Highland Group: Q2 extended-stay occupancy reaches record level

Home2 Suites by Hilton Yakima Airport exterior
The extended-stay market added 25,731 rooms, including the 107-room Home2 Suites by Hilton Yakima (Wash.) Airport, in the 12-month period ending at mid-year 2019. Photo credit: The Hotel Group

Extended-stay occupancy rose to 79.9 percent in the second quarter, the highest level ever reported in that quarter, according to a new report from The Highland Group. “The 2019 Mid-Year US Extended-Stay Lodging Market Report” attributed this increase to a deceleration in supply growth and a rise in demand.

For the first half of 2019 overall, though, occupancy slipped 0.1 percent from the same period in 2018 to 76.5 percent. The Highland Group’s report said this decrease came as a consequence of economy and upscale demand growth lagging changes in supply. This number still stands more than 10 percentage points higher than the 65.9 percent occupancy STR reported for the overall hotel industry.

Supply grew 5.6 percent year-over-year to 485,608 rooms, according to report. The 25,731-net change in new rooms stands in contrast to the more than 29,000-room increases recorded in both the preceding 12-month periods. By segment, the report found midpriced hotels experienced the fastest supply growth, economy hotels reported their largest annual supply increase in three years and the upscale segment experienced its smallest quarterly supply increase in five years.

The Highland Group pointed to rising construction costs and lengthening development timelines as two factors slowing supply growth. According to the report, the number of rooms under construction decreased at mid-year 2019, falling faster than at year-end 2018.

The group reported extended-stay hotels saw the strongest quarterly demand growth in a year. The 5.8 percent increase in demand through mid-year fell “only a tiny fraction short” of the rise in supply, according to the report.

The Highland Group reported that extended-stay average daily rate growth in Q2, at 1.3 percent, outpaced Q1, but stayed below 2 percent for the third consecutive quarter, “generally in line with the overall hotel industry.” Revenue per available room growth also stayed below 2 percent, something the report said “is not likely to change much for the remainder of 2019.” Like with ADR, Q2 RevPAR growth, at 1.6 percent, outpaced Q1, bringing year-to-date RevPAR up to 1.1 percent.