There have been many great ideas in the history of business. From paperclips to e-mails, every great innovation has increased employee productivity and contributed handsomely to an organization’s bottom line. In the relocation industry, many of these great ideas have been created to help ensure the success of an employee on assignment, where failure can cost millions of dollars in lost output, time, and market share.
One sterling example of the above-mentioned workplace productivity enhancement is corporate housing. A furnished apartment is many things, but most important, it is a home. After a long day at the office, it is nice for an employee to know that a packed box of his personal items is not waiting to greet him at the door.
It is no secret the hospitality industry suffered after the terrorist attacks of September 11, 2001. With America’s collective psyche shaken, and the economy in shambles, many travelers—both for business and pleasure—either opted to, or were told to, stay home. Three years later, corporate housing, thanks to a competent and steadfast industry association, as well as a new method of benchmarking, are helping to foster a new level of sophistication that is leading to a resurgence for the industry.
A Brief Look at Corporate Housing
“Essentially what we do is rent out unfurnished apartments from a landlord or residential community owner, and we fully equip them for occupancy by our customers,” said Joe Lavin, executive vice president and managing director, Marriott ExecuStay, Gaithersburg, MD, and a member of the board of directors of the Corporate Housing Providers Association (CHPA). “We furnish it and hook up all the utilities and cable —all the things you need to be ready to go. Then we hand the key to the customer and they’ve got a fully equipped furnished apartment for however long they want to stay.”
Sounds like a novel idea. But surprisingly, corporate housing was not even on the radar of most companies until recently.
“Five, seven, ten years ago corporate housing was what I would call a niche or boutique business,” said Terry Flahive, president, Princeton Properties, Lowell, MA, and president of the CHPA board of directors. “If you used the term corporate housing or furnished apartments in a general sense, I don’t think there was much recognition of what it was. You would have to explain that it meant furnished apartments for stays of 30 days or more, and would be ideal for relocation or special projects or consultants coming in for long periods of time versus staying in a hotel room.”
One of the things that has increased awareness of corporate housing is an industry association.
The CHPA
“CHPA started seven years ago when a group of corporate housing providers recognized that there was a need in this industry for a national association where people in this business can gather together and exchange ideas on best practices, what is working in particular markets, share ideas, and increase awareness of the corporate housing industry,” said Flahive. “In the last five or six years, because of organizations such as CHPA, it has gone from a niche business to an internationally recognized business. You can say corporate housing today and there’s now a real recognition of what it is. It’s not an unknown commodity or a very small niche business anymore.”
Blossoming from a niche business to an internationally recognized institution has been beneficial for all providers of corporate housing, and for many reasons.
“It’s very much needed to help professionalize the corporate housing industry,” said Lavin. “The CHPA is a vehicle to create a professional approach to doing business, to provide information and knowledge about how to do business better, to benchmark, to create circles of excellence, and to foster networking opportunities. I’m very proud to be associated with it. I believe a strong industry is good for everybody.”
Although an industry association has accomplished much for corporate housing, certain elements required for a dynamic business were still lacking.
“One of the things that struck me when I came to the corporate housing industry is that there was virtually no branding, centralized distribution was in its infancy, and there was very little information on what was going on in the industry,” said Lavin. “People were basically in the dark about how they performed in relation to their competition or their market.”
Lavin is one of many industry insiders who desired a way to quantify aggregate data for his marketplace. Prior to this year, there was never a good way to measure supply and demand. The first attempt to quantify the industry took the form of an annual report, which was helpful, but lacked certain fundamental elements, and it came out too late to be useful as a decision-making tool. Recognizing the need to quantify data, the CHPA began a search for a benchmarking leader.
“As an organization [CHPA] looked at who benchmarks data effectively, and the hotel business has been doing it effectively for years with a program called Smith Travel Research,” said Flahive. “Smith has been tracking hotels and how hotels do in their market share forever. And we said, ‘that’s exactly what we need, we need the same type of information that every individual hotel in this country has on a monthly basis.”
In search of a solid way to benchmark data, the CHPA looked to Smith Analytics, an offshoot of Smith Travel Research.
The Origins of Smith Analytics
If you ask anyone in the hotel industry about benchmarking, the answer will never differ. Smith Travel Research has been called the bible of hotel data.
“Smith Travel Research is extremely well known throughout the hotel industry for providing the oracle of information for the hospitality industry,” said Mark Lomanno, president of Smith Travel Research, Hendersonville, TN, and co-founder of Smith Analytics, also located in Hendersonville. “We have been doing it for 20 years now, and we produce reports every week that compare individual hotels and entire brands against their competitors, starting on a very local basis. And you get to see how you are doing versus your competitors every week on a variety of metrics.”
For the hotel industry, Smith Travel Research metrics have proven more than beneficial.
“We have talked to many hotel operators about the data, and they said they would just be lost without having this kind of feedback,” said Lomanno. “Our business is all about providing feedback to operators in different industries so they can make better informed decisions. We naturally think just about any industry would want to embrace something like this. You never know until you go our there and start talking to them.”
Many say that in any industry, there is a direct relationship between the amount of industry knowledge and how each individual company prospers. In their quest to improve the benchmarking of their industry, CHPA contacted Smith Analytics, and because a number of the board members have backgrounds in the hotel industry, they were familiar with the popularity of Smith Travel Research.
“The reports bring another level of sophistication to the industry,” said Lavin. “Just about every industry I’ve ever been near, or touching, or reading about, has a data collection arm so that everybody knows how they’re doing versus the industry, how they are doing versus the competition. Corporate housing did not really have anything like that. There was the yearly study, which provided valuable information, but the problem with that was that it was essentially old information by the time it got out because it was done annually and then published some months later after that because of the timeline to get it all put together.”
Mining the Data
With the help of CHPA and others in the industry, Smith Analytics has developed a competitive analysis program that requires corporate housing providers to contribute information on a monthly basis for each market in which they operate—defined as metropolitan statistical areas (MSAs)—and feedback is provided concerning how each operator compares to the others operating in their MSA.
“The information on the competitors is aggregate, so you never know how a specific competitor is doing, otherwise no one would contribute the data,” said Ricardo Anders, president of Smith Analytics. “But now you have the opportunity to compare your performance against that of your competitors, so you are not looking at your performance in a vacuum.”
On the 15th of each month, eight pieces of data are collected from each provider, with reports prepared and distributed by the 20th. The eight pieces of data are broken down into information concerning studio apartments and one-bedrooms, as well as two-bedrooms and other unit types. For each of the two types of unit categories, four pieces of data are collected. They are available units on average for the month, occupied units on average for the month, total rental revenue, and base rent.
“It’s information that virtually every provider out there already collects,” said Anders. “So it’s simple to participate in terms of the data that they give us, and the reports that we give back also are simple to interpret. One of the reasons why we collect a limited amount of information is so we don’t overwhelm people with trying to figure out how to use it all, the other is to make it as simple as possible to participate.”
A minimum of three providers are required to participate for each MSA in order for the data to be published. No provider can represent more than 50 percent of an MSA, or the data is not published.There are three pages of information per MSA, delivered in both graph and table formats. One page is dedicated to studio and one bedroom apartment information, another is for two-bedroom and other unit types, and the third page is an overview of all the units in the market. All the data is kept confidential.
“Our company is all about feedback and making people’s businesses operate more profitably,” said Anders. “We try to minimize the amount of time that is required for them to participate and submit the data. They need to initially submit a couple of years of historical information, which tends to be the most difficult task of the entire process. Beyond that, getting us the monthly information is a simple task.”
Exchanging the information is a relatively simple task, too. The information is submitted electronically to Smith Analytics and the reports are delivered back electronically by e-mail and through a user interface on the company’s Web site.
“This is the first step in getting much better data for the CHPA and the operators to use,” said Anders. “It will benefit all operators by allowing them to better understand their market’s fundamentals. Eventually, it will help them figure out how the size of each market is changing from month to month. It can help them evaluate other markets if their company is expanding. Also, it can help provide credibility for the industry in the eyes of lenders, insurers, and vendors, because now they will have some real data on how well the corporate housing business is performing.”
Benefiting from Business Intelligence
Of course, it is easy to see how they benefit from business intelligence. It is a powerful tool to know the state of the market you are operating in.
“When people don’t have any information about what’s going on around them, they essentially assume it, or guess it, and assuming or guessing with little or no data is very dangerous for everybody,” said Lavin. “Every provider is at the mercy of their least sophisticated competitor, so the more knowledgeable each provider can be, the smarter everyone gets in a competitive market situation.”
The most basic data can be used to gain leverage in a specific market.
“Just knowing the state of the market, what the level of occupancy is in the market, can make all the difference in the world in the long run in how people in the entire market operate,” said Lavin. “But people are guessing. They don’t know what the occupancy is and they don’t really know what people are charging. So they guess, or assume. If they are wrong, it damages the entire market. So here is a way, if everyone can participate, where you can make more informed business decisions. You’re not guessing, you’re not assuming as much, so everyone is operating on a much more sophisticated basis. And that’s the goal here, to help everybody to be smarter about how they do business, because the smarter everybody is, the better off everybody is.”
What Is in Store
As the corporate housing industry continues to blossom, there are many more trends appearing on the horizon.
“One of the things that seems to be going on is that there is a consolidation of buying behavior by the big users of corporate housing,” said Lavin. “They want to have a few relationships with players who can deliver to their needs in a wide variety of places around the country or around the world without having to make a lot of phone calls. It’s all about time, it’s all about ease of doing business.”
As organizations revert from a cost-cutting strategy to one of increased spending, the desire for excellent service is slowly replacing the need for a more cost-effective experience.
“Another big trend is the shift ever so slowly to a balance of what you’re buying by the customer,” said Lavin. “During the last few years, it has always been about price, price, price. Nobody says they don’t care about quality, but that’s what they seemed to be acting like. All they wanted was the cheapest thing, and the level of service was almost secondary, if even on the radar. Now, we are starting to get more emphasis on service. Instead of how cheap can you do this, now it is how well can you do it.”
Although there appears to be a renaissance underway in the corporate housing industry, there is still definitely room to grow.
“I think that the combination of quantifying a business and certifying a business makes it a truly national and international activity,” said Flahive. “The trend in terms of business, after 9/11, as with all aspects of the hospitality and hotel business, corporate housing suffered. For the last two years it has been relatively flat. We are all hopeful that this year we will begin to see, and are seeing, a bit of an increase in our business. But we are more directly tied into the economy. Companies are beginning to do better and have more relocation and more training and more travel and that obviously correlates into us being more successful in our business.”
Frank Mauck is Mobility managing editor, Washington, DC. He can be reached at 202/862-4290, or e-mail fmauck@erc.org.