Serviced Apartments On Beach Resorts Tourism Essay

Serviced Apartments On Beach Resorts Tourism Essay A preliminary model of business development factors was created from both literature review and interviews conducted with international serviced apartment operators in Singapore. Subsequently, the model was being tested in a case study visit to Pattaya. The field study encompassed observations, interviews with government officials, serviced apartment operators and facilities operators. Through these modes of information gathering, the pilot model of business development factors was modified. A post model was drawn up to present the final list of business development factors, as well as three other complementary factors which affect the setting up of serviced apartments indirectly. Primary findings include the importance of extended stay markets, sources of expatriates, a viable and thriving tourist market, good transport connectivity, availability of facilities, proactive government support, high level of security and safety, warm and stable climate as well as affordability of the location. The future development of serviced apartments on beach resorts is also explored to include the possibility of venture into timesharing, vacation club, fractional property ownership or hybrids of the above mentioned. The history of beach resorts, or seaside resorts, dates back to Great Britain in the mid 18th century. Back then, visitors often went to beach resorts for their fashionable practice of sunbathing in a belief that it will help in disease treatment (The great British seaside resort: a brief history, 2009). However, times have changed and this trend has shifted from Europe to Asia Pacific. Hobson (1994) identified that future growth in the Asia Pacific region will be focused on the expansion of resort-type destinations, particularly in countries such as Thailand, Malaysia and Indonesia. With the development of beach resorts in Asia Pacific, accommodation has changed within different stages of development, as reflected in the Beach Resort Model (Smith, 1991). Serviced apartments are one of the newer accommodation types found on beach resorts, arising from the needs of modern travellers such as expatriates who are seeking an extended stay in a location, and families who intend to stay in a location for a longer holiday. As few studies have been done on serviced apartments on beach resorts, a case study on Pattaya beach resort was done to better comprehend the business development characteristics for establishing serviced apartments there. Objectives This paper firstly aims to provide insights on the current growth and penetration of serviced apartments on beach resorts. Secondly, it seeks to recommend a model of business development factors that lead to the growth of serviced apartments in Pattaya and also brings across how these factors may influence beach development and vice-versa. Finally, the implications of the business development factors to various stakeholders of serviced apartments are studied. Scope This paper is written in the context of beach resorts in Asia Pacific. Value of Research This paper provides knowledge about the different business development factors in contributing to the success of serviced apartments on beach resorts. Various stakeholders, especially developers and operators who are interested in establishing serviced apartments in Pattaya, will find this knowledge useful. For owners and operators of existing properties, this knowledge can enhance their management abilities. Limitations Being full-time undergraduates, this study was conducted on a part-time basis. As such, only one case study was conducted due to time and budget constraints. Additionally, the topic of serviced apartments on beach resorts is still relatively new and not widely explored. Therefore, there is limited information available. Furthermore, available publications mostly focused on the Western context, hence not specific to Asia Pacific. CHAPTER 2 LITERATURE REVIEW Serviced Apartments Definition While there is no standard definition of a serviced apartment, serviced apartments are typically considered to offer self-contained accommodation with additional services. The apartment will generally include a small kitchen or kitchenette, with a living room in addition to the bedroom(s), or a studio bedroom (Foxley, 2001). Apartments are cleaned weekly and more often if client prefers, and a round-the-clock reception desk for queries and advice is usually available (Collins, 2007). The appeal of serviced apartments is that they offer the comfort and facilities of a hotel, with the privacy and facilities of home (Foxley, 2001). In addition, it is a cost-effective accommodation solution as guests staying for longer periods of 7 nights or more will normally benefit from a reduced price per night (The Association of Serviced Apartment Providers, 2009).  Globally, serviced apartments are sometimes referred to as serviced residences, condotels, extended stay hotels, and the like (Servi ced Apartments Association Singapore, 2005). Target Segments With changing work practices and increased globalisation of business, business executives are increasingly required to work away from home on a short to medium term basis (Foxley, 2001). Hence, serviced apartments provide the perfect solution for this group of professionals, who form the primary segment for serviced apartments. With a relatively long stay away from home, these business executives seek more space and a friendly home-from-home feel (Fearis, 2006). Besides business travellers, leisure markets with an extended stay intention are also targeted by serviced apartment operators (Harris, 2008). Greater international leisure travel and a growing trend towards taking extended breaks between jobs, vacations and working-holidays are also resulting in the demand for temporary accommodation (Foxley, 2001). Families form an integral part of the leisure market as the space and facilities serviced apartments offer suits their needs. Current Trends and Growth Serviced apartments business has been growing at 15-20% annually compared to a modest 6-8% notched by hotels (Choudhury, 2009). According to STR Global, demand for extended-stay accommodation had been growing by 4.9% in 2004, the fastest rate since 2000, and surpassing the 4.6% jump reported for the overall hotel industry (Ligos, 2005). One key driver for this trend is tight corporate budgets. The recent global economic turmoil forced many companies to reduce their travel expenses in an attempt to minimise costs, allowing serviced apartment operators to ride on this by matching limited budgets with competitive prices (Chinmaneevong, 2009). This was reflected in Asia, where demand for serviced apartments remains high despite the crisis (Harris, 2008). The increase in supply of serviced apartments is further bolstered by the predicted continuous growth in global business travel, with Asia Pacific being poised for substantial growth between 2008 and 2013 (NBTA/IHS Global Insight, 2009). Another driver for this surge in popularity of extended-stay hotels is that more companies are willing to pay to relocate new employees (NBTA/IHS Global Insight, 2009), or send them for cross-border corporate training programmes (Foxley, 2001). Employers regard this as an investment due to the lack of qualified and skilled labour (NBTA/IHS Global Insight, 2009). The percentage of such willing employers has increased from 2007 to 2008 by 14% (Fryson, 2008). Locations The locations of serviced apartments will determine the mix of studios, one-bedroom and two-bedroom apartments (Geieregger Oehmichen, 2008), as well as the quality of accommodation and service (Foxley, 2001). Typically, serviced apartments are found in urbanised locations (Harris, 2008), where many multinational companies establish their headquarters or manufacturing plants. This facilitates movement of business executives in cities for meetings and conventions. However, serviced apartments can also be found along beaches. Beach Resort Development Beach resorts are defined as geographic areas offering a variety of facilities, services and activities which are orientated towards seaside recreation for the accommodation, use and enjoyment of visitors (Smith, 1991). Resort morphology goes through a predictable sequence of stages: from pre-tourism low through high-density development to an urbanised state (Andriotis, 2006; Smith, 1992). Barrett (1958) first noted the significance of the seafront in the structure and location of the commercial core, distinct zonation of accommodation types which expands in a semi-circular fashion inland from the commercial core and an elongation of settlement parallel to the coast. Stansfield (1970) later observed the development of the Recreational Business District (RBD) consisting mainly retail, food and beverage and entertainment services along the beach front. The Commercial Business District (CBD) is distinctly separated from the RBD and commonly found more inland. Pigram (1977) noted that improved public transport played a significant part in the arrangement and evolution of zones of land-use. In addition, recreational businesses and accommodation establishments tend to orientate themselves on major access routes to the resorts. Smith (1991) created the Beach Resort Model (BRM) which describes ad-hoc beach development from stages 1 to 8. The stages were determined by 6 categories of change morphology, physical, environmental, social, economic and political. Four coastal resorts in Asia Pacific were studied in developing the BRM; however, it can still be applied at large to other coastal resorts. BRM documents the start of a beach resort from a settlement in pre-tourism datum to a fully urbanised city resort. Accommodation Development on Beach Resorts Accommodation at resorts fall into two groups: traditional and self-catering (Stallibrass, 1980). Traditional accommodation includes personal service both in the private rooms and public areas while self-catering accommodation is self-contained, with its own kitchen facilities. Accommodations on beach resorts frequently start with second homes, followed by hotels which are the traditional accommodation (Smith, 1991). There would be structural changes to accommodation typically at the last two stages of the BRM, because resorts mature and narrow accommodation bases diversify to include significant components of all classes of accommodation (Smith, 1991). In addition, changes experienced when a beach matures, such as greater accessibility and new facilities, results in visitor profile changes (Strapp, 1988). This also affects the type of accommodation in demand. Multi-titled tourism accommodations (MTTA), which include serviced apartments, have been on the rise due to lower financial risks compared to single-titled properties, and the larger target market available due to its mixed use (tourists and residential) (Warnken, Guilding, Cassidy, 2008). MTTA complexes now represent an integral part of, or even dominate many popular seaside and ski resorts in many parts of the developed world (Warnken Guilding, 2009). Serviced Apartments on Beach Resorts In later stages of beach development, beach resorts may start to see year-round residency. The area could become more of a residential community with people staying well past the traditional tourist season (Strapp, 1988). Anecdotal evidence suggests an increase in demand for self-catering short holidays (long weekends up to one week) amongst young families and self-catering accommodation for increasingly wealthy retirees (Warnken et al., 2008). Together with increased demand for accommodation, suppliers are encouraged to add higher quality infrastructure typified by a shift from inexpensive motels to resort apartments such as serviced apartments (Prideaux, 2000). Majority of internet accommodation search engines for major destinations returned listings with MTTA-style complexes (Warnken et al., 2008), and these include serviced apartments. Reasons which could have spurred the establishment of serviced apartments on beach resorts encompass the following: Presence of an expatriate market working in nearby industrial hubs requiring temporary accommodation (Appendix A, B C) Presence of a retired silver-haired market moving to beach resorts during winter months in order to stay in warmer climates (Foster Murphy, 1991; Williams, King, Warnes, Patterson, 2000) Transport connectivity for convenient access to the beach resort (Appendix C) Top-notch facilities such as schools, medical care and entertainment (Appendix B) Serviced Apartments on Beach Resorts in Asia Pacific Serviced apartments were the fastest growing segment of the tourist accommodation sector in Australia during the late 1990s (Foxley, 2001). The number of serviced apartment properties in Gold Coast has been increasing over the past few years. In 1998, the number of serviced apartment guest rooms was 3,180 (Australian Bureau of Statistics, 1999), while in 2007, this number was 5,371 (BusinessGC, 2007). In the year ended June 2009, serviced apartments saw the strongest increase in establishments (0.9%) and room nights available (2.4%) out of all accommodation types, while the motel and hotel sector experienced a contraction of 4.7% and 6.1% respectively in number of establishments (Tourism Queensland, 2009). Currently, here are not many major international operators located on beach resorts in Asia Pacific. Some international operators feel that there are opportunities for serviced apartments to be located on beach resorts in the region. With news releases indicating the plans of Ascott and Oakwood to enter Pattaya, Thailand (The Ascott Limited, 2005; Viboonchart, 2009), it suggests that development of serviced apartments on beach resorts in other parts of Asia Pacific is gaining momentum. Currently, Frasers Hospitality already has a property in Pattaya named Fraser Resort Pattaya. CHAPTER 3 PROPOSED MODEL OF BUSINESS DEVELOPMENT FACTORS FOR ESTABLISHING SERVICED APARTMENTS ON BEACH RESORTS The role of the market has not been the main focus in existing research for the development of beach resorts. The following section takes a closer look at market conditions and operation of the supply side in spurring beach resort development, specifically the development of accommodation to include serviced apartments. The three most important stakeholders in a beach resorts are guests (who are the main cause for induced development); hosts (who by supporting development and by being involved in tourism contribute to the success of a destination); and politics (which influence overall development) (Andriotis, 2006). As such, the factors which are considered below are greatly influenced by characteristics of these three stakeholders. Industrial areas and city centres Relocation of corporate personnel would generate demand for serviced apartments. For beach resorts, there would usually be a presence of expatriates if there are nearby industrial areas and busy city centres (Appendix A C). Moreover, coastal areas are emerging as major centres of economic activity and new powerhouses of tourism interest (Prideaux, 2009), possibly bringing in an expatriate market. Viable and thriving tourist market During weekends, serviced apartments target leisure travellers to fill rooms. This is supported by Foxleys (2001) observation of a trend amongst the international leisure travellers to take extended breaks. In addition, there is seemingly an increase in demand for self-catering short holidays amongst young families (Warnken et al., 2008). Hence, a viable tourist market should also be present for serviced apartments to tap on. Medical tourism Medical tourism has grown rapidly in the past decade (Connell, 2006). People travel long distances overseas to obtain medical, dental, and surgical care while simultaneously being holidaymakers. Reasons for the growth of this niche tourism are high costs of treatment in developed countries, long waiting lists, relative affordability of air travel, and favourable exchange rates (Connell, 2006). Medical tourism has grown in Thailand who deliberately linked medical care to tourism, thus boosting beaches attractions (Connell, 2006). The Phuket Health and Travel website states that it aims to combine health and holiday aspects of travel. Their health and holiday package could include hotel accommodation, pre-doctor appointment, sightseeing, island tours and night entertainment attraction bookings (Phuket Health Travel, 2009). As medical tourism gains popularity, operators may establish serviced apartments next to large hospitals to cater to this kind of demand (Sharma, 2005). Transport Connectivity Transport access to the resort is likely a key determinant of the resorts rate and size of growth. Kim (1998) mentioned that the assessment of tourism potential would place great emphasis on transport communications and general access to the area. As accessibility improves through new road, rail, sea and air services, new and more distant markets will become accessible (Prideaux, 2000). In addition, a good transport system is essential in bringing customers to the apartments doorsteps, and bringing customers to their destinations in the day. Facilities Guests of serviced apartments require nearby facilities for basic living essentials and recreational activities. Recreational activities include sports, shopping and entertainment (Prideaux, 2000), while basic essentials encompass healthcare and educational institutions. Healthcare and educational institutions are especially important for expatriates who have brought their families along when they are relocated by their companies (Appendix B). Political aspects Government policies can hasten the development of beach resorts (Prideaux, 2000) and also implement favourable conditions to boost tourism which potentially encourages serviced apartment establishments due to healthy tourist market prospects. National Tourism Organizations are also responsible in wooing tourists to the country. Ooi (2002) discovered that the political environment can have a significant influence on the image of the destination and tourism promotion policies. Safety and Security Safety is a major concern for tourists (Kim, 1998). Davidoff and Davidoff (1994) concluded that people would not travel to a location believed to be unsafe. Given that expatriates can stay up to a considerable period of time and may bring their families along when they are relocated, security for the family and self becomes an important concern. A summary of the above mentioned factors are integrated into the table below: Table 1.png The factors identified above can possibly shape future growth and development of beach resorts. Additionally, they also aid in future planning by recognising supply short-comings and predicting rising needs of the market, allowing sufficient time and space for operators to cater to these trends. CHAPTER 4 RESEARCH METHODOLOGY Case Selection The case method (Yin, 2003) is used in this study and the unit of research is a beach resort. The case selected in this study is Pattaya. In Pattaya, there is one major international serviced apartment operator, Fraser Resort Pattaya. Interestingly, a huge industrial development is located east of Pattaya. As a developed beach resort, Pattaya has good facilities and infrastructure in place to support its tourism activities. These indicators provide an inkling of the entry of more international operators eventually, thus providing adequate data for this study. Data Collection Formal interviews were conducted with major international serviced apartment operators headquartered in Singapore to gain a better understanding of the industry. A preliminary model was created through book, journal and internet research, newspapers and interviews in Singapore. A field study to Pattaya was then conducted from 8 to 11 December 2009 to collect primary data. Details of the site visit are: Interview with an international service apartment operator several local operators an official from the Tourism Authority of Thailand (TAT), Chon Buri (Pattaya) international hospitals Physical observations of the facilities, establishments and general environment Subsequently, a post-trip model was constructed. This is a refined and condensed model after further knowledge gathered through the field study. Complementary factors which contribute to the listed factors are also identified to provide a wider perspective. CHAPTER 5 PATTAYA CASE A seaside province located on Thailands east coast, Chon Buris scenic views earns itself a reputation as one of Thailands popular sanctuaries for holiday retreats. Situated near the city of Chon Buri is Pattaya, a holiday paradise for fun-lovers. As Thailands premier beach resort that attracts a large number of tourists, Pattaya is charmed by a tropical resort atmosphere suitable for total relaxation. Besides its blessed natural beauty, Pattaya also offers a wide range of water sports and vibrant nightlife (TAT, 2006). Today, it boasts the unique distinction of a beach resort with a city status (TAT, 2007). 5.1 Accommodation Development in Pattaya The increasing influx of visitors over the years has stimulated changes in accommodation types. Most of the large hotel chains, resorts and serviced apartments are located in two regions north and central of Pattaya city. In the stretch right in front of the coastline, the smaller hotels or budget accommodations are found. This stretch is also the region where there are many restaurants, bars, pubs and a number of shopping malls spread out along the coastline. Although most of the serviced apartments are in the north and central region of the city, there are still a few serviced apartments located in the beachfront stretch (Appendix T). This occurrence as described by the BRM model is due to development saturation of the original beachfront strip causing subsequent accommodation to develop along the same strip but extending further inland (Smith, 1991). As serviced apartments are only recently developed on beach resorts, their locations are thus further away from the beachfront. In addition, beachfront region is considered to be nosier with activities ongoing till late. Since serviced apartments are targeted at long-term stay visitors who might want a more conducive environment, serviced apartment operators have thus established the apartments away from the noise. The contrasting location of some serviced apartments in the beachfront stretch is due to their smaller sizes and absence of a serviced apartments full capacities. CHAPTER 6 CASE EVALUATION The business development factors in the preliminary model are assessed against observations and interviews conducted at Pattaya. Further findings are also indicated. Evaluation of Preliminary Model Industrial Areas and City Centres As business executives are the primary target audience of serviced apartments, the existence of sources generating expatriates, such as industrial areas and city centres, are vital. In Pattaya, industrial areas are of notable importance as a driving factor for guests in serviced apartments. Chon Buri province is located in the industrial development region of Thailand, a short drive to southeast Bangkok (Tanvatanakul, Saowakontha, Amado, Vicente, 2007). Business executives who work in both Bangkok city and Chon Buri are thus able to commute to Pattaya quickly. Besides Chon Buri, Rayong province also houses several industrial areas and is approximately 220 kilometres from Bangkok (Bangkoksite.com, 2009). Five main industrial areas (Appendix N) situated in both provinces Laem Chabang , Map Ta Phut, Eastern Seaboard, Amata City and Pinthong, are sources of the expatriate market who seek accommodation in Pattaya city (Appendix I). Some local operators revealed that the bulk of their customers come from the industrial areas. The close proximity to both provinces makes Pattaya a preferred place for many expatriates to stay in (Thailand Guru, 2007). This spells business opportunities for serviced apartments. Positive statistics draw links to a possibly burgeoning expatriate market coming to Pattaya, as reflected in the rise in tourist arrivals in Pattaya for business activities over the years. Arrivals based on business purposes increased by 38.08% from 349,010 in 2006 to 481,916 in 2007 (TAT, 2007). In addition, the proportion of these business arrivals out of total arrivals also increased from 5.7% in 2006 to 7.21% in 2007. For conference/seminar purpose, figures rose from 95,887 in 2006 to 260,695 in 2007 (TAT, 2007), representing an astounding 171.9% increase. The proportion of this conference/seminar-driven tourism out of total tourist arrivals increased from 1.6% in 2006 to 3.9% in 2007. These trends may further spur the growth of serviced apartments in Pattaya. Viable and Thriving Tourist Market Apart from business travellers, serviced apartments may also serve leisure travellers who are on extended holidays. A promising inflow of tourists is likely to affect the growth of serviced apartments. The following section assesses the tourist market in Pattaya based on figures retrieved from TAT for years 2005 to 2007. TAT indicated that figures for 2008 and 2009 are not available. Tourist Arrivals Table 2.png Table 3.png Figure 1. Internal Tourism in Pattaya Tourist arrivals have been increasing steadily from 1997 to 2007. It increased by 14.55% in 2006 as compared to 2005, to a decade high of 6,680,658 in 2007 (+9.25%). The main purpose of visits has been for leisure, which comprises about 83 90% of tourist arrivals in years 2005 to 2007. This shows a thriving leisure tourist market. Table 4.png Interviews conducted with local serviced apartment operators revealed that their main customers are Europeans. Figures have shown that out of the 4,481,630 international travellers who visited Pattaya in 2007, 40% are Europeans. As Pattaya remains a popular beach resort destination for European visitors, the European tourist market in Pattaya will either maintain its size or expand in the future. Local operators also mentioned that these Europeans customers can stay for long periods ranging from a few weeks to a few months. Aside from Europeans, Pattaya is also a popular destination amongst Asians due to its location and reputation for providing a beach getaway. A dip in figures is expected for 2008 and 2009 due to the global economic recession and H1N1 pandemic. Other sources suggest that following a 5% increase in tourism numbers in the first half of 2008, international tourism began to slow down rapidly in mid-2008, reflecting rising oil and commodity prices, volatile exchange rate fluctuations, political instability, and the impact of the global economic recession (UNWTO 2008; UNWTO 2009a; UNWTO 2009b). However, as the world emerges from the recession, tourism in Pattaya is expected to pick up in late 2009 or early 2010 onwards. Tourist Receipts Table 5.png Accommodation expenses generally comprise the bulk of tourist expenditure. Furthermore, tourist receipts have been increasing from 48,522.13 million baht in 2005 to 59,347.61 million baht in 2007. As both tourist arrivals and expenditure increase, this means more business opportunities for serviced apartments in Pattaya. Average Length of Stay of Tourists Table 6.png The average length of stay has decreased from 3.41 days in 2005 to 3.13 days in 2007. However, local operators revealed that the average length of stay ranges from a few days to a few months for leisure travellers, while the average length of stay can be up to 2 years for expatriates. Major Attractions and Future Plans The two principal beaches are Pattaya and Jomtien beach, which offer a range of recreational and entertainment services. Aside from the beaches which saw 61% and 31% of total tourist arrivals in 2007 respectively, other key attractions include bars and nightclubs (30%) and shopping malls (13%) (TAT, 2007). As beaches remain the most visited place in Pattaya, plans are proposed for a large new pier and marina for sporting and leisure craft on Pattaya beach (Channgam, 2008), rejuvenating the beach and thus keeping it attractive for tourists. In addition, the Pattayas mayor wishes to shift the image of Pattaya away from a red-light district to one full of other exciting activities such as a possible indoor ski resort which could attract more international business chains and induce more long-stay guests (Appendix J). Hence a viable and thriving leisure tourist market helps to raise occupancy rates in serviced apartments. Nonetheless, the tourism industry needs to keep improving to sustain or develop new interest in tourists. Medical Tourism The presence of international hospitals may stimulate the establishment of serviced apartments next to them to cater to potential medical tourists who stay for long-term treatment. Three international hospitals dominate Pattaya, namely Bangkok Pattaya Hospital (BPH), Pattaya International Hospital (PIH) and Pattaya Memorial Hospital (PMH). Of these hospitals, only BPH is programme certified by Joint Commission International. It also has 400 beds, having the ability to accommodate more patients as compared to PIHs 70 beds, and PMHs 80 inpatient beds. However, from interviews with the hospitals, it was revealed that patients are largely locals and to a lesser extent, international visitors. Medical tourists are hence an insignificant contributing long-stay market. Nonetheless, it may grow in significance in the future. Transport Connectivity Favourable transport connectivity helps visitors and locals to orientate their way to and around Pattaya easily, a basic essential factor required to draw guests to stay. Features affecting transport connectivity are analysed below: Distance and time to airport Located approximately 110 kilometres away, Pattaya has close proximity to Suvarnabhumi Airport, with travelling time around 1.5 to 2 hours. This relatively short distance and travelling time makes Pattaya a desired city to visit. Modes of transport to Pattaya Visitors can access Pattaya conveniently via air, rail, taxi, coach or local buses. Modes of transport around Pattaya The most commonly seen transport is the Baht Buses, which are transformed from pickup trucks. Other forms of transport include motorcycle, bicycle, car, local bus and taxi. Local buses, however, are not easy to spot and thus often underutilised. Road InterconnectivityC:UsersLoyAppDataLocalTempRoad Map.jpg Figure 2. Pattaya Road Map The road system can be complex and confusing for first-time visitors. However, after gaining familiarity, it is simpler to navigate around. From North to South, there are Beach Road (also known as First Road) which faces the sea, Pattaya Second Road and Pattaya Third Road. Beach Road is a one-way road which runs southwards, while Second Road runs northwards. These one-way roads pose inconvenience and a hassle to travel. In between these roads are smaller and busier streets which connect the three roads together. From East to West, there are the North Pattaya Road, Central Pattaya Ro