It may have taken a pandemic to really wake the lodging market—including investors, developers, and hoteliers, as well as their consumers—to the beauty of the extended-stay concept. Yet, as Matt McElhare, Senior Director, Extended Stay Brands at Choice Hotels International, explained, the extended-stay hotel segment was never a sleeping giant so much as a quiet but constant player in the brand mix of hotel companies.
Extended stay, he said, accounts for 10 percent of overall lodging supply and 20 percent demand for extended stays of a week or more. The decision for Choice to grow in that direction was an easy one—made easier still because it’s likely to grow even more, thanks to an anticipated increase in blue- and gray-collar business travelers hired for newly approved federal projects and newcomers to the segment such as remote workers and “bleisure” travelers. “As it is now, the segment is under-built, so you’re talking about a 2-to-1 supply demand imbalance that should support a lot of continued growth in the space, particularly at the lower price points, which is where our brands are positioned,” remarked McElhare. Beyond that, he expanded on how and why Choice is focusing especially on Everhome Suites, its new-build midscale offering in the segment.
Choice Extended-Stay Growth
During the first nine months of 2023, Choice’s extended-stay hotel openings grew by 38 percent, compared to the same period in 2022; and its extended-stay domestic pipeline increased 12 percent year over year to more than 47,000 rooms in the third quarter of this year, according to McElhare. Choice currently has 60 Everhome Suites properties in the pipeline and over 250 across three other extended-stay brands: MainStay Suites, Suburban Studios, and WoodSpring Suites. Everhome Suites was the first midscale extended-stay brand launched in over a decade. Current activity, he said, includes 12 new-construction Everhome Suites, with three under construction and six more in various stages of development across the Southern California region.
What’s Behind the Segment’s Growth
McElhare said there’s nothing new about the demand for extended-stay lodgings, which he said has always been needed for “non-discretionary guests who can’t do their jobs via Zoom” such as construction and healthcare workers whose jobs keep them away from home for extended periods of time. McElhare maintained that the pandemic didn’t so much increase the need for the extended-stay segment as raise awareness of it: “During that time, when discretionary travel went to low levels, extended stay continued to perform because it accommodated those nondiscretionary guests.”
He also noted that during and since the pandemic, others gravitated to extended stay, which provides more space, a kitchen, and a place to do laundry, because it offers greater comfort and flexibility, even for shorter stays. The model enables guests to work remotely—as they do increasingly—and extend business trips into so-called “bleisure” vacations.
McElhare also mentioned current economic trends and fiscal policy that suggest continued extended-stay demand growth. These include the $1.2 trillion infrastructure bill and onshoring of industries fueled by the CHIPS Act.
Attracting Investors to the Segment
McElhare further described the environment in which many investors have become aware of unique opportunities in the extended-stay space: “The pandemic made apparent the resiliency of the model combined with the profitability potential of the segment, which prompted people who hadn’t previously considered it to take a look. Between the existing imbalance and growing demand, developers have been gaining confidence to build in the space.”
Value Proposition for Guests
McElhare noted what goes into the “value proposition” in a guest’s choice of an extended-stay hotel over a traditional one: “Guests staying for seven-plus nights aren’t generally looking for a hot breakfast and daily housekeeping as much as space to spread out and the ability to make meals and do laundry. So, when they have an option in the right location that is within their price range, they’re going to choose extended stay.” An attractive element factored into the cost consideration, he said, is the “tiered pricing,” which means, “the longer you stay the more you save.”
Everhome Selling Points
McElhare said the decision to take on the challenges of new construction rather than take the faster path to entering the space via conversion was not made lightly. Despite high construction costs, he remains confident that Everhome will fill a need in the space and perform, saying, “All things being equal, new wins.”
Proof of Concept
McElhare said that Choice is confident that with Everhome, they have created an exciting new product geared toward the highest profitability within extended stay, and with it, will enjoy first-mover advantage even as others recognize and are trying to target the opportunity.
He described how the newly opened Everhome in Corona is faring against its competition in a market with older and more traditional extended-stay properties as validation for its concept. “We’re running 85 percent occupancy, and that’s in shoulder season,” he said. McElhare expects further validation in the coming year, when there will be 10 to 15 more properties opening across the country.
Conclusion
“We believe that Everhome is entering markets where there’s both a great demand opportunity for extended stay and the existing composition is dated. This is favorable ground for us to steal share and drive really high performance in the brand,” said McElhare.
