Staying power: Ex-stay is hot

NATIONAL REPORT—Everybody’s talking about extended-stay. The top hospitality companies in the world have their hands in the segment, and they’re not letting go anytime soon. Developers are pairing these brands with transient product to leverage property efficiencies in the hopes of generating higher ROI for owners. The segment’s momentum is expected to continue as extended-stay progresses in the coming years.

“Extended-stay as a grouping has some requirements that are industry standards,” said Bruce Ford, SVP and director of global business development at Lodging Econometrics, a Portsmouth, NH-based real estate intelligence firm. “You must have a separate eating, living and sleeping area within the guestroom, so it has to be formatted like it’s an apartment.”

But other industry standards have relaxed. Compared to 30 years ago, when extended-stay was first introduced into the market, the lodging industry’s current extended-stay standards are a lot less strict, especially as it relates to length of stay.

“When [extended-stay] first came out, the idea was a week or more room nights per guest, and today, those requirements are not in place, so the length of stay has been reduced,” he said. “It’s typically multiple days.”

Even though extended-stay properties require larger rooms and more in-room amenities, the positives can outweigh the negatives. “When you consider the length of stay and ADR premium, it delivers a good ROI, and the booking patterns can help with shoulder night occupancy lift and create some consistency throughout the week, not just peak nights,” said Don Urbahn, VP of sales and revenue management at New Castle Hotels & Resorts, a Shelton, CT-based hotel management company.

There are 1,360 extended-stay projects with 143,379 rooms in the construction pipeline in the United States, according to Q1 2018 data compiled by Lodging Econometrics. There are 428 extended-stay projects with 47,340 rooms already under construction. (According to the firm’s data, these projects account for nearly 27% of all projects under construction in the total pipeline). Lodging Econometrics’ data also revealed the following pipeline numbers from Q1 2018: 428 projects with 66,846 rooms are scheduled to start construction within the next 12 months, and 304 projects with 29,193 rooms are in early planning stages.

“The economic fundamentals are driving demand: employment growth, capital spending, lots of construction, relocation of people,” said Mark Skinner, hotel consultant at The Highland Group, a St. Michaels, MD-based hotel consulting firm. “Growth is also being fueled by the age of the product now, so there’s a replacement demand as well.”

With 377 projects with 39,474 rooms in the pipeline, Home2 Suites by Hilton has the largest extended-stay pipeline. Home2 Suites opened its 200th hotel at the close of 2017. The company’s All Suites division ended last year with a footprint of 900 opened hotels, and is on pace to reach 1,000 opened hotels before year-end 2019.

Right behind Home2 Suites by Hilton is TownePlace Suites, Marriott’s mid-tier, extended-stay brand (with 206 projects and 21,193 rooms in the U.S. pipeline). TownePlace Suites by Marriott openings this year ranged from properties in locations including Loma Linda, CA; Lexington, KY; Jeffersonville, IN; Mesquite, TX; and Oregon, OH.

Close behind its sister brand is Residence Inn by Marriott, the company’s upscale, extended-stay brand, which, according to Lodging Econometrics’ data, has a total of 200 projects with 24,978 rooms in the U.S. pipeline. There were several notable Residence Inn openings this year. Owned and managed by Stonebridge Companies, the 155-suite Residence Inn Boulder Canyon Boulevard opened in Colorado in March. In May, the 170-suite Residence Inn Seattle Sea-Tac Airport, owned by Western International and managed by Texas Western International Partners LP, opened its doors.

IHG’s Staybridge Suites follows suit with 139 projects and 14,740 rooms in the U.S. pipeline. The upscale, extended-stay brand made one of its biggest announcements this year in February when it unveiled a new design for future Staybridge Suites openings. At the time of the brand’s news, there were 255 Staybridge Suites properties open in total.

Extended-stay projects are being developed differently now than they were in the past. For example, to the average consumer, many extended-stay properties now look fairly similar to the typical select-service hotel, Ford said, adding that many extended-stay properties today are also being designed to be more efficient overall.

“The new thing that’s coming out—that even makes it more compelling—is now they can be paired together with another brand,” he said.

There was a spike in the development of shared-site properties (683 in total) in Q1 2018, according to data provided by Lodging Econometrics. During the same time period, there were 46 developers who had more than three shared-site projects in the U.S. pipeline. At the time, the two top brand combinations for shared-site properties were Home2 Suites by Hilton and Tru by Hilton, and MainStay Suites and Sleep Inn.

There are several reasons as to why shared-site properties are currently popular among developers, according to Skinner: lower per room development costs; shared back-of-house space; shared amenities; and strong cross-selling opportunities.

“We find that the business-class hotel is a great partner for an extended-stay brand because guests often have different needs on different trips,” Urbahn said. “For example, at our dual-brand in Syracuse, NY, parents come with their children when they are doing college tours and take advantage of the extra room of the Residence Inn. When they return for parents weekend, they just need a room—so they stay at the Courtyard. Later, when it’s time for graduation and the siblings come along, they’re back to the Residence Inn. The guest gets the ease of a familiar routine, location and staff, and we keep the customer over a period of four years.”

Tru by Hilton opened its first-ever dual-brand property with Home2 Suites by Hilton in September 2017 in Murfreesboro, TN. The combined property has 154 rooms in total (75 of which are Home2 by Hilton). Hilton in March 2018 acknowledged 15 pending Home2 Suites by Hilton/Tru by Hilton projects in the pipeline.

Choice Hotels in January 2018 opened Sleep Inn and MainStay Suites – St. Louis Airport in Bridgeton, MO. The opening of this property marked the Rockville, MD-based hotel company’s 10th Sleep Inn and MainStay Suites property. At the time, the hotel group noted a U.S. pipeline of more than 70 Sleep Inn and MainStay Suites dual-brand hotels.  

Other top combinations included Courtyard by Marriott and Residence Inn; Holiday Inn Express and Staybridge Suites; and Hilton Garden Inn and Homewood Suites by Hilton.

“[Extended-stay] is a flexible product, and you can shift your mix of business based on demand in the market,” Urbahn said. “High-demand periods allow for shorter stays and higher rates, while off-peak periods lend themselves to longer stays. The hotel product lends itself to either.”

By year-end 2018, 320 extended-stay projects with 33,961 rooms are expected to open, including the Residence Inn in Missoula, MT (174 rooms); the Hyatt House San Jose Airport in San Jose, CA (165 rooms); the Residence Inn in Weehawken, NJ (164 rooms); the Homewood Suites by Hilton in Teaneck, NJ (160 rooms); and the Residence Inn in Stamford, CT (156 rooms).

“Over the years, we’ve seen the kitchen amenities improved and more shared spaces like basketball courts, putt-putt greens and more F&B outlets, such as a bar,” Urbahn said. We’re also seeing larger workspaces in public areas where project teams can gather. In the future, we anticipate that the demand for technology will not subside, and that guests are going to want amenities like they have at home—Amazon’s Alexa or Echo, for example.”

The extended-stay segment is expected to continued to thrive. “Extended-stay is going to continue to grow as long as fewer and fewer people report to headquarters every day,” Ford said, pointing to the trend toward remote work and employees living in far-flung places. “They have to come to headquarters eventually, at periods of time during the year, and if they’re going to stay for the whole week, having a larger room is preferred.”

In 2019, 309 projects with 33,087 rooms are projected to open.

“I do expect we’ll have some new brands,” he said. “I do expect we will continue to see pipeline growth. I do expect the products will continue to morph more into short-stay kind of stuff, two to three to four days. All of that seems to be in play.” HB