The serviced apartment market sector is a considerably new concept of residential cum commercial hotel development. The establishment of the UBN Park along Jalan Sultan Ismail, Kuala Lumpur in 1988 is the first serviced apartment in Malaysia.
To date, there are approximately 2,400 units of serviced apartments in the market, with Prince Hotel & Residences providing the latest supply of 150 serviced suites. Out of this 2,400 units, approximately 70% are located within the city whilst only 30% are located in the suburbs and outside the city limits.
At present, the 4 and 5 star serviced apartments in the Klang Valley total up to about 1,104 of the total amount or 48% of the total supply, evenly distributed within Kuala Lumpur City and the Suburbs.
The future supply of serviced apartment in the Klang Valley is astounding with an additional 3,300 units coming into the market by end 2004. The future supply in the Kuala Lumpur City is estimated at 1,640 units, similar to the amount of 1,660 units outside the City limits. The 4 and 5 star units total up to 24% or 790 units. Out of this, only 236 units or 7.15% will be outside Kuala Lumpur city namely Dorchester Place in Sri Hartamas and California Serviced Suites along Jalan Ampang (after the Jalan Tun Razak interchange.)
A chart depicting the Existing, Future and Cumulative Supply of 4 & 5 Star Serviced Apartments is as appended in the following page.
The demand for serviced apartments in Kuala Lumpur is unlike the tourist-dependent hotel industry. The serviced apartment sub-sector caters for the economic-driven market niches. Ninety percent are foreigners who require accommodation for extended periods from three weeks to six months.
Most of these foreigners are from UK, Australia, USA and Japan and are primarily involved in the oil and gas industry, information technology and infrastructure projects. The tourist based clientele are mainly from the Singapore and Arab Markets
This indicates that the survival of serviced apartments is highly dependent on the corporate markets and expatriate communities who are on contractual employment terms in Malaysia.
The overall occupancy rate of service apartments for the year 2001 in the Klang Valley was 68.55% out of which the occupancy for Serviced Apartments within the City Limits were 67.5% and at the suburbs recording a higher 70.55%. As of the 2nd quarter of 2002, the year to date average occupancy rare for Klang Valley was marginally higher at 68.8%, mainly contributed by the Singaporean and Middle Eastern Market, skewing the present city based serviced apartments occupancy slightly higher than those outside the city.
4.0 Market Prospects
Despite the impending supply of new hotel and serviced apartment rooms in the market, the serviced apartment market is still a niche market to be reckoned and the potential for growth is very healthy for the future short and medium term.
The niche market forms only a relatively small component targeting at long staying business travelers. This foreign group is projected to grow rapidly with the growing economy in view of the following foreseeable circumstances:
- The stronger promotion of the Multimedia Super Corridor will see an influx of foreign experts and foreign investors. This is expected to increase the business activities especially in the preferred Klang Valley location
- The liberalisation of the financial and services sectors coupled with stronger promotion of the Kuala Lumpur International Airport is expected to witness many long staying business travelers.
- The ongoing and future government infrastructure and capital projects will see a continuing inflow of expatriates
- The general residential markets lack quality and specialised accommodation for expatriates. Although one may argue that there is an abundance of condominium units, but the quality, finishing, furnishings, amenities and facilities provided are not up to the expectations.
On the whole, the short to medium term future prospects for the 4 & 5 star serviced apartment market is seen as healthy in view of its relatively few quality projects coming on stream.
Based on the market data, it is evident that the 4 and 5 star serviced apartment market has not fully capitalised on in the prestigious locations in the suburbs like Ampang Hilir, Bangsar, Damansara Heights& Petaling Jaya. This is evident by the fact that only a few 4 & 5 star Serviced Apartments are located in these locations. This again gives a location and product niche to future serviced apartments
5.0 Successful Factors
End users, that is hotel guests, are becoming more sophisticated. In Kuala Lumpur, where majorities of the hotel guests are business travelers, there is a need to tailor products to meet the more discerning and specialised needs of long stay guests in order to achieve success. This includes business facilities and services, IT and multimedia facilities.
Other considerations for a successful product include:
- Market driven design which is efficient
- Low Density
- International accessibility
- Highly service orientated which is personalised
- High quality of facilities and services
- Effective packaging and marketing
- Easy access and egress
- Technology orientation.
- Personalised concierge services for the serviced apartments