In the same way transient business hotels in Philadelphia have bucked the national trend in occupancy rates and room revenues in 2002
(BTN, July 15), the city's corporate housing market has been relatively resilient.
According to three major providers, the market this year has skewed in two directions: a concentration of Center City apartments and a large number of units dispersed throughout the suburbs, including into central New Jersey, where a number of major pharmaceutical companies are headquartered. "Over the past year, we've centralized our Center City locations into what we call dedicated buildings, meaning the majority of the apartments are ours," said Phil Leonard, Philadelphia district manager for Oakwood Worldwide. "The remainder of our 350 apartment inventory is spread out in those more remote locations."
Travelers seeking interim housing downtown mostly are on consulting assignments, while the customer base in the suburbs leans more toward relocations. "Executives—many from the pharmaceutical industry—need temporary housing near the communities where they are looking to purchase homes," said Melissa Wechsler, Philadelphia general manager for ExecuStay by Marriott, which also has a dedicated building in Center City as well as more than 350 units in the greater metropolitan area.
Larry Korman, president of operations for Korman Communities, a third large corporate housing provider in the market, attributed the relative strong performance of Philadelphia's lodging industry to supply and demand. "Philadelphia has fared better than some other cities that were more technology-driven," he said. "There hasn't been an oversupply of corporate apartments and suites built the way there was in such cities as Atlanta, where developers expected an influx of high-technology jobs through the late-1990s—jobs that never materialized." Similar to its competitors, Korman Communities' inventory is divided between high-rises, dedicated buildings in Center City—including a landmark structure on Rittenhouse Square—and the suburbs, where most of the units are in garden-apartment developments.
Given the belt tightening that many corporate clients have undergone in light of the weak economy, these providers have responded by making adjustments in how they market their products. "Most of our residents are with us for 30 days or longer and sign a lease accordingly," Leonard said. "However, we have seen more shorter-term stays in the past year, pending availability, though we won't take stays shorter than five nights."
Such bookings often make economic sense to travel managers, whose budgets have been under pressure. "In this way, the price-value equation of a corporate apartment can be the best solution," Korman said. "After all, even as the economy has started to rebound, many companies still are wary of spending $200 a night for a traditional hotel room. They'd rather spend $80 for a corporate apartment."
Given that it is part of Marriott with its extensive retinue of brands, ExecuStay has held the line on 30-day minimum bookings. "Rather than take shorter, more transient-like stays, we partner," ExecuStay's Wechsler said, noting that a Residence Inn, one of Marriott's extended stay brands, where five-night stays are standard, recently opened in Center City. The core Marriott brand and a Courtyard also are represented in the market. "We essentially split the business," she said. "There always will be people who prefer to stay in more of a hotel-like setting, but it definitely gives our clients an option." The average length of stay at the ExecuStay so far this year has been 85 days.
Considering the flow of long-term stay travelers in and out of such a market as Philadelphia, Oakwood's Leonard used to see companies holding apartments empty between stays of their travelers. "When the company held the lease in prior years, it might have made sense, but no longer," he said. "Companies can't afford to leave the apartment vacant. We go from move-in date to move-out date now. If it's going to be empty for even five days, they prefer to turn it back."
Similarly, this has had an effect on the pricing model. Unlike extended stay hotels, where the nightly rate gets lower the longer the stay, the monthly rate for corporate apartments tends to remain the same. "In today's environment, corporations' needs can change quickly," Korman said. "As a result, the monthly charge on a six-month lease would stay the same. Otherwise, should the executive need to leave after three months, it would present a problem."
Yet, Leonard and Wechsler said they've seen more turn-key scenarios lately. This is where travel managers house a series of executives in an apartment, each executive staying for a fixed number of weeks or months. "We want to be flexible, so whatever makes the most sense for the company, we try to accommodate them," Leonard said.
ExecuStay, however, considers 30 days the minimum for such rotations. "Typically, any shorter periods like a week wouldn't really work, considering we really provide a home-like setting," Wechsler said. "It's just too transient. In those cases, we'd just encourage the client to consider other—hopefully, Marriott—options."
The providers said that at times it can be a challenge to make travelers aware of the difference between a hotel and an apartment with its home-like setting. "Yet, in some ways, our relocation and consulting clients are increasingly savvy when it comes to temporary housing," Wechsler said. "Many of our residents, in fact, have done this before, in some cases two or three times in their career at a company."
Considering this growing sophistication, the providers have tried to make more amenities available to travelers in an effort to make their stays more pleasurable and productive. "We've offered complimentary breakfast for a while, but added complimentary afternoon tea this year," Korman said. "Some of our guests need to conduct small meetings during their stay, so many of our buildings provide limited meeting space as well as business centers and videoconferencing facilities."
To occupy guests during their leisure time, Korman has installed mini movie theaters in his firm's dedicated buildings. With seating for up to 100, the theaters show movies and sporting events.