Ten years ago there was just one temporary housing company exhibiting at the Worldwide ERC® National Relocation Conference. This past May, there were more than a dozen.
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The growth in corporate housing options gives companies and transferees the opportunity to find better housing solutions for a variety of needs. To determine the best option for a relocated employee’s short-term housing, one must consider the following factors: What are the rate parameters? What is the length of stay policy? Are transferees given a lump sum and choosing where they live? What are the tax implications for the transferee? Can the provider meet your company’s required service metrics?
Bob Gray, a vice president with Liberty Mutual, Boston, MA, is very familiar with interim housing. Having moved from Scotland to London, England, London to New York, NY, and, most recently, New York to Boston, MA, Gray said, “I am truly a lost sock in the Laundromat of life.”
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Gray provides us with a first-hand perspective of the short-term housing options. There are several temporary living alternatives, each with different operational procedures. Understanding these differences will help a company choose the provider that best meets a transferee’s unique housing needs. In general, there are two housing models with a variety options for transferees, hotels and corporate housing.
The Hotel Option
The first and most traditional option is temporarily housing employees in a hotel. Hotels offer arrival and departure flexibility, check-in ease, and daily maid service. Most also offer frequent guest reward programs, which transferees see as a perk of a relocation. The market segments run from economy to luxury, with most companies choosing moderate or business class accommodations during relocation.
Hotels typically have high daily rates, and meal expenses run higher due to lack of cooking facilities. Not being able to leave milk in the fridge and cereal in the cupboard can cause an inconvience and added calories for some. Taxes raise daily rates by as much as 19 percent in some markets, although they can be waived for stays of 30-plus consecutive days.
Gray said his company placed him in a luxury hotel for almost a month. He said that a normal hotel is not a good option for any assignment lasting more than three weeks. “It’s too expensive from the employer’s standpoint, even with a corporate discount,” he said. “[Hotels] lack living space flexibility, particularly for families or married couples. Even suites, except at the top end, are small in size.”
Additionally, if the transferee travels on weekends or for other business reasons, the employee and/or family must take all of their belongings with them, or leave their luggage with the hotel until they check in again on their return. But, for relocating employees with shorter or undetermined stay needs, the flexibility of a hotel can make it the best choice.
The extended stay hotel concept grew in response to the drawbacks of a long stay in a traditional hotel room. Extended stay hotels offer the flexibility of a hotel with a more homelike environment. Like regular hotels, they service several market segments and price points: from upscale to moderate economical.
All extended stay hotels have living, kitchen, and sleeping areas, with upscale properties including separate rooms. The kitchenette space typically includes a refrigerator, microwave, an undersized stove, and meal prep areas, along with dishes and utensils. Along with daily maid service, these features make extended stay hotels a popular choice for transferees who need departure flexibility or require a stay of less than 30 days.
The globetrotting Gray said, “in my experience, I had a one bedroom suite with separate living room and kitchen. This was much less claustrophobic.”
Wayne Conway of MITRE Corporation, McLean, VA, added, “We do not gross-up temporary living costs for new hires, making any reimbursement taxable income. A newly hired college graduate on a limited budget and on a stay of less than 30 days couldn’t afford higher end temporary living providers. That’s where a Homewood Suites or similar accommodation is more appropriate.”
But space and home-like conveniences are limitations to these specialized hotels. One relocating couple recently said of these extended-stay hotel options that, while the husband was okay for a few weeks in a Town Place Suites in Dearborn, MI, as soon as his wife moved in, they decided they needed to get into a larger option with a real kitchen, fast!
The Corporate Housing Solution
The number of short-term assignments is increasing. In reference to the 2003 Global Survey of Short-term International Assignment Policies, Cris Collie, CAE, Worldwide ERC® executive vice president, said that “60 percent of surveyed participants predict an increase in the number of such assignments in their organizations.” On a global scale, the driving need for these assignments are lower costs (49 percent), management development programs (37.8 percent), and employee preference (27.5 percent).
Corporate housing has shown tremendous growth in the last decade, offering an affordable and convenient housing alternative. More than adequate kitchen and living space are key features of corporate apartments. A corporate (or serviced) apartment is a fully-furnished apartment or townhouse with housewares, local phone, cable, and all utilities included. Housewares include everything from pots and pans to linens, electronics, and decorative accessories. Most also offer Internet service, fitness amenities, and optional maid service.
For transferees staying for 30 days or more, corporate apartments are the most preferred choice of accommodation. Gray said they offer “…the greatest flexibility and probably best value.”
Lee Koehler, CRP, manager of relocation and immigration, EMC Corporation, Hopkinton, MA, said, “Transferees prefer the amenities [of corporate apartments] and are more comfortable when families come and visit. For those staying 30 days or more, our transferee will choose corporate housing over staying in a hotel or extended stay hotel.”
With companies attempting to save money with large relocation packages, there has been a push internationally and domestically for short-term assignments. Corporate housing is a perfect solution for these stays.
Unlike comparable hotels, the quality of furnishings and housewares in corporate apartments can vary greatly, making it important to be familiar with exactly what is included when choosing a provider. Rates can be significantly lower than similar quality hotels, but there are operational factors that can affect price.
A Closer Look
There are three business models for corporate apartments: direct, third-party, and blended. Direct corporate apartments are leased directly from the company that owns and/or manages the apartment community. Leasing direct corporate apartments often can result in lower rates, but service often is limited to specific apartment communities in an area.
Direct corporate apartments, such as Windsor Corporate Suites, take advantage of their ownership of properties nationally by offering customized packages that work for cost-conscience transferees and lump-sum programs. An apartment can be rented with the full package or with any combination to meet all budgets.
“Because we own and operate our own portfolio of apartment communities, we can pass on our lower overhead costs to our clients in the form of better pricing,” said Janet Appling of Post Corporate Apartments, Atlanta, GA.
Koehler said, “There are lower costs when working directly with the properties, and our transferees like saving the money.”
Shane Tart, move manager of Plus Relocation Services, Inc., Minneapolis, MN, works with EMC transferees and agrees with Koehler. He said that renting directly from the property is easier, and that he receives better service and a more timely response than when he rents from third-party corporate housing providers.
Third-party corporate apartments are essentially sub-leased from a temporary housing company. The temporary housing company may have a lease directly with the property management, or may even lease an apartment from another temporary housing company. While third-party housing companies can provide housing virtually anywhere, the costs of such services typically are higher.
Finally, some temporary housing companies use a blended business model, both renting directly from properties they manage and also leasing at unaffiliated properties. Pat Hinch, vice president of Equity Corporate Housing in Minneapolis, said, “Our ability to use properties across the country that we don’t manage, as well as those that we do, allows us to offer more apartments in more locations, better serving our clients who have national needs.”
While any of these models can provide cost savings from hotels, corporate apartments have some drawbacks. As a legal real estate transaction, corporate apartments require leases, which can limit flexibility on arrival and departure dates. But leases can begin on any day of the month, and stays of more than 30 days are prorated to the actual number of days the apartment is used when given proper vacate notice. State and city laws differ on lease requirements, which can confuse or frustrate corporate clients who like consistency.
Some states, such as North Carolina and Florida, require a tax on certain shorter term leases. Lee Curtis, president of Bridgestreet Corporate Housing, Arlington, VA, said, “While it is challenging, we’ve really focused on simplifying the process to make it easier for our guests and clients, while still maintaining the required legal documentation.” Where the law allows, some corporate housing companies also offer housing for stays of less than 30 days at taxable rates.
Understanding the temporary housing options available is a tricky task. Having similar suppliers in several market segments makes it difficult to keep track of the differences between providers. Recognizing the specific benefits of each allows you to make informed housing decisions.
As temporary housing has grown in the relocation industry, providers have responded with innovative service offerings. Curtis reported that the Corporate Housing Providers Association, recognizing the need to better serve its relocation customers, is offering a certification that includes understanding of the relocation industry and processes.
Andrea Schroeder, CRP is managing partner of Strategic Five Business Solutions, Clarkston, MI, and an expert in temporary housing issues. She can be reached at +1 248 393 2350 or aschroeder@strategicfive.com.
Julie Pendleton is national sales manager, Windsor Corporate Suites of Windsor Communities, Waltham, MA, and a member of the MOBILITY Editorial Advisory Committee. She can be reached at +1 781 899 5100, or e-mail jpendleton@windsorcommunities.com.