Scope of Service Apartments

Scope of Service Apartments
Case Study : Emerald Executive Apartment, Juhu
By Jaswant Mehta, Architect

What are the advantages of a service apartment or an apartment hotel over the conventional hotels?
There are many areas in which service apartments or an apartment hotel would score over conventional hotels. An apartment offers a more homely atmosphere than a conventional hotel room. In the former, the children have the advantage of staying with their parents instead of being accommodated in separate rooms. Apartments also provide privacy. Further, a guest can cook his food if he wishes, thus economising on F&B costs, which can be quite high in hotels At the Emerald we also provide Laundromat facility and grocery delivery service from out stores. One can also avail of groceries at nominal rate. From a long-term point of view, this provides very economical. Besides, many service apartments provide regular facilities like conference rooms, business center, fitness center etc. At The Emerald, we offer all the usual facilities like 24-hour reception, room service etc, as well as full –fledged F&B services.
We also provide Laundromat facility and grocery delivery service from our stores. All our kitchens in the apartments are provided with Filtered water on tap, Electric Induction Cooking, Toaster, Mixer, running-hot-water, Pressure Cooker, Frost-free Fridge, Utensils, Quality Cutlery, Chinaware and Glassware. We also have spacious Lawns and Children’s playing area for recreation requirements of our Guests.
We have, thus tried to combine the amenities of an ultramodern hotel with the comfort of home.
What licences does an apartment hotel require?
We have taken all the licences required for a normal hotel since we have registered our apartment hotel under the hotel industry. We needed licences from the Municipal Corporation, health department, police etc.
What scope do service apartments have in the country?
I think there is tremendous scope for the service apartment concept in our country because of the steady increase in business travel. But we need to formulate the necessary guidelines and recognize the service apartment as a separate category by itself. We can even develop our own concept in service apartments, for example, we can even provide the guests with the services of a cook or an ayah if required.

With corporate cost cutting, what is the current scenario for service apartments in India?
The concept of a genuine service apartment is yet to catch on in India. Despite being among the pioneers, we are yet to get real mileage. The concept has been a slow starter due to the scare of provisions of the Rent Act. Most people fear they might not get the apartment back if it is let out. It was for this reason that we opted to register our apartment hotel in the hotel category, to which the Rent Act does not apply.
We must established proper guidelines to classify the service apartment as a distinct category, else owners would prefer to register their properties under the hotel industry.
Maharashtra State Development Corporation (MTDC) has framed stipulations to classify apartment hotels. Ours was the first project classified as a deluxe apartment hotel by MTDC. The economic considerations of a service apartment as lost to some extent when it is categorized as a hotel. With the amendment in the Rent Act in Maharashtra, people have begun letting out their apartments on the basis of leave and licence agreements. These are cheaper than apartment hotels, which are burdened with the heavy taxes applicable to the hotel category. For hotels, municipal taxes are four times higher and water charges at least nine times higher than the amount paid by residential apartments. Electricity rates too are higher, being charged for commercial use. There is also applicability of Hotel Expenditure Tax and Luxury tax.
Further, in Mumbai, such is the anomaly of municipal taxes that an old hotel like the Taj, which is a five-star deluxe property, might be paying less taxes tan a newly commissioned three-star hotel because the rateable value is fixed on the date of first letting, i.e. on the date of completion of the building and thereafter remains constant. The government is now proposing to remove these disparities by implementing a new capital-based tax system. The tax burden and the need to provide all the service of a conventional hotel prevent us form competing with the rates of lease apartments; we may be unable to maintain out bottomlines. So we are offering all sorts of combinations at The Emerald, including independent double rooms, studios and one/two bedroom apartments. Most of our bedrooms are interchangeable. Currently, we receive about 15-20 percent long-term guests (three 12 months) and about 20 per cent mid-term guests (one to three months). The rest are a short-term guest.

How does the service apartment concept in India compare with the international scenario?
The genuine economy achieved by service apartments abroad do not compare with those in India. Service apartments are generally categorized as residential unit’s abroad. There is a proper set of guidelines and one can get back possession immediately after the contract is over. The apartments are let out for a minimum period of one week. Staffing cost is a fraction of the total cost 950-75 per cent less), when compared to conventional hotels and occupancy is 80-90 per cent. This makes them a viable and competitive proposition. Moreover, most of them do not provide all the services available in a hotel and taxes are comparable to those paid by conventional residential units. In India, one needs innumerable licences before setting up and apartment hotel, which is not the case abroad. These costs, along with other factors, work to the disadvantages of service apartments in India.
We have also tied up with Best Western to establish a brand name. Best Western is a brand name that stands for competitive pricing, quality accommodation and a consistent dedication to customer satisfaction. Best Western International is the world’s largest lodging brand in the budget category with more than 4,100 independently owned and operated hotels across 84 countries around the world. Best Western has received an award of ‘Best Value for Money Hotel Chain’ in Europe for three consecutive years, and we are proud to belong to a hotel chain of such international repute.
What are the problems faced in the development of service apartments or apartment hotels in the country?
We require clear thinking. The tourism department should formulate an independent classification to exempt genuine service apartments from the Rent Act. Taxes should be reasonable and guidelines should be framed regarding the level of services expected. As with hotels, separate classifications could be made and it should e ensured that they are not misused.
How do they compare with flats available on Leave and Licence basis?
Most of the flats available on Leave and Licence basis are unfurnished apartments. The maintenance is not upto the mark. If some one wants to hire the apartment for less than a year or so, he has to spend on furnishing it. Furnishing will also take its own time which period will be ideal. The recovery cost of this furniture and fixtures when he vacates is only a small fraction of what he may have spent. He has to also sign a Leave & Licence agreement and have it registered. He has not to pay the brokerage or heavy deposit. If he is lucky and finds a fully furnished apartment, then still he has to hire services for housekeeping etc. In a serviced apartment all the basic services such as housekeeping, security and maintenance etc. are taken care of. If it is an apartment hotel, the additional services such as 24-hour reception, room service, business center, conference rooms are also available. The tariff is all-inclusive, including change of linen, electricity, air-conditioning etc. The upkeep of service apartments is much better at par or even better than most exclusive buildings. Thus, for anybody wanting to hire an apartment for 6-9 months,. Service apartments will be definitely a cheaper and less cumbersome proposition than hiring a Leave & Licence Apartment. To conclude, I would say that our tourism ministry must promote the service apartment concept. That would help us attract many more tourists travelling with their families and looking to stay for a longer duration at lower costs. It is popular concept in many tourist destinations around the world and there is no reason why we should lag behind.
In the last 5 years, we have had many prestigious multinational as well as Indian clients such as the Enron, Silicon Graphics, Singapore Telecom, Reuters etc. who have taken our apartments for duration between 6 months – 2 years and their senior executives with or without families have occupied them.
For further details contact The Emerald Ph: 022-6611150 Fax: 022-6603475 Web: www.theemerald.com