Success in the corporate housing marketplace boils down to whom you know. Just ask CWS Corporate Housing president Tracy Hayes, who recently joined her staff as they spent a Friday afternoon speed-dialing their connections in Hattiesburg, MS.
A midsize consulting firm had just called with a specific request of the Austin, TX–based corporate housing provider: eight apartments in the same building, located within a 15-minute drive of the firm's client site; similarly furnished units; a meeting room within the apartment building; access to a nearby business center; telephone service; cable television; and, of course, high-speed Internet access. Waiting seven days for the cable guy to activate a high-speed connection sometime between noon and 2 p.m. was not an option. The consulting firm's project team would be in Hattiesburg Tuesday morning to begin a year-long engagement.
Veteran road warriors and travel directors might be surprised that corporate housing companies routinely meet those types of specifications. CWS did so quickly, winnowing down 27 available eight-unit groups to three options that satisfied its standards and its client's needs, and had keys waiting for the consultants when they arrived in downtown Hattiesburg.
Corporate housing, the industry's association admits, has been the hospitality sector's best-kept secret. That's changing, but the lodging option remains largely misunderstood by consultants, many of whom incorrectly envision corporate apartments as amenity-poor suburban enclaves. In truth, corporate apartments often pose a cost-effective, well-equipped alternative to hotels for engagements of 30 days or longer. Whether a consulting firm can exploit the economic and lifestyle benefits of corporate housing depends on what travel managers and project managers know about the marketplace and their consultants' lodging preferences. The latter group can be difficult to sway.
"Travel differs from other procurement areas in that it is a highly personal commodity," notes Doug Weeks, Booz Allen Hamilton's senior manager, global travel. "Getting travelers to change airlines or hotels can be tough."
Less Cost, More Space
Roughly 600 corporate housing companies in North America have been hammering away at that challenge for more than 15 years. On any given day, more than 8,500 corporate apartments are occupied in the United States. Oakwood, Equity Corporate Housing, Marriott ExecuStay, and BridgeStreet Corporate Housing Worldwide, a subsidiary of Interstate Hotels & Resorts, Inc., represent corporate housing's Big Four.
"Corporate housing offers an entirely different existence than hotels do," says Julie Pendleton, national sales manager for Windsor Corporate Suites. Besides offering more space, fully equipped kitchens, living spaces and bedrooms, and customized amenity packages, corporate housing competes on cost. In March, the average daily rate for a corporate apartment in the U.S. was $85.46, according to Smith Analytics, LLC, which tracks performance data for the Corporate Housing Providers Association (CHPA).
Furnished apartments are available throughout Asia and Europe. In Europe, quality is less consistent than it is in Asia and North America because regulations governing the leasing of furnished apartments vary from country to country.
Aside from a SARS-related dip in early 2003, the Asian corporate housing market has grown steadily in recent years. BridgeStreet president Lee Curtis reports that the Asian corporate housing market is more mature than the European market. Large U.S.-based providers have alliances with Asian providers, such as Singapore-based The Ascott Group. Oakwood, the largest North American corporate housing company, owns and manages properties in Japan, China, Korea, the Philippines, and Thailand. It expects to open apartment buildings in Bangalore, Hyderabad, and Mumbai within the next 24 months.
Some providers own all of the apartments that they lease. Others hold no real estate assets, choosing instead to lease apartments, often on a cost-plus basis, in "communities" (the term is a popular one in the sector — picture a condo complex or a collection of town homes with a health club and meeting rooms) owned by other companies. Many corporate housing companies do both. For example, BridgeStreet or Oakwood might go toe to toe against CWS in Dallas, but then partner with CWS in San Antonio, where the smaller company possesses more knowledge and maintains more relationships.
Corporate housing companies that own all or most of the apartments they lease increasingly promote the service and cost benefits of that business model to differentiate themselves from competitors without real estate holdings. Windsor Corporate Suites, for example, leases up to 1,000 corporate apartments each month throughout the United States. National Sales Manager Julie Pendleton says that Windsor's ownership model provides better service — on-site property management staffs are employed directly by Windsor as opposed to a different property management company — and monthly lease rates $300 or more per month lower than competitors that lease from other companies.
Competing and Comparing
That type of differentiation signifies the strides the sector has made against hotels and extended-stay suites, such as Residence Inn or Homewood Suites, which offer weekly and monthly rates and kitchenettes. Until recently, the hotel sector's size and national branding success has proven difficult to pierce.
For most consultants, CWS or Princeton Properties — the largest corporate housing provider in New England — will not conjure the same expectations as Marriott, Sheraton, and Hyatt. "Corporate housing probably suffered from a national brand identification problem," notes Princeton Properties president Terence Flahive, whose term as president of the CHPA runs through December. "It was so individualized in different markets that a consultant usually didn't think of corporate housing. If they did, they may not have been sure of what they were going to get."
That's changed drastically in the past decade and in the past four years in particular, says Flahive, thanks to the entrance of major hospitality groups such as Marriott and Interstate into the corporate housing sector. "It has boosted awareness, which has also helped individual providers," Flahive notes.
More corporate housing companies are competing against hotels on lifestyle and price while emulating hotel service. In May, BridgeStreet unveiled a new tagline, "Corporate Housing Made Easy," which reflects the company's — and the market's — continuing embrace of hotel-esque amenities and service.
Since 2002, BridgeStreet has included concierge service — tracking down theater tickets, making dinner reservations, scheduling lawn services, making pet arrangements, and more — for its guests via the Web and a toll-free number. The company also has tested a meal service, through which guests can order from an on-line menu of gourmet meals delivered to their apartment's refrigerator, in the Washington area and will make the program available nationwide in December.
ExecuStay guests receive points toward free hotel stays, vacations, and frequent-flier miles through the Marriott Rewards program. CWS guests receive frequent-flier mileage, and other companies offer similar offerings designed to compete with the allure of, well, Marriott Rewards and other hotel points programs.
"Today, whether you're looking at a corporate apartment in Austin, Texas, or Manchester, New Hampshire, you're going to find a consistent level of experience and professionalism," Flahive emphasizes, noting that the CHPA expects to initiate a professional certification process soon.
Preferential Economics
As the Smith Analytics database fills, those figures should help consulting managers with the economic portion of their decision.
Although some providers offer shorter leases, 30 (consecutive) days represents the point in a consulting assignment at which a corporate housing lease makes economic sense. It also happens to be the point at which lodging tax in most states and cities — with the exception of Florida, North Carolina, and some metro areas — ceases to apply. A $199 per night rate at a downtown hotel can translate to $250 per night once all of the taxes are added. But few consultants stay in hotels more than four nights a week on lengthy assignments. Corporate housing leases are monthly rates, regardless of whether the apartment is occupied. Compared to Smith Analytics's average March rate of $2,649 for corporate housing, the downtown hotel — at $250 per night — becomes more expensive as soon as the consultant passes the 10-night mark in any given month.
That type of comparison may give consulting-firm travel managers more leverage in their negotiations with hotels. Booz Allen's global travel team has succeeded in negotiating project rates in addition to the corporate rates they've agreed upon with some hotels.
"You can achieve some of the cost savings you would otherwise get with a corporate apartment," Weeks reports, "by returning to your hotel suppliers and saying, 'We've won work in this location and we're going to have project teams coming in every week for the next six months. Will you give us a project-specific rate that would be more competitive than our corporate rate?'"
But Weeks emphasizes that cost is only part of the equation. "We put a great deal of demand on our consultants' time," he explains. "We need to make sure that we're not requiring them to stay in places where they would not have access to amenities that they would otherwise expect from a hotel."
Firms must keep their road warriors comfortable while keeping a lid on expenses that are passed on to clients. For that reason, project managers have the ultimate responsibility for selecting lodging at Booz Allen, BearingPoint, and most other firms. Weeks's global travel team includes a person dedicated to researching lodging options, and that person presents market-specific research to project managers. BearingPoint has preferred hotel and corporate housing providers and two agents dedicated to researching extended-stay options, but the firm does not require project managers to use the agents on every engagement.
"At the end of the day, it's usually such a wash that I try to let people do what they prefer as long as it is economically viable," says J. Scott Laughner, vice president, Accenture Finance Solutions. "You can make the economics of corporate apartments more attractive if you ask your staff to share them. And actually, many of our people — even the senior ones — want a roommate."
Personal Pros and Cons
Laughner, who has essentially been out of town since he joined Accenture in 1988, finds corporate apartments to be a more flexible and convenient alternative to hotels.
"Many of the details of staying in a hotel simply add time to the consultant's already busy day," he says, during a call from a corporate apartment that happens to be in a converted YMCA in downtown Dayton, OH. "There is always that awkward moment when the doorman grabs your bag as you jump out of the taxi. You think, 'I can carry my bags up, but I should let him do his job,' and then you feel compelled to tip him."
Laughner finds that many of the interactions required at hotels in major cities are time consuming. He also prefers to travel lightly on his weekend commutes. "If you need to fly in a day early or you want to stay a day later, you don't have to worry about making changes to a hotel reservation, which nine times of out 10 are last-minute and costly," he says. "The other big advantage is that I don't have to take anything but my briefcase home with me on the weekends. I can leave my business wardrobe at the apartment."
A light weekend commute has taken on greater importance in light of tighter security at most airports. LanpherWilson's Alex Bonino, who leads his firm's high-tech and aerospace defense practice, has talked hotel staffers into letting him stow his luggage in a cubby when he leaves a client site for the weekend. A 25-year consulting veteran who logged six years with Capgemini before joining Reston, VA–based LanpherWilson, Bonino represents the grizzled road warrior segment of the consulting industry, which may prove a tough sell for corporate housing salespeople.
He recently completed an 18-month engagement in Toronto, where he spent half of his nights in a Residence Inn and the other half in a corporate apartment. "What is there to say?" he responds, when asked to compare the experiences. "It was what it was. You shower in the morning and you sleep there. I didn't spend a lot of time hanging out in the apartment."
Yet Bonino also appreciates it when his unit contains a DVD player or VCR. He, Laughner, and most other consultants list proximity to client site and high-speed Internet access as crucial factors in their selection process. "It's all about trade-offs," Bonino adds. "If you stay in a corporate apartment, you're cooking. You also have housecleaning, and one thing I prefer not to do when I'm away from home working on an engagement is houseclean."
Corporate housing's selling point of a fully equipped kitchen tends to resonate less with consultants than the fact that they can leave their wardrobe behind when they commute home on weekends. For consultants, housecleaning remains an attractive feature of hotels. Other reasons commonly cited for choosing hotels over corporate apartments, such as business centers, high-speed Internet access, "more character," and proximity to client site, are often misconceptions. Laughner's unit at the converted Y previously housed the building's chapel; the room's loft-style layout features stained glass windows and terrazzo floors. While corporate apartments are available in the suburbs, there are also plenty of units available in more eclectic parts of cities.
Laughner also finds that corporate apartments deliver "the things that simplify my life while I'm working out of town." Those include a short drive to the client's offices, high-speed data access, a laundry valet service, a nearby health club, and underground or dedicated parking.
Many providers offer a set of standard furnishing options and a nearly unlimited supply of customized extras. Hayes, who has rented a massive plasma-screen television and an in-room hot tub for a prince during his visit to San Antonio, reports that her company's baby package (car seats, crib, strollers, room monitors, gates, toys) are more popular options among 30-something consultants, while the 20-something set frequently opts for covered parking so that they can bring their vehicles on longer projects.
"Overall, you want amenities that make work easier for you and those on your engagement team," says Laughner. "Of course, sometimes you have to take the bad with the good." The Formica content of rental furniture sometimes hits the danger zone. "Mattresses are usually not the greatest," Laughner adds, "which, quite frankly, is the number-one complaint I hear from our people when they stay in furnished apartments."
Like their hotel counterparts, corporate housing firms closely track their guests' satisfaction. Feedback from consulting customers to BridgeStreet's electronic survey program sparked the company to enhance its standard furnishing packages with a desk and chair, and a 19-inch television set in the bedroom. BridgeStreet's consulting clientele also expressed a preference for affordable direct-dial telephone plans, as opposed to restricted lines or code-based access.
In her research on consulting guests, Hayes says that she has been struck by the uniformity of the furnishings packages across the entire team. "I can never tell who the project manager is by looking at the furnishings packages or the additional amenities that have been requested," she notes.
Hayes, Curtis, and their competitors have discovered that it pays to know about those preferences and behaviors. And they're leveraging that knowledge to convince consultants that more space and less cost is the way to go when they're on the go.
Sidebar: Corporate Housing by the Numbers
If an industry or sector is to truly understand its performance, Corporate Housing Providers Association (CHPA) president Terence Flahive says, then it must measure itself. To that end, the CHPA is working closely with Smith Analytics, LLC, an affiliate of Smith Travel Research (the Oracle of hotel industry information and analysis), to collect competitive performance benchmarking data. Although Smith Analytics's ongoing "competitive analysis program" for the corporate housing market has just begun, the company recently published its first reports, based on data collected through March. Smith Analytics president and CEO Dan Webster notes that the quality and richness of the database will improve each month as the number of participants continues to increase.
Sidebar: Regional Differences
BridgeStreet Corporate Housing Worldwide president Lee Curtis estimates that in a normalized economic environment, his company's furnished apartments are typically two to three times larger than traditional hotel rooms and cost 20 to 30 percent less.
Corporate housing rates also vary, sometimes significantly, within the sector. Runzheimer International, an international management consulting firm specializing in transportation, travel, and living costs, tracks average costs of one-bedroom corporate apartments in the U.S. on an annual basis. The firm's 2004 report identifies the most affordable temporary living locations — Greene, AR; Madison, TN; Cameron, TX; and Spartanburg, SC — and the most expensive locations: San Francisco; Washington; New York; and Kauai, HI.
Runzheimer reports that the leasing rates of national corporate housing firms tend to be about 15 percent higher than rates of regional providers. (The larger firms tend to offer flexible billing options, convenient access to reservation systems, and other advantages.) The research also includes the following breakdown:
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.