SilverDoor's Market Update is a comprehensive review of the global travel landscape using our own booking data, wider economic context, and our experts' experience and predictions to build a picture of serviced apartment trends worldwide. Reflecting on the past quarter and forecasting for the year ahead, the report advises corporates on rates, supply, demand and traveller preference to inform booking practices.
SilverDoor captures more than 127,000 datapoints from an average of 593,000 enquired room nights each quarter, the largest and most extensive sets of data available in the sector. This means we can provide the most accurate trend commentary and forecasting for global mobility professionals.
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|SilverDoor Snapshot
Major conflicts continue to impact global trade, the biggest election year in history could significantly change worldwide governing policy, and traveller demographics are shifting in key growth markets. Key consequences of instability are already evident in the steady global decline of average daily rates (ADR) by 3% and shortening of average lengths of stay (ALOS) by 25% - how much more impact will there be on pricing, availability and demand of corporate housing in 2024?
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|Middle East Spotlight
Geopolitical instability continues to impact the travel market as escalating tensions in the Middle East particularly are having repercussions for many of our clients and property partners. While the global impact on oil prices and availability has been limited so far, the Israel-Hamas conflict is impacting consumer, business and travel confidence, as well as causing significant issues with global trade and shipping through the Red Sea.
Virgin Atlantic has announced plans to continue their flight suspension to Tel Aviv until September, British Airways flights to Tel Aviv are currently paused but are due to restart in April, and easyJet flights to the city also remained paused but the schedule is being reviewed on a rolling basis.
Israel’s national carrier El Al is currently still operating direct flights between Tel Aviv and the UK should travel be necessary. There are also still flights to Tel Aviv from other parts of Europe and the Middle East, but be warned of disruption and last minute restrictions.
According to the Foreign, Commonwealth & Development Office (FCDO), people are advised against travelling to the following cities and your travel insurance could be invalidated if you choose to do so against FCDO advice:
- Israel
- Gaza
- The West Bank (excluding East Jerusalem)
- Areas near the Lebanon and Syria borders
- Areas within 20km of the Egypt-Libya border
Areas considered safe for travel include many UAE states, Oman, Dubai, Abu Dhabi, and Ras al-Khaimah, but military activity may increase in these areas and travel restrictions may change at short notice.
|Red Sea shipping disruption
The Houthis are an armed political organisation from Yemen that started attacking Red Sea vessels in October 2023, around the same time as the Israel-Hamas conflict began.
Major shipping companies have stopped using Red Sea routes - through which almost 15% of global seaborne trade usually passes - and ships are being redirected around the southern tip of Africa instead. This is delaying delivery services by up to 50%, particularly for shipments from Asia and the Indian subcontinent to Europe and the US East/Gulf Coasts.
The Suez Canal at the northern end of the Red Sea is a key trade route through Egypt that connects Europe and Asia and is also being impacted by the Houthi Rebel crisis. Eastbound trade from Europe (shipments to Asia, Oceania, India, and Middle East) are the routes most affected by the Suez Canal diversions.
Delays are expected of two to three weeks and diversions are causing higher freight costs due to longer transits and detention charges from congested ports. We would recommend considering temporary accommodation extensions for in-house guests awaiting delayed shipments of personal belongings for an overseas relocation.
|United Arab Emirates and Saudi Arabia update
On a more positive note, our Middle East Market Manager, Gillian Greer, notes that all Emirates reported strong results for the end of 2023, with Dubai even setting new revenue and occupancy records. Boosted by events in the area like COP28 and its continued popularity as a destination, overall occupancy levels remained above 70% throughout December (Department of Tourism and Commerce Marketing).
Saudi Arabia is also undergoing an interesting economic shift in line with the Saudi Vision 2030 programme as it attempts to move away from oil dependence and diversify its income sources. The country did experience lower overall growth because of the reduction in oil production, however non-oil generated growth was around 5% in 2023.
Also worth noting on the Vision 2030 scheme is that the female workforce in Saudi Arabia has doubled over the past four years. The female workforce reached 37% by the end of 2023 which surpassed the 30% Vision 2030 goal and could be influencing the volume and nature of business travel accommodation requests in the area.
With the exception of Egypt, where Red Sea destinations are reporting lower occupancies, the UAE and KSA regions don't seem to be impacted by the political situation so far.
|Average Length of Stay Trends
ALOS is notably shorter than this time last year in all global markets and has reduced 25% overall:
“On a macro level, it's unsurprising to see shorter bookings in response to supply chain disruption, the unsettlement and displacement of war, and global rising costs. On a micro level, there's a general caution evident throughout the market: businesses are trying to minimise costs and travellers are hesitant to travel amidst global instability.
Business confidence might have been knocked by a lower performing 2023 compared to the booming 2022, so current projects may be delayed and new projects quelled. Not only are investors hesitant to invest in big projects amidst ongoing uncertainty, but projects that have started may be starting to cost more than expected and take longer than hoped.
ALOS may be shorter for now, but it’ll be interesting to see if the average extends by next quarter with extensions needed due to delayed household goods being shipped for relocations. Or we could perhaps see an increase of early departures if project work is cut short.”
- Shabina Awan, Vice President Partner Development
|Global Rate Trends
At the end of last year, our booking data prompted us to predict a modest drop in rates for the start of 2024. So far that prediction is a reality, with global ADR coming down from £159.71 (Aug-Oct 23) to £157.60 (Nov 23-Jan 24) and dropping 3% from £163 compared to the same period last year (Nov 22-Jan 23).
APAC ADR has dropped slightly from S$236.38 in Nov 22-Jan 23 to S$231.27 in Nov 23-Jan 24 - a 2.1% YoY reduction. APAC ADR is also down 8.3% compared to the end of last year (Aug-Oct 23). Our booking data predicts the following APAC ADR trends for 2024:
“Tokyo remains a core location with high demand, but inventory is tight, so rates tend to be higher to reflect this. We are working hard to onboard new partners to bolster our portfolio in the area, but we suggest longer lead times to allow for sourcing and negotiation.
Chinese New Year didn’t have as much of an impact on availability as last year and we saw less regional travel during this period – perhaps China's current economic instability could explain this. As for India, demand is increasing like we anticipated and rates remain high. We receive regular requests for Bangalore, Mumbai, New Delhi and Hyderabad, but Pune demand particularly is rapidly increasing as it's making a name for itself on the IT scene.
Corporate travel is buoyant with consistent demand from TMC clients and whilst relocation demand is currently muted, we expect this to pick up in the next few months.”
- Sophie Brinsley, Executive Vice President - APAC
EMEA ADR has reduced 3.1% YoY from £165.70/771.37 AED in Nov 22-Jan 23 to £160.40/746.70 AED in Nov 23-Jan 24. EMEA ADR has remained stable compared to Aug-Oct 23, with rates only dropping 1.6% from £163.03/758.59 AED. Our booking data predicts the following EMEA ADR trends for 2024:
“Rates are competitive and availability is good throughout the region, with the exception of Paris where there is limited availability and significant ADR hikes for bookings being made around the Olympics and Paralympics.
Our London team is also noticing flatter nightly rates than usual due to reports of low occupancy from property operators in the UK capital. Whilst supply is ever improving in the big cities, demand is increasing faster than supply in tertiary locations like Ireland’s Limerick and small towns in Italy and Germany.
Group bookings for graduates are starting to ramp up, and we'll typically see a busy period of 8-12 weeks in late summer with large numbers of graduates joining international firms in key cities like London, Amsterdam and Dubai. We’d strongly recommend securing availability soon if you’re considering booking for such a group – with longer lead times, we can negotiate flexible cancellation terms to work around arrival dates nearer the time.”
- Amy Pammenter, Head Account Manager
Americas ADR has experienced the most significant drop, reducing from $221.55 in Nov 22-Jan 23 to $199.75 in Nov 23-Jan 24 - a 9.8% YoY reduction. This is also a 5.6% reduction compared to Americas ADR for Aug-Oct 23. Our booking data predicts the following Americas ADR trends for 2024:
“Business travel is starting to warm up in the Americas as we start to move out of winter and internship programme demand particularly is beginning to increase. Whilst we are starting to see the usual cyclical changes that come with the busy season, cautious decision makers are trying to forecast what this US election year will bring so perhaps the peaks of peak season won’t be as dramatic as usual.
We’ve noticed demand that would usually be directed to familiar large markets like New York City, is now being directed into slightly smaller, less expensive cities like Chicago.”
- Stephen Homsey, Vice President - North America
|A comment on rate volatility
“The serviced apartment sector is no stranger to a degree of dynamic pricing, but we've certainly been seeing much more rate volatility in recent years. Something quite interesting I’ve noticed on this topic is the prevalence of venture capitalists, who enter the market with large initial investment and focus almost exclusively on growing their market share quickly by selling at unprofitable rates.
Of course, this has short-term benefits for clients who can enjoy the low rates offered, but this unsustainable strategy undermines stable suppliers and can cause longer term rate volatility. When the venture capitalists switch their goal to profitability, rates are left out of sync across the board and client expectation of pricing is left misaligned with what 'normal' rates actually are.
Balancing the operator preference for dynamic pricing models with clients who unsurprisingly prefer corporate static rates to protect them against unpredictable rate spikes can be challenging but, with strong booking volumes and agent negotiation, a happy medium can be achieved.”
- Alex Neale, Senior Vice President Partner Relationships
|Other Global Incidents & Events Impacting the Market
|"The biggest year in election history"
2024 will see nine parliamentary elections across Europe, including the UK general election towards the end of the year and European parliamentary election in June. Four of these elections are predicted to cause significant changes in policy direction - in the UK, Portugal, Austria and Lithuania - which most notably could result in sustainability or immigration policy changes (Economist Intelligence).
The EU’s Corporate Sustainability Reporting Directive (CSRD) is a recent development of the EU’s Non-Financial Reporting Directive (NFRD) which formalised sustainability reporting expectations for large companies in 2014. The CRSD is set to be phased in from early 2024 for EU-incorporated companies already subject to NFRD, with reports expected to be published in 2025.
While the CSRD will be rolled out gradually for other EU companies and non-EU companies with significant operations in the EU, it’s just one example of the kinds of policies that could be amended or enforced by changing governments.
The US presidential election is also scheduled for November, so expect impacts on pricing and availability in the lead up in line with conventions and vote rallies throughout the country.
- Republican National Convention: Milwaukee, Wisconsin – 15-18th July
- Democratic National Convention: Chicago, Illinois – 19-22nd August
- US 2024 Presidential Election: 5th November
|Entry rules of foreign nationals into China eased
China’s National Immigration Administration (NIA) has implemented five initiatives to ease the entry of foreign nationals into the country, so we may start to see a demand increase in China.
- Foreigners can now apply for port visas for last minute business trips
- Foreigners with valid reasons to stay in China can now more easily apply for visa extensions and renewals
- Foreign nationals can also apply for a multiple-entry visa if they will be entering and leaving the country several times in short succession
- The document submission process has been simplified for visa applications
- Foreign nationals on 24-hour direct transit are exempt from border inspection procedures at nine airports
|Panama Canal drought
Another challenge for global trade and shipping is the drought affecting the Panama Canal - a vital shipping route connecting the Atlantic and Pacific oceans. The drought, thought to be exacerbated by climate change related issues, caused a 36% drop in transits last year and authorities estimate the drought could cost as much as $700 million in 2024 (AP News).
Initial solutions involved redirecting shipments through the Red Sea, but that’s now got its own challenges. Canal authorities have limited the number of crossings until the next rainy season starts around May, and additional surcharges are being introduced on various routes to cover extra costs relating to carbon taxes.
The main consequence is the increase to notice required to secure a space on transit vessels. Some shipping lines have already advised 4-6 weeks’ notice when booking to Jebel Ali (Dubai) and the wider Middle Eastern region - it’s likely that other ports/trades will follow suit, so keep this in mind when relocating goods.
The SilverDoor team are monitoring all these incidents closely and are on hand to assist anybody affected by continued global instability.
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Answer this quarter's quick poll!
What impacts to shipping and transportation, if any, are you seeing right now?
- Increased costs
- Delays to transfer goods
- Extensions to projects or temporary housing
- More reliance on airborne freight services
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Last quarter's quick poll results are in…
AI is being incorporated into more and more aspects of hospitality. Which aspects of the booking journey do you see AI improving?
- Streamlined booking process: 55%
- Tailored recommendations - e.g. accommodation or relevant add-ons: 26%
- Efficient complaint handling and resolution: 13%
- Enhanced customer service - e.g. better chatbots: 6%
|Events impacting supply, demand and pricing
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Major annual and one-off events can increase rates and reduce availability. With bookings already being made for events throughout 2024, SilverDoor can advise on how to secure suitable accommodation at the best price.
If you would like specific topics or trends to be discussed in a future SilverDoor Market Update, get in touch with us at [email protected].
