I had a great time meeting Paul Constantinou, Founder and Chairman of Quest Apartment Hotels last week. Watch the video to hear his insights from 28 years of building a chain with a clear and resolute focus on serving extended stay guests. Hear about his alternative to traditional loyalty programmes and why he pushes franchisees to accept all bookings over 5 days, even when there appears to be no availability.
We met a the Serviced Apartment Summit
CHARLIE: Hi, I’m Charlie from Triptease and I’m here at the Serviced Apartment Summit in New York. I had the opportunity to chat to Paul who is the Founder and now Chairman of Quest Apartment Hotels. It’s fascinating to hear about the way in which he approaches the market and the focus he has on a very specific type of customer who can be there for the long-term.
PAUL: Paul Constantinou from Quest Serviced Apartments or Quest Apartment Hotels, as their known today.
CHARLIE: Maybe we should start there! What’s the reason for the rebrand?
PAUL: Well, the rebrand was more around understanding – well, working with our clients and customers and always trying to get a better understanding of serviced apartments. And, it was a bit of an issue as to what serviced apartments really were. Because there are a different number of industries that use those apartments, especially in aged care – they have a serviced apartment component, which we’re not. So, we thought we’d synergize ourselves a little bit with the European market and the UK market, which are Aparthotels. So, we changed our name to Quest Apartment Hotels. So, it fits in well. Again, being careful that we’re not hotels. We have amenities, we act like hotels but we don’t have the food and beverage offering that hotels typically do.
CHARLIE: And just out of interest with that rebranding, which is always quite a big exercise, to what extent did it change the people who turned up at the front door? I mean, did you attract different types of customers?
PAUL: No, what it did it is, it helped us get into markets we weren’t in before. And typically, we were always trying to get into the hotel market from travel managers that manage corporate accounts. Now, although most of our business is corporate clients, we tend to deal with their procurement section as opposed to just the travel manager. When we created the new brand and created a studio offering, which is similar to a hotel offering because the rooms are a bit smaller, it becomes just the – it’s still got a kitchenette. It helped them identify the asset or the product similar to a hotel, so it was easier offering. But what it did actually is people felt good about the whole brand change and that came from every stakeholder – from customer to employee to investor. Even the financiers loved it because we put the new brand on the buildings and every was like, “oh jeez, look at that! Doesn’t that look great? It is a brand, it doesn’t make you profitable but, jeez, it goes along way in helping you.”
CHARLIE: Because I imagine that one of the challenges for growing the business is finding more franchisees?
PAUL: Yep, franchisees. Or, the hardest part is finding the right location. So, we’ve always stemmed from a locational perspective. So, our core market is understanding where our corporates need to be. So, we’ll venture and develop with third party developers and ourselves in those locations. And once you’ve got the location, then you can start building the business around that, building the building and then finding the franchisee who’s actually going to run that business at the end of the day. But typically if the location is wrong everything else tends to fall apart. You can’t move the building! [laughs]
CHARLIE: And, can you give us an example of what is your typical client? How long are they staying for? What’s the reason?
PAUL: OK, well what we did is, we broke up the market back when we first started in ’88 into roughly Corporate and Leisure. Typically, two segments. We took Corporate that focused on the corporates who needed to stay more than two nights. So, and the typical classification terminology was Extended Stay. So, we tended to go for that end of the Corporate Traveller. So, all the efforts, all the designs that we did were all based on Extended Stay Corporate Traveller. So, all we do is focus in on those. We do pick up the shorter-term stay. Our average length of stay, depends if you’re in the city of out of the city, will range from four to seven days. It could go up to two or three months. In fact, we do have longer-term stays. But we’ve built our buildings that we can cater to all segments. So, that if you want to bring your family there’s a three-bedroom apartment in that building. So, we don’t have part of the building, we have the whole building.
CHARLIE: And, we’re always fascinated in distribution. So, what are the ways in which people find you? How do you distribute your rooms?
PAUL: Again, the corporate market is a little bit easier to market to because, first of all, we’ve built a relationship with the major top three hundred corporate companies in Australia. So, we know where they want to be, we know what they need. Sometimes we find in the corporate market the actual guest may want a lot of things. He may want a 6-star experience but it’s neither here nor there, the 6-star experience. Nor is the company going to pay for a 6-star experience. So, it’s more around in focusing on their needs. So, what we’ve done is work with the corporates, understand what their needs are, where their locations are and then, ask them: “how would you like to transact with us?” And that can be via a distribution channel, be it through the website. We’ll work with OTA’s; I think they’re important. But our challenge is always when we’re working with a third party website or provider, at the end of the day, it’s going to be our guest.
The guest has to come to us. So, we’re hoping that the second/third time stay that he can book directly. So, our company currently we’re fortunate to have 65% to 67% of our business come direct. And a lot of that is still by the phone. It’s the nature of extended stay or long-term stays, one or two night stays; it’s more than just a price. It’s more around other facilities that I may want. I may want some food stuff in my pantry, it’s all of those little things which are easier to do over the phone as opposed to trying to work out: ‘what list do I press?’
CHARLIE: And you must get a lot of - because of the corporate market - a lot of repeat visitors. Is a loyalty programme something you’ve thought about or that you’ve had?
PAUL: Look, we’ve worked with a number of loyalty programmes. We’ve linked-up with airline loyalty programmes. The one we’ve worked with, probably for the last five years, has been one of more of recognition. So rather than just doing points, because we know corporates have a lot of cards and they’ll get points on their cards on their flights. We tend to recognise that corporate or acknowledge the corporate as one of our customers. So, during your number of stays - we actually track where you stay - and you’ll be surprised that at a point in your stay that you might be given a box of chocolates, a bottle of wine – something to take home to your spouse, to your partner for an appreciation of your stay. As opposed to, more nights to use more stays. It’s like, well - Corporate Travellers look at it differently than a Leisure Traveller. Most of them hate travelling; they don’t want to see another hotel room. So, if you surprise them with something else it tends to go well.
CHARLIE: Right, surprise and delight – that’s a great strategy.
PAUL: Acknowledge them as your customer. So, by doing that it’s not just: “here’s 10,000 points, hop on a plane!” Everyone does that.
CHARLIE: And, I know that you have a partnership with Ascott and then that’s really interesting to see an independent brand like yours, joining up with another. What was the driver of that and how does it work?
PAUL: OK, the driver behind was more around growth – the Quest growth. And again, stepping outside of Australia as well and looking at global markets. But also, in Australia. The difficulty we’ve had in Australia is that the industry itself suffered from being a true asset class, to funders to third party lenders. So, having tried to deal with those people - and it’s taken 28 years to educate them to this level. Ascott came to us and said – and because we’ve worked with Ascott for many years, it wasn’t something that just happened – they said, “well look, how about we try and create something more than just an alliance?” We’ll take a share of your business. But in doing that, we’ll provide you with property capital.”, which helps our expansion.
So, they’ve provided I think we’re talking about $500M dollars over five years, which they’ll expend in Australia. So, they’ve put that aside for our growth, which is great. And in doing so basically, the precursor for the capital they bought three existing properties and put them in their REIT. So, the REIT owns their property. So, we’ve created this…. And that then we sold to them at 20% share of Quest. So, we’re all partners in the industry. The good thing is that we’re in the same industry. They’re at that part of the world. We’re in this part of the world. But we act a bit differently. They have management, they have ownerships. We have franchising. And, I think the three work very well in the global market. And hopefully, over the years we’ll see the brands - all brands - grow.
CHARLIE: And when you think, finally, about sort of the rest of this year and challenges or opportunities in revenue management or online distribution, where will you be putting efforts?
PAUL: It’s probably more in just, well we’ve just sourced or are looking at, improving the distribution and probably how revenues generate within a property. And what I mean by that is that, when you’re aiming at the Serviced Apartment or the Extended Stay market, you generally want to chase the long-term bookings. When you’re dealing with franchisees and you’re dealing in very tight markets they’ll chase the dollar.
So, if they get someone for two nights at a very high-rate that’s good enough for them. So, what we’ve now done is we’ve built a system whereby any booking that’s five days or greater will automatically be accepted into your business. How you then manage it is your concern. Because typically what we find is that the booker that’s coming here for a two-night stay typically isn’t your market. They’re probably going to go – the reason they’ve come to you is the hotel has been booked.
What you’ve decided to do is neglect a core market, which is Extended Stay, which will be there tomorrow. Which will be there next time. It needs that product. So, we’ve got to force the franchisees. I think the big challenge is: don’t become a product for everyone because the market is very vibrant at the moment. It’s stay very core focused on the Extended Stay market. And I think over the 28 years, that’s what we’ve focused on: our growth, our distribution, and it’s working hard with even some of the travel managers, relocation companies and asking them how do they want to source our inventory? As opposed to being open to everyone. When you’re open to everyone, you’re going to get some people you don’t want. And 9 times out of the 10, it’s going to be at prices you don’t want. So, we don’t use the third party websites or the online travel agents as the seller of last resorts. We actually use them at our top end. How can we sell our last two rooms at the best price?
CHARLIE: That’s fascinating. So, you’re pushing your franchisees not to accept short-term bookings that they’d like to accept. That must be quite a…
PAUL: Well it’s challenging…
PAUL: Well, but the rationale is that if I said to you, “I can give you $200 now or you can take a $5,000 booking.” And all that they see is the $200 because it’s now. As opposed to that long-term stay. Even if you have to displace that client and pay him $300 to put him someone else – you’re still in front. And that market is your market. Because that hotel room – or if you sell that apartment for one night, the cleaning cost for an apartment is far greater than a hotel room. So, there’s not much money you’ll make out of it anyway. Give me the $5,000 or the $2,000 booking which is really what it’s about. We’re here building a business to service the Extended Stay Traveller. It’s like people will take Group Bookings for one night. Why? That’s what hotels are here for! Let them have it. They’ll deal with them better. They’ll give them the experience. Because you can’t give them the attention they need that a hotel can provide. They want to have room service; you can’t do it.
CHARLIE: Well, I’ve got to say, that I’m sure it’s that guts and that clarity of vision that’s allowed you to be building this business for, what - 28 years is it?
PAUL: 28 years, yep.
CHARLIE: Amazing. I think that focus is admirable and inspiring. So thank you very much
PAUL: Thank you very much indeed!