HM on location: Extended-stay in focus at My Place conference

SAN DIEGO—Day two of the 2019 My Place Hotels of America Convention underway here found hospitality leaders focused on the extended-stay market: how it can respond to issues affecting the hotel industry at large, what the latest data shows about the future and the ways in which hotel owners can maximize revenue in this particular segment.

The All-Star Panel

True to its name, this session brought together a half-dozen industry insiders to discuss the state of hospitality, and how extended-stay hotels like My Place may be suited to respond to the current environment in a way in which other markets may not be able. Glenn Haussman, host of the No Vacancy podcast, moderated. 

The panel cited increases in both construction and labor costs. Joe Dinger, VP/development at My Place, said hard construction costs are increasing by 15 percent to 20 percent, while Hitesh (HP) Patel, outgoing chairman of the Asian American Hotel Owners Association, estimated labor accounts for 40 percent of a typical hotel’s bottom line currently. If the minimum wage keeps rising, he warned, that figure could increase to 50 percent. “At the end there, there’s nothing left for hotel owners to take home,” said Patel.

Patel emphasized the importance of worker efficiency, and stressed following a guideline of keeping hotel staff under 15 in the segment; My Place averages about 13, according to Haussman.  “If you try to run an extended-stay hotel like a daily hotel, you just lost opening the gate; it’s not going to happen,” said Patel.

David Gustafson, president/owner of Heavy Construction, highlighted one aspect of extended-stay hotels that lends itself to increased efficiency: four-day cleaning. A less-frequent housekeeping model helps lower operational costs for extended-stay hotels.

Mike Johnson, president of Management Consultants, expressed concern about the rising control guest demands are having over a hotel’s bottom line. With experience managing properties for Marriott, Hilton, Red Lion and Best Western, Johnson has noted amenity creep across the board. However, less than a month away from opening his first My Place hotel, he hasn’t seen this as much of an issue with the brand.

“Obviously the market matters, obviously the things that we’re doing in certain locations matter,” Johnson said. “But for this market and in this time, in my train of thought I liked the simplicity of the fundamentals of this business.”

Chip Rogers, president/CEO of the American Hotel & Lodging Association, said as travel grows overall, the extended-stay segment will expand with it, particularly as younger generations become more of a driving force. “My kids traveled more by the age of eight than I traveled by the time I was 18 or 20,” said Rogers. 

The Revenue Management Experience

My Place’s director of revenue management Kory Burdick moderated a discussion among three executives involved in operating and managing the brand’s hotels: T. Kevin Nelson, co-owner of Kamp Hotels and Texas territorial developer for My Place; Anna Watson, regional manager of “Team Texas” at Thirty Nine 23 Management; and Katie Seitz, regional manager at Legacy Management.

The key to revenue management, they agreed, is to know what’s going on in your market, whether it's a college team’s game schedule months away, when a hotel could reasonably raise its rates, or noticing rising rates at a competitor that could indicate a special event of which the hotel staff may not yet be aware.

[From left] Kory Burdick, T. Kevin Nelson, Anna Watson and Katie Seitz talk about revenue management. Photo credit: Chuck Dobrosielski

While transient travelers for special events may drive a large share of traffic in a given weekend, Nelson said KAMP Hotels is looking to extended-stay guests to be its consistent base. Specifically, he said it’s targeting a three-way split with equal parts extended-stay, negotiated rate and transient guests.

“So you know someone’s coming into town and they need 15 rooms for two nights and you think: 'Well, that’s a wonderful piece of business,'” Nelson said. “That’s the same as one guy needing one room for a month, right?”

“Just having those long-term stays, it really makes a difference with controlling your costs because you’re not having to clean a room every single day,” Watson said. “That makes a difference in managing the revenue and saving us money.”

Extended-Stay Outlook

At a dedicated extended-stay session, Mark Skinner, partner at research firm The Highland Group, broke down the state of the segment and where it’s headed.

Currently, he said, there are 470,000 extended-stay hotel rooms in the United States and in 2018, the segment brought in $13.3 billion, compared to $2.5 billion 20 years earlier.

Mark Skinner discusses the trend in total extended-stay rooms under construction in the United States. Photo credit: Chuck Dobrosielski

According to his research, extended-stay hotels averaged approximately 76.5 percent occupancy in 2018, about 10 percent above the overall lodging industry. Last year marked the seventh consecutive year the segment’s occupancy came in around 75 percent and 76 percent, above the long-term average of about 74 percent. This high occupancy, he noted, is despite 8 percent average annual growth in supply.

Looking at the near term, Skinner offered some takeaways: supply growth is slowing; occupancy is above the long-term national average; and average daily rate and RevPAR are seeing moderate growth nationally. He did not foresee a major economic contraction, saying instead: “it’s a very, very good time to be in the hotel industry and the extended-stay hotel industry.”