IJEMR August 2016 - Vol 6 Issue 08 - Online - ISSN 22492585 Print - ISSN 2249-8672

A Study on the Emerging Opportunities and Scope of Serviced Apartments in Tamilnadu

*S.P.Deepeka
**Dr.M.K.Badri Narayanan
*Research Scholar, School of Management, Hindustan University,
**Associate Professor, School of Management, Hindustan University
Abstract
Traditionally, a Serviced apartment is a term considered to illustrate as a substitute to
hotel accommodation for long stay guests whose purpose of visit is for business. However the
term now has various sub-categories and there are new brands approaching the market
makes this a well known and simplified definition. Serviced Apartment is now a generic term
used for furnished accommodation that provide services for long term staying guests. It
provides services at par with a star categorized hotel, which includes separate kitchen,
laundry, dining area, housekeeping and other services for the guest on request. The prices
include taxes and utilities which are quite affordable. These are considered to be alternative
accommodation as they provide services like a hotel but they do not operate like them. Hotels
are always known as Primary accommodation. India is a country which is globally integrated
and has executives of MNCs frequently visiting the country; these executives require a highend accommodation with affordability. The Extended stay market in India consists of Two
segments namely Star categorized hotels and Economy or Budget Hotels. The Country has
large number of single property like Motels and Guest houses catering to budget travellers.
Apart from these properties, there is an emergence of Serviced Apartment units and chains in
all the metro cities of the nation. Initially this concept started in Delhi, Mumbai, Bangalore
followed by Chennai and other metros. Now it has the scope of operating in tier II cities of the
country. Chennai being an upcoming investors destination in the state of Tamilnadu, this
industry has huge scope to concentrate on various cities and sectors in the state. This study
deals with the emerging opportunities in Chennai and the scope of operating in tier II cities of
Tamilnadu and also the sectors which can be concentrated for their potential business
development.
Key Words: Service Apartment, Opportunity, Tamilnadu, Emerging sectors
Introduction
A Serviced Apartment is often referred as a home away from home that provides the
guest with accommodations at affordable prices. Service companies and housing developers
let out fully furnished apartments as corporate housing units. Few companies manage owned
properties and they are furnished by individual real estate investors. The Serviced Apartment
includes studio units, or two or three bedrooms, which are furnished with all modern
amenities like refrigerators, kitchenettes, microwave ovens, televisions and internet facilities
(Wi-Fi). It also includes full housekeeping facilities which are mostly outsourced. They also
provide other additional services like gyms, conference rooms and party halls which are not
mandatory. All these are offered at prices lesser than 5-star hotel tariffs including the taxes.
Universally, Serviced Apartment is the terminology that had been used to portray an
alternative accommodation for long stay guests in urban locations. However there are three
types of accommodation which falls under the category of Serviced Apartment with subcategories of list that is ever-growing list.

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TABLE 1: Types of Accommodation with Description
Extended Stay Hotels

Corporate Housing

Condo - Hotels

En-suite bathrooms

Furnishings

Provision to own a fullservice vacation home

Weekly cleaning

prospect to receive fivestar luxury services to

the prices of threestar

Fitted
kitchen
kitchenette

or

Lounge or a dining area

which at times include a Utility charges
pull down or sofa bed
Working area including
Local
office chair with desk, wifi
taxes
& direct telephone line.

municipal

When the unit is not

utilized, it can be rented
out or can be managed
by hotel chains
-

24hrs or limited hours Telephone, WiFi and

operating Front Office
TV channels

Services for Guest

with
support
for
Daily or weekly cleaning &
maintenance
and
laundry service
telephone
related
issues etc

Provision of
laundry
services either on sharing
basis or built inside the
apartment unit

Units rented and

maintained by the
operator on daily
basis

SOURCE: AUTHORS COMPILATION USING LITERATURE

Literature Review
The Serviced Apartment is a well known concept which was started over 30 years ago in
the United States. There were various demand and supply factors that lead to the development
of Serviced Apartments:
Demand
Convenience of the Tourists
During the process of Tourism, tourists wants to stay in a place where there is a laundry
facility to wash their clothes and an attached kitchenette to cook whatever they feel like. They
also had the convenience of getting groceries and vegetables nearby so that they can cook
according to their preference which can directly be related to the concept of home away from
home.
Tourists want to save Money
Serviced Apartments helps tourists to save money. The rates offered by them are less when
compared to the hotels. But they enjoy the services which are equal to hotels at lesser cost.
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Emergency Accommodation
These Serviced Apartments can also be utilized for temporary accommodation. For example,
at times of emergency or when the landlord of the place needs their property but the tenant
could not find an available house to shift immediately.
Supply
Developers own unoccupied apartment units which is considered as loss to them
During late 1980's, the concept of Apartments were not a popular and preferred choice for
people to reside and only limited Apartments were purchased by the people. Real estate
investors then decided to convert those unsold units into a Serviced apartment by providing
additional services with nominal cost.
Investors want to gain rent and capital
The buyers will gain capital if the investors decide to sell out the units. The Prices can also
be fixed or changed based on the demand, supply and market conditions. Many investors have
now started to invest in Serviced Apartments in order to gain income.
Objectives
To Understand the varied characteristics of Serviced Apartment industry
To Highlight the changing scenario of the competitive landscape in the sector
To analyze the emerging opportunities for Serviced Apartment in Chennai/Tier II cities of
Tamilnadu
Methodology
This is a descriptive study based on Secondary data collected from various reports which has
been compiled from industry research reports, government publications and articles from
reputed financial dailies.
Tamilnadu Increasing Industrial Investments Catalyzing Serviced Apartment Demand
Tamil Nadu is one among most developed states economically in India. It stands 3rd in terms
of industrial units in the country. During the year of 2005-10, the state has increased twice
the time with 18.6 CAGR. This urbanized state is also an ideal choice for leading investors in
industries, which has been reflected in its industrial output, total unit of working factories,
growth of manufacturing sector, performance of service sector and development in
infrastructure. In the year from 2000-14, the state has received around FDI of USD 12.5
billion among 35 of the 500 fortune companies in the state. Potential sectors for investment in
Tamil Nadu are the Aerospace, Auto & Auto Components, Agro& Food Processing, Biotech and
Pharma, Chemical & Petroleum, Electronics & Hardware, Heavy Engineering, Infrastructure,
IT & ITeS, Renewable Energy, Skill development and Textiles. The state is a home to major
manufacturing plant like Nissan, Daimler, Renault, Hyundai and Ford. The recently held
Global Investors Meet in Chennai had attracted Rs.2.42 lakh Crore investments to the state
which includes Rs 10,950 Crore in IT sector, which is the prime driver of demand for Serviced
Apartment. This shows that there is lot of opportunities available for this Serviced Apartment
sector to grow in the state as these industrialists have to travel to and fro for their business
development.
Chennai Scenario
Chennai being the metro city of the state has emerged as the largest electronic hardware
manufacturing and exporting hub. The city ranks 4th in terms of employment opportunity in
the country for IT/ITes sector and it is said to be the Detroit of Asia. It has also got the highest
resource pool in the form of graduating students and 4 th highest in holding the number of
higher education institutes.
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FIG. 1. Industrial Scenario - MSME Units in Chennai

4896
5089

Others
Other Business activities
Computer & Relating activities
Machinery
IT/Ites
Auto components / Engineering
Pharma
Plastic
Metallurgy
Rubber & Plastic Products
Chemicals & Chemical Products
Leather & Leather Garments
Readymade Garments
Textiles and Apparels
Food Processing

6084
2186
500
500
100
2480
1411
754
1652
1379
669
1172
182
0

1000 2000 3000 4000 5000 6000 7000

SOURCE: MINISTRY OF MSME, CHENNAI DISTRICT 2012-13

FIG. 2.Education and Skill Development Sector
6

Polytechnic Institutions
Engineering Colleges
Medical Colleges
Arts & Science Colleges
Universities

170
6
43
7
0

50

100

150

200

SOURCE: CHENNAI DISTRICT, STATISTICAL HANDBOOK, 2012-13

FIG. 3.Health Care Sector
2

Ayurvedic Hospitals
Private Hospitals
Government Hospitals

584
25
0

200

400

600

SOURCE: HEALTH & FAMILY WELFARE DEPT., GOVT. OF TAMILNADU 2012-13

The above figures show that the three sectors have provided Serviced Apartment a great
opportunity to operate in the city. The working professionals in the industrial sector pour into
the city from various places. Expansion of Serviced Apartments can cater to the need of these
professionals. Students in the educational sector require a peaceful environment with basic
facilities at a lesser cost. The Serviced Apartment business has spawned an unexpected
beneficiary due to a boom in Medical tourism in the city. These apartments are coming up in
locations close to hospitals, making it convenient for patients and their families to stay there
and commute without spending much on transportation. The leading hospitality and real
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estate investors have targeted projects across metros like Bangalore, Chennai, Delhi, Pune,
Kolkata and Kochi. Serviced Apartments are nowadays becoming a preference for guests
looking for a home away from home and has a great opportunity to operate in Chennai.
TABLE 2: Classification of Service Apartments Based On Tariff
Minimum Tariff per Day

No. of Serviced
Apartments

>500

500 - 1000

11

1000 - 1500

25

1500 - 2000

45

2000 - 2500

35

2500 - 3000

23

3000 - 3500

3500 - 4000

4000 - 4500

4500 - 5000

Total

149

SOURCE: WWW.HOLIDAYIQ.COM
Demand for Serviced Apartments in Chennai
The demand for Serviced Apartments has grown drastically in the past 10 years by
improving the knowledge of the product, considering the benefits of Serviced Apartments
amongst Corporates, improving standards of apartment and the arrival of major brands into
the sector. The gradual easing of the impact of the worldwide recession is illustrated by
improving occupancy figures up year- on-year for 65% of operators during 2012 and unchanged for 23% over 2011, compared to 59% and 22% respectively in 2010. 94% of operators
report that demand for Serviced Apartments in their regions is increasing. This compares to
77% in 2011, further evidence of optimism comes from a 2013 survey of the Association of
Serviced Apartment Providers which revealed that 74% of operators in the UK and Ireland
expect their business to increase during 2013.
Scope for Serviced Apartments in Tier Ii Cities of Tamilnadu
Apart from Chennai, Tier II cities like Coimbatore, Salem, Trichy and Madurai, will be
the emerging hotspots and drivers of Tamil Nadu economy in the coming years. With the
availability of conducive ecosystems in these cities and the government planning major
infrastructure push in the form of industrial corridors connecting these cities, real estate
would also see impressive growth in the near future, the report which was released at the
state conference of Confederation of Real Estate Developers' Association of India (CREDAI) had
identified these cities as the upcoming investing cities next to Chennai. Not only the start ups,
IT giants are like HCL, Cognizant are investing in these tier II cities. Officials with the state IT
department said a large portion of the Rs 10,950 crore in IT investments will go into smaller
cities and towns in the state. The expansions are in Coimbatore, Madurai, Trichy, Tirunelveli,
and Salem, where the state government has managed to sell land to IT firms. The other
sectors that could attract investments in various cities are: industrial, IT/ITES and agro-based
industries in Coimbatore, textile and rubber manufacturing in Madurai, heavy industries and
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IT/ITEs in Trichy, and heavy industries, textiles and agri-based industries in Salem. In future,
Service Apartment can also concentrate on these cities for their growth.
Conclusion
The Developing economy of India has led to a booming tourism sector and with many
families travelling; they feel that Serviced Apartments are more of a home away from home.
This may also be an important sector influencing the expansion of service sectors. The other
main sector which acts as a push for progress of the Serviced Apartments is identifying the
destination as an investment opportunity by various sectors. The number of industries,
educational institutions and hospitals have increased multi-fold in cities like Chennai and this
is also now witnessed in the Tier II cities of the state of Tamilnadu. This is also reflected in the
fact that apart from the major players in Serviced Apartment industry, even property
developers are eyeing to enter into the Tamilnadu market. Major Serviced Apartment chains
have already started investing in Chennai. These investments are expected to increase in the
coming years. Apart from Chennai, they can also concentrate on the tier II cities of the state.
Reference
[1]Maria Pia Fntini and Isabel Vaz Ferreria, Chennai growth stimulates travel, Hotel News
now, March 29, 2012.
[2] Nahid Alam and Ankit Sharma, States Emergence: A Comparative Analysis of Growth and
Development, The associated chambers of commerce and industry of India, February 2015
[3] Neeraj Gulati, Growth story of Service Apartments in India, October 03, 2013.
[4]Pritam P. Hans, Mixing home and Hospitality, Money today, September, 2011.
[5] Ravi Teja Sharma, Why Service Apartments are in Demand, Rediff, November 18, 2006.
[6] Sweckrit Nadekar, Serviced to convenience, Hospitality biz India, January 27, 2014.
[7] Vaishna Roy, At your Service: Service Apartments open new doors to medical tourists,
The Hindu, March 17, 2013.
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from

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from

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