During the pandemic and subsequent travel downturn, extended-stay hotels were one of the few segments of the industry to keep both occupancies and the bottom line healthy. The economy and midscale brands in the segment surpassed their 2019 levels by early 2021. During a webinar sponsored by Choice Hotels International and hosted by Questex Hospitality, the parent company of Hotel Management, several industry insiders gathered to share their thoughts on how the extended-stay segment is growing and what hoteliers need to know.
Mark Skinner, partner at hospitality consulting firm The Highland Group, defined extended-stay hotels as having a full kitchenette and no lease requirement. (That requirement, he added, is the difference between extended-stay and serviced apartments.) According to the company’s research, economy extended-stay hotels lost a tenth of the revenue that economy hotels in general did during 2020. “They're more resilient than traditional hotels in many respects,” he said, noting the residential base of guests that was not subject to the same travel restrictions transient travelers faced.
Anna Scozzafava, VP and general manager of extended-stay brands at Choice Hotels International, said that the company’s WoodSpring Suites brand recovered from the downturn “early” in 2020. By Q1 of 2022, the brand reported 27 percent growth in revenue per available room over the same quarter of 2019. Improvements in average daily rate have driven RevPAR growth in WoodSpring Suites, Suburban Studios and MainStay Suites, Scozzafava added. Right before the pandemic hit, Choice launched its Everhome Suites economy extended-stay brand. “Developer interest has remained high there, and we'll open our first one this summer,” she said.
Extended-Stay vs. Transient
There are some key differences between operating an extended-stay property and a traditional transient hotel. Gulf Coast Hotel Management operates a portfolio of Mainstay Suites and WoodSpring Suites. Ian McClure, the company’s CEO, said the segment benefits from a “lean operating model,” with six to eight full-time employees, depending on the type of asset and where it is located. “We're pushing through 55 to 60 percent [gross operating profit] on a very consistent basis,” he said. “It's gotten to the point where we don't even look at developing any other type of asset class.” Still, McClure noted that operating an extended-stay hotel requires diligence in adhering to the operating model: “You cannot vary from it.” (Scozzafava cited the labor percentage as a significant differentiator between extended-stay and transient hotels.)
Rolf Gunderson, president of installation and turnkey services company Profillment, noted the consistency in branded extended-stay options. “There's not been a lot of deviation between products,” he said. “That allows us a better peek into the supply chain and more consistent pricing.” The company was able to maintain consistent costs for furniture, fixtures and equipment throughout the pandemic, he added.
Scozzafava predicted future growth for the segment due to some notable tailwinds. “We have the infrastructure bill that passed, and there's a housing shortage,” she said. “And so all those things really play in our favor from a demand perspective … So I don't think that we're going to experience [a decline] from an extended-stay perspective.” The segment, she added, has proven itself to be resilient “both from a recession and now pandemic standpoint,” maintaining performance premiums in several negative scenarios. “So it's still a good kind of investment and we'll still see our guests traveling.”
Click here to watch the roundtable on demand.