The very intense investment focus in the extended-stay market has narrowed into upper-economy/lower-midscale positioning, said Mark Skinner, partner at the Highland Group. “That's where most of the growth is centered where previously it was more broad-based,” he said. “The fastest growing brands are all in squarely in the mid-price select. ... If you look at 2016 to 2019, the highest growth in supply was in the mid-price select but now it has shifted more towards lower-midscale and upper-economy. And the reason for that is the performance of those segments during 2020 and 2021.”
The trends of investment in infrastructure in the United States, the reshoring of supply chains and more migration into the southeast U.S. correlates very well with extended-stay demand, said Matt McElhare,VP of Extended Stay brands at Choice Hotels International. Areas that are seeing a lot of that investment, and a perfect example would be in Savannah, Ga., where Hyundai Motor Group is building a large EV battery and car manufacturing plant, have a lot of interest in extended-stay. “Both from a build and operations standpoint, it's a lot of blue- and gray-collar business travelers and they are a big demand driver of extended-stay at the lower price point,” McElhare said.
The Darling of the Industry
Extended-stay has been coined the darling of the industry for the last several years as it has been outpacing other chain scales when it comes to performance, even through the pandemic. The market for these hotels is expanding because the consumer demand for them is expanding, said Chip Ohlsson, chief development officer at Wyndham Hotels & Resorts. “From remote employees who can take their work on the road to the floods of infrastructure workers who are taking on projects as a result of the historic spend from the federal government, more people than ever know about and need what extended-stay hotels offer.
“It’s also why we’re continuing to expand and doing it in a way that meets the needs of guests while refining the model to be the most profitable for owners.”
When there are inconsistencies in economics and as performance within the hospitality segment fluctuates, an aspect owners love about the extended-stay market is that it's usually an evergreen, great performance, according to Rick Colling, global brand leader, Homewood Suites by Hilton. “Whether the economy is in good shape or whether it's relatively challenged, the performance of the extended-stay segment is always wonderful,” he said. “Many owners told me during the pandemic that the reason their portfolio stayed afloat is because of their extended-stay properties.”
The extended-stay category has remained resilient against what’s been a “more dynamic than usual” past few years. The Highland Group found that supply, demand and room revenues for extended-stay hotels reached an all-time high in 2023.
During the height of the pandemic, extended-stay hotels experienced a unique inflection point as first responders, medical personnel and other professional travelers increasingly made suites their home for long periods of time, said Justin Alexander, vice president, global brand management, Holiday Inn Express, Staybridge Suites and Candlewood Suites, IHG Hotels & Resorts. “Even as travel has normalized to pre-pandemic levels, we’re still seeing significant demand among the professional audience (such as medical, construction and government workers), project-based workers and others needing temporary accommodation during relocation.”
But while extended-stay has been the darling, the fundamentals haven’t really changed much, said Ron Burgett, senior vice president, extended-stay development at Choice Hotels International. “That’s why we are adding more product and revamping some of the brands. The U.S. infrastructure bill has definitely given us the comfort that we're doing the right thing,” he continued.
New and Evolving Guests
Alexander said IHG’s extended-stay brands are beginning to see an influx of Gen Z and younger travelers booking and staying at its hotels. “In turn, we continually evaluate our brand propositions for relevance, differentiation and appeal among traditional, current and next generation travelers,” he continued.
One of the most exciting parts of the extended-stay segment is the new and evolving guest, said Brad LeBlanc, SVP and chief development officer at BWH Hotels. “Today’s guest includes business travelers from corporate America or gig workers who might be in a market for a week or more and are looking for something different than a typical hotel room,” he said. “These guests also include young families on vacation.”
If you’re doing it right, you’re approaching the consumer market for extend-stay hotels much more dynamically than in years past, said Ryan Rivett, co-founder, president and CEO of My Place Hotels of America. “A focus on promoting and delivering the adaptability and intrinsic value of extended-stay accommodations is far more important today than simply pairing longer-staying guests with extended-stay amenities,” he said. “The general population of travelers isn’t staying longer than they were previously; they’re more aware of extended-stay, choosing extended-stay more frequently for a greater variety of travel purposes, precipitating more diverse opportunities in marketing, sales, and revenue strategies.”
Extended-stay hotels need to serve a diverse group of travelers seeking different amenities and services at various price points, said Mark Williams, managing director, franchise development at Extended Stay America. The company has evolved into a family of brands to meet this growing demand, providing more development opportunities to penetrate new markets, Williams continued.
In the past few years, sparked by the pandemic, a new type of guest persona evolved: the digital nomads. “We all learned that we could do meetings like this on Teams or Zoom and actually conduct business,” said Kevin Dailey, COO at LivAway. “They could work from wherever they wanted to and a lot of folks started taking advantage of that traveling to cities like Nashville, for example. People have learned that they can work during the day out of their hotel room or their extended-stay suite and go sightsee at night or on the weekends and they don't miss a beat at work. This new guest persona has emerged and I don't see it slowing down anytime soon. I think that trend is here to stay.”
To read more about the overall extended-stay industry, read about it here: Extended-stay market: Will supply exceed demand?