Extended Stay Remains Resilient Amid Continued Uncertainty

Hotel guestroom

Travelers today are more price-conscious than ever. Armed with the knowledge that full-service, midscale, and all-suites hotels are understaffed and lacking resources to provide many of the amenities they traditionally offer, the value equation has changed and hotel guests are adjusting their plans and expectations accordingly.

Extended-stay hotels benefit from a highly efficient business model and offer a clear value proposition. As a result, they weren’t as vulnerable to the pandemic as were properties in other segments. According to data from the Highland Group, in 2020, the hotel industry as a whole was experiencing a 35.7-percent drop in demand and a 49.4-percent decrease in revenue. However, extended-stay hotels stood out from their competitors, recording only a 15.8-percent drop in demand and a 30.8-percent reduction in revenue in 2020.

The story doesn’t stop there. Economy extended-stay fared best of all, with just a 0.6-percent reduction in demand, and only a 3.1-percent reduction in revenue. This success can be attributed to a number of factors. Examples include extended stay’s focus on business types that were only marginally affected as a result of the pandemic, such as construction, to reduced service expectations from guests as social distancing took hold. But the true source of economy extended-stay’s success comes from the consistency provided at the property level, purposeful guestroom design with deep attention to detail, and a full understanding of their positioning in their local market.

The success of the extended-stay segment has been consistent throughout the summer. According to a new report from the Highland Group, the segment recorded 10.5 percent more revenue in July of 2021 than the same period in 2019. The value these properties deliver to both travelers and hotel owners is clear, which is why so many individual and group investors acquired extended-stay hotels at the tail end of the last segment.

In addition to the segment’s core audience, extended-stay also provided a destination for temporary or long-term housing during the pandemic, and many properties today continue to help families displaced economically or in transit to new job opportunities. This purpose has shifted over time as well, with travel limitations directing guests to more local options. As a result, extended-stay hotels’ value proposition helped position them as multi-week escapes from the dreaded home office during summer.

Shifts in booking behaviors like this are helping change the perception of what an extended-stay hotel can be, and what markets they can be successful in. But there is always room for improvement. The next challenge for the hotel industry overall will be finding ways to grow rates. Just as the rest of the industry can learn from extended stay’s commitment to comfort and efficiency, so can extended-stay hotels learn from the successful marketing and opportunistic pricing strategies employed by other segments.

This may sound aspirational. Hoteliers are already suffering under the weight of a labor shortage, making it difficult to apply sweeping changes to your operational or pricing strategy. Unfortunately, due to the nature of today’s business environment it is very difficult to succeed completely on your own. Partnerships are vital right now, from brands to third parties. Hoteliers need someone in their corner, and should not be afraid to reach out to the partner’s advisory board in order to make use of every opportunity available to them.

Extended-stay hotels are positioned to succeed through the end of 2021 and beyond, but there is much they can learn from successes in other segments, from creative marketing at the local level to the use of new technology to improve the guest experience. The future is always uncertain, but there is one thing we can do to stay ahead of the curve, and that is to provide the best possible value to our guests and owners, and remain open to learning from our peers.


Sponsored by Red Roof

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Matthew Hostetler is currently serving as the chief development officer for the leader of the economy lodging industry, Red Roof. He brings extensive knowledge in hospitality and franchising to Red Roof and his role of expanding the brand through franchise development, operations support, and branding. Prior to joining Red Roof, Hostetler was intimately involved in the re-launch of the Germany-based luxury real estate brand Engel & Völkers in the USA as a Senior Vice President–Eastern Region. Matt also worked with Coldwell Banker Residential & Commercial Real Estate leading the expansion efforts in North America. Hostetler honed in his skills in the hospitality industry with Wyndham Worldwide prior to joining the Red Roof team. He is a graduate of California University of Pennsylvania.