Serviced residences will continue their rapid rise in the region. BTN Asia-Pacific invites Fraser Serviced Residences chief operating officer, MR CHOE PENG SUM, to explain why and which markets will grow faster than others.

The Asian hospitality industry has been reeling in the aftermath of the 9-11 terrorism attack, followed closely by the Bali blast and the recent Jakarta blast too.

Times have been tough, especially when the travel and hospitality drops come at a time of economic slowdown. In the midst of this, the SARS outbreak might just be the straw to break the camel’s back.

Is there no good news left in this industry? There is, and it is in the extended- stay sector.

First, though, a roundup of the extended stay – or the serviced residence market – post-9-11, Bali and SARS. The impact was negative of course, but while hotels have reported occupancies plunging below 20 per cent, the Serviced Apartments Association in Singapore says that occupancy in this sector fell “from 80 to 95 per cent to 60 to 70 plus per cent”.

For branded properties such as Fraser, the drop has not been drastic – occupancies of Fraser’s two flagship properties in Singapore fell to 70 per cent – and the recovery has been stronger and faster. This speaks volumes on the importance and resilience of branding.

All industry players have been vigilant against SARS, and have stepped up security measures to ensure the safety of their guests. In fact, some expatriates are moving from private housing in the suburbs to serviced residences, where there is tighter centralised security.

As we look at the future, our mandate of expanding in the region continues, and as in the past, China and North Asia generally continue to offer much by way of opportunity. Besides Beijing, Shenzhen and Shanghai, Guangzhou is also moving up in terms of opportunity.

Such opportunity is looked at in a nuts-and-bolts way and for the hospitality industry – and the extended-stay sector in particular – these criteria include foreign direct investment, tourism and business travel, as well as land cost and room saturation.

The Economist Intelligence Unit (EIU) forecasts that China and India would lead the regional economy until 2007, keeping Asia as the world’s fastest-growing region.

China’s economy is projected to grow seven per cent this year, followed by India at 5.9 per cent in fiscal year 2003/2004 and 6.7 per cent in 2004/2005, said the EIU.

Of course, there are risks in both countries. India’s chequered history is a significant uncertainty and in China, the risks include political instability, issues of government transparency and increasing disparity, bad debt and length of land tenure.

Still, their strong economic growth record and forecast has attracted serviced apartment providers.

Business travellers made up 24 per cent of China’s foreign visitors in 2002. This is the second largest group after vacationers. The number of business travellers is expected to increase with Beijing preparing to host the Olympics in 2008, and Shanghai’s continual efforts to be the nation’s financial centre.

In addition, foreign investments in manufacturing and various industries in China are flourishing, owing to increased government incentives, availability of industrial facilities, low labour costs and the huge domestic market, which is about 20 per cent of the world’s population. In India, business travel made up 55 per cent of international travel in 2002, according to the Federation of Hotel and Restaurant Association in India. It also forecasts that business travel would increase steadily as foreign investors continue to flood this market.

Fraser will open its Shenzhen property in May 2004 and its Beijing apartment is expected to open a few months after. It is also looking at projects in Shanghai, Guangzhou, Mumbai, New Delhi, Bangalore and Hyberabad.

Fraser is also undertaking feasibility studies on properties in Hong Kong, Tokyo, Bangkok and Sydney. There is still room for the extended-stay sector in these area as business travel and medium-term projects continue to flow into Asia.

Multinational corporations working on medium-term project-based assignments are looking for more flexible leases that carry no hefty downpayments and security deposits.

The industry’s track record over the past year shows the serviced-residence concept is wellsuited for the business-oriented climate in Asia. And for the vigilant, the opportunities are aplenty.