Business apartments – a growing business
Around 1990, furnished apartments were rented for the first time in Zurich. In the meantime, various providers are on the market. Even hotels are increasingly interested in “long stay” customers.
Neue Zürcher Zeitung about Business Apartments
No. 8, No. 12, No. 14, No. 16, No. 21, No. 26, No. 31, No. 33 – the Zurcher Friesstraße is Swiss-Star county. Eight houses with a total of 203 residential units are rented by the provider of business apartments on the small street near the railway station Oerlikon. And it is becoming increasingly important, because the business is going well: Expats, but also people with several residences who have neither the time nor the desire to regularly rent an apartment and equip themselves, increasingly rely on the comfortable variant of the furnished apartment on time: the lease of the apartment is immediately ready for occupancy, and a household help is also not necessary, since the weekly cleaning including changing of bed- and terry-towels belongs to the standard package. In addition, you remain flexible even after the move, because terminating at short notice is also no problem.
2,390 business apartments are now available in the city of Zurich, as the statisticians have determined for the first time (see graphic). This corresponds to around 1.1% of the total housing stock. Whether this is little, much or even too much is a matter of opinion. It is certain that the number is rising because thirty years ago this business had not yet existed.
Pierre-Alain Bardellini, who founded with a partner Pabs Résidences + Appartements in 1990, was one of the pioneers in the rental of furnished apartments. Bardellini already rented private apartments to travelers during the 1980s as part of his work at Zurich Tourism. When apartments were vacant because of the real estate crisis, many landlords turned to him asking if he would not rent apartments from them and convert them to a short-term rental. Anja Graf also belongs to the first movers in this industry with her Vision Apartments, founded in 1999. With her, the business idea matured because she was the owner of a model agency in Zurich in search of cheap overnight accommodation for her models. In the past ten years, however, innumerable providers have now joined, many of them small and only regionally active or pure niche player, e.g. Le Bijou, a company focused exclusively on luxury apartments at the very best locations.
The market penetration is facilitated by the Internet brokering platforms, which allows everyone to make their offer visible without great advertising effort. The objects are advertised not only on the well-known Swiss real estate platforms like Immoscout24 or Homegate (both with search functions for furnished apartments) but also on Airbnb as well as specialized international platforms such as Spotahome, Thehomelike or Silverdoorapartments.
Business Apartments – Potential for further growth
Despite the growing supply, the market is still not saturated. If the statements of company representatives are true, occupancy rates of 90 to 95% are not uncommon. This corresponds almost to a full load because a slight decrease over the Christmas holiday is hard to be avoided with this kind of offer. Many vendors still have expansion plans. Swiss Star, for example, with 940 apartments in and around Zurich, is one of the largest providers in the region, will soon exceed the threshold of 1,000 units, as Shahin Ardabili, the owner, and CEO explains. The Swiss market leader Vision Apartments is also in the process of opening three further locations in Switzerland (plus one in Frankfurt) with Lausanne, Vevey, and Zug, which will increase the number of apartments by 345 to around 1,300.
But other voices are also heard: the business has become more difficult and the times when one could almost make money with furnished apartments is a thing of the past. The main reason for this is the increased cost awareness of the customers. Balazs Zsin, CEO of the Reloc Services Apartments, based in Wallisellen, founded in 2009, says, especially the big companies, have been strongly affected by the spending brake. In the past, grants of 5,000 francs per month had been the order of the day for a house. The statement by Antonio Di Gregorio, one of the today’s partners of Pabs: The utilization rate is more than 90%, but this value is also necessary in order to be profitable at all.
Increasing competitive pressure
The competition has become harder, indeed not so hard as it could be, because, until the present, the competition limits itself primarily to home companies. International chains are not really present right now. A possible reason is that business apartments are valid as a residential use and the property ownership is subordinated by Lex Koller. Foreign suppliers are not allowed therefore as a house-owner. Also from the Swiss suppliers, only a few are owners of her flats. Swiss Star and Pabs are everywhere to the rent. Though vision apartments own almost all flats or build the houses partially even. However, also Anja Graf wants to appear with her company in future increasingly as an operator. In the modular concept, homeowners will be able to buy services, be it the management of the apartments, the furniture or the software.
But why – in contrast to the hotel industry – this absence of international players? The most important factor is the fact that the market for “serviced apartments” is even less developed worldwide. According to the consulting firm JLL, only 12 apartments in London have a furnished apartment with service, and the ratio is 10: 1 in New York. Compared to these figures, the range of business apartments presented in Zurich is quite generous, as the ratio between hotel beds (not rooms) and business apartments is around 6: 1 according to the statistics of the city of Zurich. 14,000 hotel beds were counted in 2016 – and the mentioned 2390 apartments.
Aparthotels as a competition to business apartments?
Meanwhile, the serviced apartments are on the rise all over the world. Especially in the area of Aparthotels, market entries by international players are to be expected, as this format (see Infobox) is known abroad. Anja Graf, however, is looking forward to this development. For shorter stays, these offers are well suited, but with longer rental periods they could not keep up. Vision Apartments deliberately focuses on stays of one month and more. There is no formal lower limit. But the advertised prices – from CHF 1,300 per month for a furnished studio with kitchen – according to the Graf refer to a minimum rental period of thirty days. For shorter stays, the surcharge would be up to 30%, which is no longer attractive.
Hotel room and business apartments under a roof
For Bruno Schöpfer it is clear: the growth potential of the hotel industry is in the “long stay”. That is why, at the Bürgenstock Resort, which he designed and built as the managing director for Katara Hospitality Switzerland, he placed great emphasis on a large proportion of residences. This is why Acasa Suites, which he opened two weeks ago, shortly after the Bürgenstock Resort in Zurich, near the Oerlikon train station, are located in his own hotel. In addition to 64 traditional hotel rooms, there are 77 suites and apartments all equipped with kitchens.
Who lives in these from 28 to 88 m² to big suites, can bring down the referring services on the level of a business flatlet. Minimum is the weekly cleaning. Not only cook, also of the same laundry wash is possible thanks to launderettes on several floors and partially even own washing machines. Thus not only the privacy can be raised, but also lowered clearly the price. Per night 28 m² studio costs 186 fr, then per month, these are only 3,375 fr, about 40% less than the projected short stay price. Though this is still more expensive than a business apartment even of the high category, for it the guest still has at disposal common rooms, from the lounge about the library and the fitness space up to the small spa in the Acasa Suites beside his rooms.
Community zones and a staffed reception area are typically the main difference between aparthotels and business apartments, which meanwhile both appeal to the same clientele. But the boundaries are fluid because, in the age of digitization, electronic self-check-in is spreading, whereas providers of business apartments, Such as a swimming pool with rooftop bar or lounge on the top floor. Even with regard to the minimum period of stay, the limits are blurred; some vendors of business apartments have already abolished them and regulate the demand for the price. Unlike the classic hotel market, the “long stay” market is still very fragmented. Instead of world brands, local suppliers characterize the market. But according to the real estate service provider JLL, this is changing slowly, for, on the one hand, more and more hotel operators are putting their money on long-term guests, For example, the Marriott brand with the “Elements” brand, or Hilton with “All Suites”. On the other hand, specialist suppliers such as the Ascott group from Singapore, which is registered under the label “Citadines” in Europe, are expanding rapidly. The declared aim of Ascott is to grow to 80,000 residential units worldwide by 2020.
What makes the long-term customer so interesting, according to the creator, is the fact that he consumes much fewer services, thus reducing personnel costs. Instead of paying 50 to 55% of his wage costs, he expects his aparthotel to be 30% or less. In addition, bookings usually do not arrive via Booking.com, but directly through companies in the area or relocation agents, which leaves the hotel more margin.