Service Apartments – Hospitality Industry

In the days of global competition business houses are finding alternatives of cutting down costs of travel and at the same time they also want to ensure that their employees are comfortable during travel. Service apartments are fitting into the scheme where it is a win-win situation for the customer and the service provider. More and more regular corporate travelers to the metro cities are choosing service apartments over premium hotel space; such apartments also promise better returns to flat owners. Even companies have started owning service apartments and renting them out in a professional manner offering 5 star comforts but charging substantially lesser than regular premium hotels.

The concepts of service apartments is catching up in the metros of Mumbai, Delhi, Hyderabad and many other cities with a sizeable number of flat owners seeing better business sense in converting their flats to service apartments instead of renting out to local people. The flat owners are up grading their flats to be let out and entering into contracts with the client companies. This way they find that their flat is secure and returns on investment on the property are well worth the efforts.

The reason: increasing number of corporate clientele and tourist inflows.

The payback in service apartments is much better than renting out to locals affirm many flat owners or even companies who are in service apartment business.

In Mumbai let us take the case of Ezd Apartments owning six apartments in the Building at Andheri East closer to both domestic and international airports.. The company has also leased seven more flats in and around Andheri East.

While the running rental rate for a furnished two bedroom apartment of 1000 square feet is RS 25,000 a month, a cluster of such apartments if modified to a service apartment gets as much as Rs 5,000 per apartment per day . The Airport Connection keeps up its demand and occupancy rate.

According to a recent study on the hotel industry, Mumbai has an inventory of around 6,829 rooms in the premium category, including 404 service apartments.

Moreover, the city has a floating population in the range of 3-5 million, a large share of which is contributed by business travelers.

Corporate Mobility:

Corporate travelers constitute a large chunk of revenues for service apartments. For instance, Ezd Apartments currently has five clients including Kingfisher Airlines and Jet Airways.

Companies hire these apartments for their trainees, or delegates visiting the city. The deals are set on a monthly or yearly basis. Kingfisher Airlines, for instance, spends close to Rs 200,000 annually on a single service apartment.

Another company having 76 apartments claims to have more than 70 corporate clients which include MNCs like Citigroup, IBM, DHL, Wipro and Infosys. They offer five star services at almost half the rates of premium hotels.

Interestingly, service apartment owners reveal that it’s not just the sunrise industries that are tapping the service apartment market. Owing to the price difference between the service apartment and the premium hotels, even the hospitality industry players like ITC Grand Maratha and Kohinoor Hotel to name a few check in their visiting staff and trainees in these apartments.

Last year, the city’s annual Average Room Rate (ARR) in the premium category was Rs 8,942. North Mumbai hotels situated in the airport vicinity recorded ARR in the range of Rs 5,832 – 11,000, and an average occupancy level of 72%.

The premium hotels in North Mumbai including five star hotels like Grand Hyatt close to the domestic airport, the Leela Kempinski and ITC Grand Maratha in the vicinity of Sahar airport, Taj Lands End at Bandra , as well as JW Marriott at Juhu cater chiefly to the corporate travelers.