of its rebranding. Ascott will retain some Oakford properties as its mid-tier brand.
Dean Minett, area general manager NSW and Victoria for Ascott International, says about 60 to 65 per cent of business in the company's 13 Australian properties comes from the corporate market. The average stay is just under three days, however Minett expects that to increase.
The relocation sector, which is a very significant market for Ascott overseas, accounts for about 10 per cent of business in Australia and is a key growth target.
Relocation clients overseas stay for between three and 12 months in a residence, and Minett says a few Australian guests have stayed for three to six months since Ascott was launched last November.
Clients are treated to special services, including assistance with relocation, a welcome hamper and personal welcome from the general manager, advice on settling into a new city and activities for long term residents.
"We focus very much on the fact that it's a serviced residence. Because of the size of our rooms and the services we provide, this isn't just a typical serviced apartment."
Somerset properties have 24 hour reception service and, if restaurants aren't on site, charge-back facilities are organised for guests at nearby restaurants. All Sydney properties have restaurant, bar, a pool and gym.