The past year and a half has been a whirlwind for Extended Stay America.
The company changed its focus from a one-brand company with the launch of Extended Stay America Premier Suites in February 2021. The new brand, which debuted with 32 new-build and “extensively renovated properties,” looks to attract higher-paying guests with upgraded amenities.
At the same time, it announced that it was rebranding the remainder of its core hotels to Extended Stay America Suites, a process that is now complete.
The next month, Blackstone and Starwood Capital Group agreed to acquire Extended Stay America and its paired-share real estate investment trust, ESH Hospitality, for $6 billion.
In February 2022, Greg Juceam was appointed president and CEO, succeeding Bruce Haase. Juceam had been ESA Management’s EVP and COO.
Then this August, the company announced that it had acquired 100 WoodSpring Suites hotels that would be converted to the ESA family of brands later this year. This, however, was just a precursor to the company’s next big announcement: the launch of another new brand, Extended Stay America Select Suites. The WoodSpring hotels will be the foundation of this more residentially oriented brand.
“What we’ve learned based on our research—and of course our industry experience—was that it was clear to us that there’s a submarket for properties that cater to longer-stay guests even beyond our current guest profile,” Juceam said. “The idea is that we’re providing basic services and amenities for our most price sensitive extended-stay guests. So they’ll continue to have a room that’s a spacious suite. It’ll feature a fully equipped kitchen as we do today. Free Wi-Fi, pet-friendly rooms on site, guest laundry, all of the things that you see today in an Extended Stay America, but it’s just the basics to keep costs low for guests.”
With the new brand, guests will be able to choose from three different price points with three different product and service offerings under the ESA umbrella.
“[This] will appeal to hotel investors and franchise partners because depending on what market they operate in, it might make more sense to be a Premier property or Suites property or now they’ll have this option for Select Suites and they can pick and choose and franchise the model that works best for them,” Juceam said. “We’re well positioned to grow from here.”
Strong Interest
The first hotels in the Select Suites brand will transition at the end of September. Mark Williams, ESA’s managing director of franchise development, said the company is jumpstarting the brand with critical mass in addition to a high amount of interest from clients interested in doing conversions as well as new construction.
“We’ve got a lot of trust out there," he said. “I see fourth quarter of ’22 jumpstarting pretty aggressively.”
Part of that interest is due to the fact that it’s hard for hotel owners and investors to find breathing room these days, according to Juceam.
“One of the great things about Extended Stay America is that even though we are a large brand ourselves we’re not competing against 10 or 12 or 15 others and so there are plenty of cities and parts of America where … something like Select Suites makes a whole lot of sense, where there today is no Extended Stay America,” he said. “They’ll have the breathing room to either convert or maybe in some cases build without having to be conflicted.”
The new Select Suites will require fewer employees and have a lower average daily rate than ESA’s other two brands. The WoodSpring Suites properties operate with two to three full-time equivalents less than the ESA model.
“If there’s no lobby coffee and breakfast, if the housekeeping is biweekly as opposed to say weekly, it will need fewer [employees],” Juceam said. “That’s part of the value proposition for the investor; it’s just a simpler model. They get the lower ADR but the trade-off is they need fewer employees to service the guest.”
Macroeconomic factors such as gas prices, the cost of food and overall inflation are impacting guests and their lodging choices, according to Juceam.
“There’s certainly demand for the lower end of the economy space because people are hurting in America,” he said. “These are huge tailwinds that you can layer on top of an already strong Suites brand. We’re really excited. I say we’re going northbound and exponential growth is ahead.”
Segment’s Appeal
The COVID-19 pandemic pushed the performance of the extended-stay segment to the forefront and Extended Stay America is seeing the fruits of that attention. Williams said the company stayed on course all the way through the pandemic.
“We came out of this very strong so we’re looking at those investors that are not happy with what they had during the downturn—we’ve got guys jumping in to invest with us because of what they saw,” he said. “They wanted some consistent returns, they wanted something they could rely on. And the extended-stay product is something that if you go back 10 years, the difference is minimal as far as the ups and downs.
“We’ve got capital groups that are throwing a lot of money toward extended-stay. We’ve got family funds that have invested in the other brands, the transient side, that now want to put their money in something a little more consistent, which is extended-stay.”
There’s still ample room to grow the segment, Juceam said, because of the lack of supply.
“Extended-stay supply across the U.S. is less than 10 percent of the available rooms,” he said. “There’s just not enough low-cost options where people can stay for weeks, months or years at an affordable price point, so there’s a broader need for buyers coming in at a lower price point for both guests and investors. We can see some of the secondary and tertiary markets today where there’s literally no extended-stay supply at all.”