Highland Group's extended-stay report shows steady demand

Although all extended-stay hotel segments lost less revenue compared to traditional hotels of the same class, the 26.9 percent decline in February was an uptick on the 23.6 percent loss in January. Photo credit: Hotel Management (Extended Stay America Kitchen)

The Highland Group’s February analysis for extended-stay hotels found a mixed bag of numbers for a segment of the industry that has found ways to thrive during the pandemic.

Despite a third consecutive month of positive change in average daily rate in February, occupancy losses more than offset the gains, and economy extended-stay hotels reported negative change in revenue per available room following January’s remarkably strong 3.6 percent increase. Adjusting for the leap year in 2020, the higher demand for economy and midprice extended-stay hotels in February 2021 compared to 2020 shows the bottom-up recovery is continuing, according to the company.

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“Despite February’s RevPAR loss, consistent growth in monthly demand compared to 2020 shows economy and midprice extended-stay hotels continue to lead the recovery from COVID-19,” said Mark Skinner, partner at The Highland Group. 

For the 11th consecutive full month since COVID-19 began affecting travel trends, extended-stay hotels reported far lower RevPAR losses than the overall hotel industry. This was despite a 7.2 percent gain in extended-stay room supply, the highest monthly increase since Q4 2019. According to STR, total hotel room supply declined 2 percent over the same period.

Although all extended-stay hotel segments lost less revenue compared to traditional hotels of the same class, the 26.9 percent decline in February was an uptick on the 23.6 percent loss in January. According to STR, corresponding declines in all hotel revenues were 45.9 percent and 49.2 percent as the overall hotel industry recovery gained momentum.

The side-step in the extended-stay hotel recovery statistics is partly due to the leap year in 2020. The economy extended- stay segment’s demand decline in February 2021 was the first monthly fall in eight months. Because of the leap year, however, average daily demand in February 2021 was higher than in February 2020. The same is true for midprice extended-stay hotels, indicating the fundamental recovery continues, according to Highland. The 7.8 percent total extended-stay hotel demand decline compares very favorably to the 28.1 percent contraction STR reported for the overall hotel industry. Similarly, the 17.6 percent fall in upscale extended-stay hotels is only just over half the 33 percent decline STR reported for all upscale hotels.

Like the overall hotel industry, the largest extended-stay hotel occupancy losses have occurred at higher price points. Extended-stay hotel occupancy was 64.8 percent in February, more than 19 percentage points above the overall hotel industry.