Sun, 07 Sep 2003

Apartment giants aggressively expand into Thailand, China

The world's major serviced apartment operators have aggressively expanded their services in relatively untapped markets in the Asia-Pacific region such as Thailand and China.

Oakwood Worldwide, the U.S. firm that created the serviced apartment concept nearly 40 years ago, is seeking to add a second property in Bangkok and is set to start running four more luxury serviced apartments in Asia-Pacific locations between 2004 and 2005.

The Ascott Group, the serviced residence arm of Singapore- based CapitalLand, said it would also add two more serviced apartment properties in China.

"The concept of serviced apartments in Asia Pacific has not been widely popular and the number of such facilities is limited, thus providing expansion opportunities for operators, especially those in the top tier," James Klein, the president and chief executive officer of Oakwood Worldwide was quoted by The Bangkok Post as saying.

He envisages the day when Asian operations will surpass the company's U.S. business in revenue and overall size, as the latter market is now saturated with Oakwood present in all big cities.

The company operates 22,000 serviced apartments throughout the world with a multinational client base that includes 80 of the world's 100 largest companies and annual gross revenue of US$750 million.

In Asia-Pacific, Oakwood now operates eight properties with a total of 1,576 units, in five countries. About 500 additional units in four locations, including Dhaka, Bangalore, Tokyo and Beijing are due to open in the next couple of years.

By 2005, Oakwood will have been operating in eight countries in Asia-Pacific and the number will continue to grow as the firm continues to scout for more management contracts.

"We sell a home environment," Klein said, as reported by The Bangkok Post in its recent edition.

In Bangkok, the Los Angeles-based concern is setting its sights on a 200-unit luxury serviced apartment, preferably in Sukhumvit Soi 21, as well as other prime areas in the capital.

Like major big cities in this region, Bangkok offers a significant opportunity as expatriates and their families are increasingly aware of the attractive alternatives to four to five-star hotels for extended stays.

Oakwood now operates the 2.6-billion baht Oakwood City Residence, owned by Rodamco, a company associated with Bangkok Bank, on Soi Narathiwat-Ratchanakarin 24, off New Sathon Road. The seven-tower property is the largest serviced apartment building in Asia Pacific.

The company is keen to expand into India, China, Singapore and several other key Asian and Middle East locations, according to Klein.

"We sell a home environment, offering more space, a longer stay and competitive terms,'' he said, comparing the different values of hotels and serviced apartments.

With nearly the same level of amenities and services, staying at a deluxe serviced apartment is about half the price charged by a four- to five-star hotel, he said.

In Asia-Pacific, the group has outperformed the competition by running at high occupancy rates.

For instance, the Oakwood City Residence in Bangkok and the 150-unit Oakwood Gold Arch Residence in Guangzhou (China), maintained about 90 percent occupancy rates during the crisis period.

Meanwhile, the Singapore-based The Business Times reported recently that the Ascott Group had won contracts to operate two more serviced properties in China. One is called Luxury Serviced Residence which is located in Beijing and the other one is Somerset Harbour Court which is located in Dalian.

Ascott said the two properties will increase its portfolio by more than 200 units, bringing its total to 1,600 serviced apartments in China. This would give it a 14 percent share of the mid- to luxury-tier market.

The Ascott Group already has properties in Beijing, Shanghai and Tianjin. Its growth target for China is 4,000 serviced residence units by 2008.

Ascott has a 10-year management contract for the Beijing property while the contract for Dalian is five years.

"China continues to offer outstanding growth potential for Ascott's serviced residence business, with its many rapidly growing cities, vibrant economy, strong inflow of foreign investments, large number of expatriates and expanding population of local business executives," said Liew Mun Leong, Ascott's deputy chairman.

The 100-unit Luxury Serviced Residence in Beijing is in the mid-tier category - the first time that Ascott is operating in that segment in China.

"We are extending our product range into the mid-tier category, which targets the domestic segment of senior business executives from Chinese companies. We see this vibrant sector growing," Eugene Lai, CEO of The Ascott Group was quoted as saying by the Times

Luxury Serviced Residence is located in Beijing's Chaoyang district. Somerset Harbour Court in Dalian marks Ascott's foray into the north-eastern city, which Lai said is part of the group's strategy to operate in major Chinese cities beyond Beijing and Shanghai.

Ascott is the first international serviced apartment operator in Dalian.

Somerset Harbour Court is located in the Dalian Asia Pacific Finance Center, a major business and residential area.

-- Bangkok Post/Singapore's The Business Times