The surge in extended stay lodging isn’t a fleeting phenomenon. Even esteemed hotel brands are channeling substantial investments into this burgeoning market, with their extended stay portfolios expanding by more than 50 percent over the past decade.
In 2023, the overall hotel occupancy rate is estimated to reach a robust 63.8 percent—only 2.1 percentage points behind pre-pandemic numbers. Multiple factors have propelled this growth, including the upswing in remote work, long-term travel, mobile work crews, and the need for temporary housing in the face of natural disasters such as hurricanes, flooding, tornadoes and wildfires.
While there are many advantages of extended stays, there are some distinct challenges hoteliers need to be aware of before jumping in.
There Are Some Risks
Consider the following risks:
- Given their home-like ambiance, guests may treat extended stay accommodations less respectfully, feeling at home causing security issues
- Activities like lighting candles, cooking or smoking indoors can raise fire safety issues
- The absence of daily housekeeping means there is less routine monitoring of guest rooms
- Security concerns related to crime, drugs and human trafficking can be more common than in a hotel with more transient guests
- Instances of guests surpassing room occupancy limits can result in increased noise and damage
- Some guests may bring along pets or large families, potentially posing risks to the property
- Upkeep of rooms over extended durations is challenging
Benefits and Efficiencies
Nevertheless, embracing the extended-stay model ushers in a multitude of benefits and operational efficiencies.
It has the potential to substantially boost revenue streams and occupancy rates since guests often book for extended periods, particularly during traditionally sluggish times in the hospitality industry. By catering to guests staying for long durations, hotels can reduce the frequency of room turnovers (and subsequently, staffing requirements), all while fostering brand loyalty, thereby elevating the hotel’s reputation and overall profitability.
Extended stays not only benefit hotel owners but also provide a host of perks to customers, with affordability taking center stage. These establishments typically offer spacious suites at competitive rates, complete with essential amenities such as Wi-Fi, fully equipped kitchens, laundry and fitness facilities, mail services, and round-the-clock security. Diverging from traditional hotels, they often omit features like bars, restaurants and concierge services, resulting in cost-effective construction.
5 Best Practices for Risk Management
Here are five best practices for managing extended-stay hotels and mitigating their associated risks:
- Recognize that extended stays may face distinct weather-related exposures. Be well-prepared for potential weather-related risks like wind damage and flooding, based on your building’s type, especially in areas prone to natural disasters. Develop a plan aligned with revenue goals and engage in extensive discussions with your insurer to address concerns.
- Invest in robust property management and security systems. You’ll want this to streamline operations and monitor guest behaviors and preferences. Enhanced security measures can be particularly valued by guests on extended stays.
- Equip front desk staff with the skills to communicate security features to guests. This should include monitoring access to side doors commonly found in extended stay hotels. By prioritizing exceptional customer service, contented patrons are more likely to become repeat guests and advocates of the property.
- Acknowledge that extended stays often become havens for catastrophic situations. Have written evacuation procedures and train staff on them, adhere to regulatory agency instructions, and have generators and necessary supplies on standby to ensure uninterrupted operations.
- Keep your insurance agent informed if you acquire or build an extended stay facility. Know that there could be policy exclusions, cost differences and limits in comparison to non-extended-stay properties. If you add an extended-stay to your portfolio, make sure to let your broker and insurance company know to ensure coverage. If the exposure outweighs the premium, that could be a problem.
As the hospitality industry continues to evolve, extended-stay hotels are positioned to endure as prominent fixtures in the accommodation landscape. By understanding the intricacies of this market and applying industry best practices, hoteliers can capitalize on the chance to offer guests an enticing substitute to conventional accommodations.
Kimberly Gore is the national practice leader of HUB International’s Hospitality Specialty Practice.