The extended-stay segment continues to attract new entrants at a dizzying pace as major brand companies look to identify “white space” in the chain scale that has consistently outperformed the industry in recent years. The newest additions come from Hilton and Marriott International, respectively, both of which recently launched “more affordable” extended-stay brands. Both of the new brands were officially unnamed at the time of their launches. Hilton was first with its announcement in late May of Project H3, a new-construction, apartment-style brand targeting the lower midscale, extended-stay market.
Isaac Lake, brand leader, Project H3 by Hilton, noted that the company’s 20th brand has been in the works for the better part of a year. Lake pointed out that it was created based on five years of stay data on the competitive set and in large part because the company’s existing extended-stay brands—which include Homewood Suites and Home2Suites—continued to perform well during the pandemic.
“What we discovered is there’s about a $300 billion workforce travel segment that continued to travel, and we didn’t have anything at this price point to attract those guests. So, we went out and created something specifically for these guests based on our research. We really feel like we have landed with a product that is going to absolutely kill the [extended stay] category and almost define a new category, both for Hilton and also for hospitality,” he said.
The roughly 120-key product is designed for guests staying 20 nights or more, according to Hilton. Each property will feature The Hive—a public area filled with natural light that includes a simple retail market—a large laundry room and a state-of-the-art fitness center, according to the company. There will also be an outdoor gathering area, which includes a fire pit, grills, and seating for guests looking to connect.
According to Hilton, the suites feature an adaptable layout with four distinct areas for guests to rest, work, cook, and refresh. Guestrooms include a fully equipped kitchen with a full-sized refrigerator, dishwasher, microwave, and two-burner stovetop, along with storage options. The hotel’s exterior is designed to include warm wood tones and a modern farmhouse-inspired palette with light industrial touches.
“We think that the product we designed is so different with the unique senses of space, such as the arrival experience, and leaning into things like fitness and guest laundry,” said Lake, who later added that Project H3 offers a “super lean” staffing model designed for some six to 10 full-time employees.
Describing the prototype as a “very succinct build,” Lake pegged development costs at an estimated $116,000 to $120,000 per key. The footprint of the prototype is 59,000 sq. ft.-plus and a new build requires a minimum of 1.89 acres of land.
Lake touted the interest the brand has garnered already from developers. “We have over 100 owners who have signed NDAs [non-disclosure agreements] prior to our launch. Of those 100 owners, most of them have submitted multiple sites, so we think this thing is going to come out of the ground pretty fast. I know it’s very competitive; [many of] the owners want to be the first one to break ground. We’ve got guys that are calling me every day, saying, ‘I’m ready to go; give me what I need to get started on construction.’ So, I think it’s going to happen very fast and it’s about a 12- to 14-month build,” he said.
Lake added that Hilton expects to break ground on its first Project H3 in the next few months, with an opening likely to take place in Q3 or Q4 of 2024.
Meanwhile, just a few weeks later Marriott debuted its Project MidX Studios, the company’s most affordable cost-per-room product in the United States and Canada. Noah Silverman, global development officer, U.S. and Canada, Marriott International, noted the company is targeting roughly an $80 average rate and $65 RevPAR.
The 124-studio prototype model for MidX Studios targets a build cost of $13 million to $14 million, requiring approximately 54,000 sq. ft. of total building area. The brand is also expected to have a light operational cost model for owners and franchisees, according to the company.
Silverman provided some insight into the creation of the new brand, which is designed to complement the company’s Residence Inn, TownePlace Suites, and Element extended-stay flags.
“We started on this journey several months back focusing on this extended-stay, midscale segment because we saw it as not only white space for us and our company, but also as a rapidly growing segment. Given the changing dynamics of customers, there is increasingly a group of travelers that are on the road for extended periods of time looking for something in this price point. We believe that we’ve achieved a solution here that not only is attractive to those customers, but very attractive in terms of the returns to owners and franchisees,” he said.
Project MidX Studios has been designed for guests in search of affordable, flexible accommodations for an extended stay, typically 20-plus nights or more, according to the company. Its streamlined, light-touch, digital-first operating model focuses on the needs of a budget-conscious consumer, with options like pay-and-go retail and check-in with Marriott Mobile Key.
With a smart, modern, and functional design, Project MidX Studios will include spacious suites offering both single or double queens, in-room kitchens, and ample closet space, according to the company. The properties will feature an onsite guest laundry, gym, and pet-friendly facilities.
Silverman touted the fact that the brand will feature a 9 percent bundled franchisee fee. “We think this is a significant advantage for our owners and franchisees interested in this tier,” he noted.
He added that the company has some 250 “live opportunities” and figures to ramp up quickly from a development standpoint.
“We expect many of them to be done with groups that have expressed interest in going very deep into this tier and in this space. So, we think many of the groups that are committing to these will be owners and franchisees that do multiple properties with us over the next couple of years. We think the reason that we’ve gotten that interest is primarily based on the compelling opportunity and the price point at which we’ve developed the product,” he said.
From a location standpoint, Silverman noted there should be plenty of opportunities.
“We’ve targeted as many as 1,800 markets where we believe this product can work and work successfully, primarily focused on secondary and tertiary markets. We don’t expect this, for example, to be a brand that we see showing up in urban city centers anytime soon,” he said.
Silverman concluded by touting the potential of Project MidX Studios. “We think there is a customer for this affordable, midscale price point that is very focused and very price sensitive. And we believe that we’ve nailed the sweet spot for where that customer is with our offering,” he said.
