How Does the Apartment Industry Measure Up to Hotels
Whether it is in technology implementation, access control or turns, many apartment firms have found inspiration in the hospitality sector.
For what feels like decades now, it seems apartment executives have been chasing hotels.
It’s easy to understand why if you know the hotel model.
“There are a lot of lessons to learn because hotels are an exaggerated version of apartments,” says David Schwartz, CEO and Chairman of Waterton. “You are selling rooms every night versus once a year. In the way sales are handled, the way technology is handled and the way the social media is done, hotels are more advanced.”
But does more advanced mean better? It depends who you ask. Schwartz, whose firm also owns hotels, sees a lot of a space between the two. If the rental housing industry can close the gap, he thinks the sector will be in a better place.
Not everyone thinks it’s necessary (or even possible) to close that gap.
“I expect hotels to stay ahead of us because of the volatility of their occupancy,” says Donald Davidoff, President of D2 Demand Solutions. “The competitiveness in their business is much greater than in ours.”
That doesn’t mean apartment firms can’t be inspired by hospitality. In at least four different areas—access control, service, operations and tech—executives think the hospitality industry has been a model for apartments. In some areas, multifamily has caught up and in others there is still some room to grow. Here’s where the industry stands in those areas and whether it can (or should) close the gap.
Ease of Entry
For hotels, keyless entry is nothing new. The hospitality sector began moving away from keys almost 30 years ago. In the apartment industry, the transition has taken longer.
“Entering your apartment using your app is something that some apartment brands are just now rolling out,” Schwartz says. “With hotels, you check in on a mobile device, your key will be on your phone and that’s how you will enter your room.”
Doug Kelley, Senior Director of Asset Management for the East Coast at TruAmerica Multifamily, who previously worked in the hospitality sector, thinks apartments would not use keyless entry until it was proven in hospitality.
“The costs had to come down and you had to find some savings with efficiencies,” he says. “With a hotel, you can [find those efficiencies] faster. If you look at trends that made it to multifamily, a lot of them started in hospitality and then reached multifamily when they became more cost-effective.”
This is nothing new. With its constantly churning customer base, the hospitality sector has long been at the forefront of technology adoption.
“Online hotel reservations [for example] were happening way before you could lease online,” Kelley says.
But the apartment industry is now adopting many of those technologies. “Many hotels have offered online or kiosk check-in and check-out and this translates into online applications and lease signing in our industry,” says Jennifer Staciokas, Senior Vice President of Marketing and Training at Pinnacle.
Apartment firms have longed talked about bringing hotel-level service to their residents, and today are making strides.
For instance, The Bainbridge Companies, an owner, operator and developer in the Mid-Atlantic region, is looking to take its resident amenities virtual. To match its hotel-inspired design elements, the company is researching ways to bring hotel-like concierge services to communities with limited amenities spaces.
These concierge services could be anything from dry-cleaning pick-up and drop-off to room service and food delivery, as well as personal chefs, maid services and pet care services.
Bainbridge is not alone in touting these types of services.
Davidoff becomes nervous about the apartment industry going too far down the resort lifestyle path.
“The whole purpose of hotels is to ‘wow’ you,” he says. “But what if they don’t have something new and you return to that hotel two-and-a-half years later and they deliver the same thing? It will not ‘wow’ you the same way.”
Apartments, instead, are something people come back to night after night.
“You can wow residents when they first move in,” Davidoff says. “I don’t know how you keep wowing them. These people are with us day after day, week after week, month after month.”
While offering hotel-level service could lead apartment owners down a frustrating path, Davidoff thinks apartment operators can follow hospitality’s model of branding its offerings—from the economy through ultra-luxury.
As rental markets tighten, operations become more important. Kelley thinks hotels may provide those productivity lessons.
“There is a lot of alignment [between apartments and hotels] in how the staff has to approach the customer and maximize the asset,” Kelley says. “There is so much labor involved in running a hotel. The fact they have so much velocity at hotels, they are hyper-focused on turn times and staffing and scheduling. There are a lot of things that are transferable to apartments.”
For instance, hotel operators know how many rooms their cleaning staff should turn and how much time they should spend to do so.
“Hotel companies use software that helps them to manage their housekeeping workforce real-time and be more efficient,” Lee says.
Davidoff cautions that apartment operators may not be able to enjoy that high level of operational efficiency.
“In a 200- to 300-unit garden style community, you are limited in the amount of scheduling efficiencies because you may only have a few technicians; whereas a 600- or 700-unit hotel has so much more revenue and opportunities for scheduling efficiencies,” he says.
But Kelley argues that incremental improvements can have a huge impact. He thinks managers who can save half a day on turns can add income throughout the year.
“Management companies that can use technology to show quantitative improvement and get turns times down to a science will have the advantage,” he says. “That is where it is going to head.”
The Tech Gap
The speed with which hotels can turn its units can give the sector other advantages. With transactions occurring every two or three nights versus annually, these is a lot more data for hotel operators to analyze.
“Hotel operators get a Day Star report and they know what each of their competitors’ rate was that day and what their occupancy was,” Schwartz says. “With apartments, someone has to call the community and hope the person that answers is telling the truth. No one is doing that every day.”
Kelley says apartment operators may have closed the gap in other areas.
“[Now], the apartment world is much more responsive than we used to be because of social media,” he says. “[For hotels], that gap has probably already narrowed.”
Custom-branded apps have also help apartment operators become more responsive. “Hotels have robust branded apps and are slowly moving into offering services through it, such as ordering room service,” Staciokas says. “In our business we have been rolling our custom branded apps for individual communities to provide convenient service to submit service requests, pay rent, order pet services and reserve community spaces.”
These technologies can increase resident satisfaction, which improves retention. But Davidoff warns apartment owners to not get excited about all the technology that the hospitality industry uses.
“Because of their competitiveness and the short-stay nature, whether it’s the wowing vacation travelers or the need for convenience for business travelers, their opportunity to monetize technology and service changes is larger than ours,” Davidoff says.
Instead of looking at hotels as something to emulate, Davidoff sees them as something to learn from.
“Let them be on the vanguard or the leading edge and then we can benefit from what they learn and the mistakes they make,” he says. “We get to be followers and that’s a good thing from a risk-reward perspective.”