Extended stay accommodations and serviced apartments represent a small but fast-growing portion of the European hospitality sector, with the market projected to grow (1) at CAGR of 12.3% from 2024 to 2030.
The segment’s relatively rapid growth should come as no surprise as more travelers are booking trips that blend both work and play, major hotspots crack down on short-term rentals like AirBnb, and their relatively lean operating models fuel an influx of investment and development across Europe.
Key Challenges for Effective Serviced Apartment Revenue Management
When it comes to the marketing, operations, and revenue management of serviced apartment properties, there are very distinct differences between these accommodations and traditional hotel rooms, along with a number of challenges that need to be overcome.
Beyond the obvious differences in physical layout where serviced apartments are typically equipped with full kitchenettes and more apartment-style amenities, these properties require different marketing strategies, operational processes, and approaches to their pricing in order to maximize revenue.
Historically, pricing for serviced apartments has posed challenges for revenue teams, as rates vary substantially depending on the length of stay a prospective guest is seeking. Additionally, demand forecasting poses challenges for different length-of-stay profiles, like shorter-stay transient demand and longer-stay demand. Understanding the dynamics of demand by length-of-stay for each market segment, unit type, and price sensitivity is key for guest acquisition.
Applying Revenue Management Principles to Serviced Apartments
Forecasting is the foundation of all revenue optimization efforts. To develop a detailed, effective forecast with an advanced revenue management system, properties need to include both historical and forward-looking data. Ideally, historical data would include the number of occupied units, type of unit occupied, and whether the guest stayed in the same unit for the entire duration (or, for example, did the guest move to a new unit after receiving an upgrade?).
The data fuelling these forecasts should also ideally ensure that the number of rooms and revenue are on the books by day—and market segment—for the property’s booking window. With daily data collection, the property can better understand their booking pace and establish forecasts by segment and day of week, which can then be compared to historical data. When done consistently, serviced apartment revenue teams can more accurately understand future demand and shape their strategies accordingly.
Accurate forecasting enables precise inventory allocation of unit types in competitive markets. Key questions include: What rates and availability will prospective guests see? Is overbooking acceptable during peak demand, considering likely cancellations or shortened stays?
Extended-stay and serviced apartment properties benefit from accurate forecasting as it enables them to respond proactively to shifting market conditions. Identifying low-demand periods allows them to secure more long-stay guests and price accordingly. Conversely, in high-demand periods, avoiding excessive long-stay bookings prevents displacement of higher-paying, short-stay segments. Market dynamics and business models may occasionally reverse these strategies, underscoring the need for nuanced decision-making.
Target the Most Valuable Business
Revenue optimization for extended-stay properties requires advanced revenue management strategies and solutions. These systems help target valuable business by balancing peak and shoulder night demand, maximizing revenues from booking extensions, and planning for cancellations. Market tools now assess competitor impacts on both long- and short-stay demand and provide recommended pricing and inventory control adjustments to maximize revenue.
Ensure Straight-Line Availability
A common challenge for extended-stay properties is ensuring straight-line availability, where unit types remain bookable across consecutive nights. For instance, a lack of availability in one room type on consecutive nights can block bookings despite overall availability. Addressing this requires teams to balance inventory effectively, keeping key unit types visible.
Unlocking the Revenue Potential of a Hybrid Approach
Blending extended-stay and short-stay offerings adds revenue opportunities but also complexity. Dynamic pricing must holistically evaluate rates to avoid displacing extended-stay guests for higher single-night yields. Advanced revenue systems are crucial to balancing diverse product types and maximizing revenue.
As the extended-stay sector matures, management strategies and operational systems must evolve. Accurate demand forecasts and best practices in revenue management enable properties to optimize wage costs, boost revenues, and enhance guest experiences across portfolios.
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