Serviced apartments now are seeing increasing numbers of Chinese customers. "Generally, the target customers for high-end serviced apartments are mainly expatriates, yet, we are finding that more Chinese professionals are showing an interest in the market," said Zhou Yu, a Beijing based real estate agent who adds that 20 percent of his company's customers are now Chinese.

International real estate advisor Savills confirmed this trend in a recent report, stating that demand for serviced apartments has picked up as foreign companies continue to grow their operations in China, and wealthy Chinese businesspeople become increasingly mobile and look to enjoy a more comfortable life while on the road.

Casting the net wide

Despite the strong demand for serviced apartments in first-tier cities, increasing interest is being seen in second-tier city markets.

Frasers Hospitality, a global serviced apartment operator, currently operates 5,000 units worldwide, of which more than 3,000 are in China, spread across nine cities. The company opened its second property under the Modena brand in Shanghai in March. It will also launch Modena properties in second-tier cities such as Suzhou, Dalian, Nanjing, Wuhan and Chengdu.

"We view second- and third-tier cities as viable markets for further expansion as economic growth is strong and investment costs are lower than first-tier cities," said CEO of Frasers Hospitality Choe Peng Sun.

The fast-growing Chinese high-end serviced apartment industry has not only become an important market for many foreign investors, but is also attracting domestic investors.

Zheng Nanyan, CEO of budget hotel 7 Days Inn, announced that the company will roll out a new high-end brand soon and that 7 Days Inn will have over 2,000 hotels by 2014.

"A clear target market audience will bring more clarity to the marketing of Chinese serviced apartments and make it much more effective. And providing better service [than your competitors] will help you get a foothold in the market," said James Costa, General Manager for Fraser Suite Shanghai. He added that having a good location and offering services that fit the needs of the target market more closely increases a property's value.

Serviced Apartments

» The concept of serviced apartments was created in the United States. The term is used to refer to an alternative to hotel accommodations for leisure and business travelers staying for varying periods of time, but distinctions can be made between the different types:

» First is the extended stay hotel, or "aparthotel," which generally has a 24-hour reception, is located in city centers, and attempts to give guests a home-away-from-home feeling within a hotel-like environment. These facilities can range from budget to deluxe, and rooms range from studio apartments, to two- or three-bedroom apartments.

» Second is corporate housing. These are residential properties that have been upgraded to be shorter term rentals. Such rentals are packaged together with services such as cleaning, utility charges, local taxes, telephone and television services, and are optimal for stays of 30 days or more. They can be located in city centers, but are more often than not on the outskirts of town, while still allowing easy access to main business areas.

» Serviced apartment rents now typically cost on average 200 yuan ($32) per square meter in first-tier cities and 150 yuan ($24) per square meter in second- and third-tier cities in China.

» What both types have in common is that the units are all fully furnished and equipped, making guests feel very at home, with cooking facilities and all modern conveniences. Serviced apartments can be less expensive than equivalent hotel rooms.

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