Extended stay is one of the fastest-growth hotel segments in recent years and it’s about to grow even larger. A decade ago, it was a niche representing less than 10% of the hotel sector primarily for guests that were impacted by relocations, home renovations and disaster relief. Today, extended stay gained a larger customer base including new business travel customers by offering just the right mix of amenities and space to keep guests coming back. Longer stays necessitated by the pandemic and “work from anywhere” helped the extended stay segment outperform all other hotel segments in 2021 and report the second-highest revenue increase in 25 years in 2022, according to The Highland Group consultancy. Now developers are racing to build new properties to meet the increased demand.
If the concept is new or a small part of your travel program today, read on to learn how changing traveler preferences, huge investments in this space and hundreds of new properties may impact your views. Companies should evaluate how and when the new breed of extended stay may appeal to the evolving needs of their travelers.
What’s The Appeal?
In addition to larger rooms, guests often find convenient amenities like a microwave, refrigerator or small kitchen, along with a desk, comfortable seating and space to stretch out and store gear for multiple nights, weeks or even months. Public space typically includes a lobby, fitness center and 24/7 laundry. These amenities align with the needs of the new breed of business travelers: remote workers, traveling healthcare workers, infrastructure-related project teams, catastrophe response and insurance claim teams to name a few. Those relocating, training or in need of temporary housing due to disasters or renovations often continue to use extended stay. And, for those combining work and leisure travel—referred to as bleisure--the segment often allows them to bring a family or pet.
Traveler needs and expectations for lodging also are changing as companies encourage longer trips with more contacts instead of traveling to meet with just one customer. Whether due to sustainability, traveler wellbeing or costs, travel managers report that one-day trips are being discouraged or not approved. With longer stays comes different expectations. Companies actively reevaluating the mix of properties, segments and locations that are part of their travel programs based on employees’ changing needs should help employees have better travel experiences – especially as hundreds of new extended stay properties debut.
Longer stays frequently result in lower per night rates, especially when combined with advance bookings or corporate contracts. Extended stay properties typically offer housekeeping weekly. And, less guest turnover requires fewer employees to operate, allowing for lower nightly rates for longer stays. As business travel and transient rates at traditional hotels surged last year, companies often looked to extended stay to stretch travel budgets.
Continued commitment to health and safety standards, as well as sustainability, have become table stakes for large national and global chains that have partnered with leading experts to develop protocols to help keep guests and employees safe. Franchisors require properties to comply with their brand standards and applicable laws. With rental properties, hosts may have less requirements which could lead to more variability by location.
“Travelers today are looking for value, especially long-term guests booking extended says. At the same time, they want a space that looks and feels like them—a space that’s well designed and inviting,” noted Shilpan Patel in a Hotel Business article, “Five Predictions for 2023.” Prediction number 2: “Bank on extended stay,” said Patel, Executive Vice President, North America Franchise Operations for Wyndham Hotels & Resorts.
More New Properties in the Development Pipeline
Hotel chains, including Wyndham are doing just that! The extended stay new construction pipeline—or in some phase of development—grew nearly 30% from year-end 2021 to 2022. Lodging Econometrics reported 1,976 branded extended-stay projects with 203,791 rooms on the books, an increase of 46,727 rooms from a year earlier. At year-end 2022, 283 of those projects for 30,090 rooms were under construction in the United States, according to the report.
Real estate and investment services firm Jones Lang LaSalle in January reported that “U.S. select-service and extended-stay investment volume accounted for 51.1% of total U.S. hotel investment volume” with a record-breaking investment volume of $20.4 billion in 2022.
Some of that investment volume was even in markets such as Los Angeles, Phoenix and Orange County, Calif., which have historically had little such activity, JLL noted. “As traveler preferences continue to evolve, expect markets that cater to a wider audience to see not only growth in demand but also increased investment activity,” JLL Research stated.
New Extended Stay Brands
Three new extended stay brands were announced last year. Since 2017, nine new brands launched.
One of the newest brands is ECHO Suites Extended StaySM by Wyndham, the “fastest growing brand in Wyndham’s development pipeline” with 200 hotels in development in the U.S. as of March 2023. Three properties are already under construction, in Plano, Texas; Sterling, Va.; and Richmond, Va. Construction is expected to start this year on nearly two dozen more. Over the next decade, the company plans 300 properties in the United States and international expansion.
“Demand for extended-stay accommodations continues to surge as interest continues to grow among both guests and developers,” said Geoff Ballotti, president/CEO, Wyndham Hotels & Resorts when announcing the name of the brand on Nov. 1, 2022. If you can give travelers the value, in a well-designed and inviting space, “we believe they will come back, night after night, stay after stay. That’s what ECHO Suites is all about: giving guests a great extended stay experience, at a great price, so that, like an echo, they repeat it, over and over again.”
While many new properties remain on drawing boards, travelers and companies today can find extended stay options already in market. Wyndham has a midscale extended stay brand, Hawthorn Suites by Wyndham® with over 70 properties. It is also a “pivotal part of the company’s new dual-brand concept with La Quinta by Wyndham” now open in Texas with more under construction. The properties share a great room, fitness center, meeting rooms, bar and other amenities.
During the height of the pandemic, creative hoteliers transformed existing economy and midscale properties into extended stay retreats for traveling nurses and emergency responders who needed lodging for weeks.