New research reveals slide in average daily rates for serviced apartments globally

SilverDoor, a leading serviced apartment agent, has released its final market update report for 2023, revealing a fall in average daily rates at a global level. The research reveals average daily rates (ADR) have fallen by 7.9% – from £173.52 (US$218.41) per night in Q3 2023 to £159.71 for Q4 2023. While usual for this time of year as business travel typically slows, global ADRs for one-bedroom apartments have seen less of a decline y-o-y, down 3.3% from £165.19 in Q4 2022 to £159.71 in Q4 2023. On the supply side, economy accommodation models are seeing a marked increase in demand and investment, offering on average 15-20% lower ADRs. The expected seasonal decline in demand has also had an impact on average length of stay (ALOS) across EMEA, down by one fifth (20.5%) in Q4 compared to Q3. However, both the Americas and APAC regions have seen increases in ALOS of 22% and 19% respectively, in-line with the continued demand for fewer, yet longer trips. EMEA  Across Europe there is a cautious return to stability. While interest rates and inflation are slowly reducing, inflation still remains above the central banks’ targets. For one-bedroom apartments, in Dubai the ADR started the year averaging £132 and looks set to start 2024 at £115. In London, rates averaged £190 in January 2023, but are approximately 7% down for the same period in 2024 at around £177 and, in Amsterdam, despite a previous rise in rates, the latest trends indicate that rates are now falling and expected to start 2024 with an ADR of £155, almost on par with the ADR of £154 in January 2023. Likewise, average length of stay (ALOS) is down by one fifth (20.5%) in Q4, compared to Q3 as peak relocation season closes and lead times have also shortened by 12% across the region. While the general trend across Europe is a decline in rates, the exception is Paris which has seen a continued rise in rates and demand ahead of the Olympics next summer. Currently at the £150 per night mark, rates there are expected to continue to climb in the new year and even exceed £400 per night throughout July and August. APAC  Now the world’s largest population, ahead of China, India is expected (Goldman Sachs) to have the world’s second largest economy by 2025. As a result, there is a marked increase in business service and infrastructure investment paving the way for increased demand for short term housing from the corporate sector in key destinations including Bangalore, Mumbai and Hyderabad. Average rates in Mumbai, for example are up by nearly a third (32.3%) at £155.02 for Q4 compared to £117.18 in Q4 2023. This is in contrast to the slowdown in China which has seen the yen fall to its lowest rate in 16 years and a 21.9% decline in ADR, down from £152.98 in Q4 2023 to £125.53 in Q4. Across APAC lead times have seen a 14% increase (unlike EMEA and Americas, both of which have decreased). Americas The Americas are also seeing a slower return to stability following stronger stock market performance throughout the last quarter. As the MICE market fuels accommodation sector recovery worldwide, according to Amex GBT the key US cities including Chicago and Dallas are expected to drive corporate MICE demand into 2024. In particular ADRs in Dallas are currently at £76 in the final quarter of the year but expected to rise by as much as 44% to £110 by summer 2024, in line with a rise in MICE demand. As in EMEA, lead times are also 12% shorter, largely due to excess of accommodation supply. Serena Dines, group head of revenue, SilverDoor comments: “Whilst there is a case for cautious optimism in terms of the global economic outlook, it is not without its challenges as the seasonal decline in travel and rates indicates. Operators have to remain competitive into the new year in order to secure the demand and bookings from corporates. Not just in terms of price but also in terms of the facilities available, location and increasingly their sustainability credentials, whilst also balancing the decline in lead times.” The full SilverDoor Market Update is available here