Despite reporting a third successive occupancy decline during the third quarter of 2024, extended-stay hotels posted new record high demand, average daily rates and revenue per available room, according to a new study from The Highland Group. Occupancy declines have been small and average occupancy remains more than 11 percentage points above the overall hotel industry for the year to date through the third quarter.
“While RevPAR growth is low compared to the last three years, if forecasts for the overall hotel industry materialize, more new performance records from extended-stay hotels are expected during the near term,” Mark Skinner, partner at The Highland Group, said in a statement.
According to the study, extended-stay hotel supply increases remain low but were slightly ahead of the change in demand for the year to date through Q3 2024. The last time extended-stay supply growth was at its current level was in 2013/14 as a post-recession growth cycle emerged. It was two more years before supply increases exceeded their long term average. During this period the federal funds rate was one eighth of its current value. This indicates extended-stay and total hotel supply growth should be relatively low nationally during the foreseeable future.
Although small compared to its long-term trend, extended-stay hotel demand is increasing and over the last 25 years it has never declined on an annual basis except for in 2020. STR/CoStar forecasts overall hotel occupancy and ADR will increase over the next year. If so, extended-stay hotel occupancy and ADR should also increase based on the long-term correlation and low supply growth. Therefore, the extended-stay segment should set more new performance records during the near term at least.