Over the last two years, the economy extended-stay hotel market has been outperforming all other segments, said Geoff Ballotti, president and CEO of Wyndham Hotels & Resorts. With this outperformance, it’s no wonder why Wyndham is launching Echo—an acronym for Economy Hotel Opportunity—its economy extended-stay brand in 2023.
“Demand for these accommodations only continues to climb—both from guests and developers alike—making now the right time for Wyndham, the definitive leader in the economy segment, to bring our experience and expertise to this high-potential space,” Ballotti said in a press release by the company. A resilient market, the segments U.S. RevPAR grew 8% during the pandemic while the rest of the industry declined 17%, the press release said.
According to Hotel Tech Report, which uses statistics from organizations such as American Hotel & Lodging Association and Statista, 833 hotels opened in the United States, 29% of which were extended-stay properties.
Wyndham has been working on Echo since summer 2021. Its prototype is a 124-room property featuring your standard 300-square-foot studio with a kitchenette and public spaces, like a lobby and fitness center. Echo will also feature a guest laundry room, designed to limit labor needs, according to Ballotti. The project is scheduled to develop 50 Echo hotels.
Other hospitality companies have made extended stays not just a sector of their brand, but the whole brand. Placemakr, formerly WhyHotel, started as a pop-up in 2017 but later became a hotel brand with long-term plans designed for long-term stays.
According to Jason Fudin, Placemakr’s cofounder and CEO, the company plans to expand by acquiring $750 million in real estate in the next 18 to 24 months, with its first being PlaceMakr Premier SoBro, in Nashville, Tennessee.
Hyatt Hotels Corporation, known for its many brands including its extended-stay properties, Hyatt Place and Hyatt House, is scheduled to open 48 new properties across the Americas in 16 new destinations, including Quebec, Canada; Panama City Beach, Florida; Sacramento, California; and Virginia Beach, Virginia, this year and in 2023. Hyatt Place and Hyatt House will comprise 6,400 of the rooms planned by the fourth quarter of 2023.
Representatives of Hyatt Place and Hyatt House said these two brands led occupancy rates across all Hyatt brands in all regions, at 65.1% at the end of 2021.
“The Hyatt Place and Hyatt House brands continue to perform incredibly well, especially among leisure transient guests, with leisure destinations commanding strong ADR,” Hyatt senior vice president Jim Tierney said. “With an eye toward recovery, we believe these hotels will remain attractive to leisure guests thanks to distribution, value and amenities.”
Marriott International has been in the extended-stay game with its TownePlace Suites and Residence Inn. In 2019, Marriott launched Homes & Villas, its rental platform company, with more than 55,000 homes across the globe, some of which have up to 15 rooms.
In a 2017 white paper, “Demand for Extended Stay,” by BTN Group Content Solutions and Extended Stay America, Mark Skinner, a partner with the Atlanta-based hotel investment advisory firm Highland Group, said about 30,000 extended-stay hotel rooms opened between mid-2016 and mid-2017.
Even with the addition of 80,000 new rooms four years prior, extended-stay occupancy remained at 76-77%. This supply growth while maintaining high occupancy allowed extended-stay properties to increase ADR faster than all other hotel segments, he said.
Extended Stays and Covid
According to The Highland Group, the hotel industry experienced a 35.7% decrease in demand and a 49.4% decrease in revenue in 2020. Extended-stay hotels, however, only had a 15.8% drop in demand and a 30.8% drop in revenue that same year. Economy extended-stays saw the least reduction, at 0.6% in demand and 3.1% in revenue.
Covid may’ve hit the hospitality market badly, but the appeal of the extended stay is why it outperformed during that tumultuous time. “Extended-stay hotels over the last 20-plus years have achieved occupancy ranging from 10-14% above the overall hotel industry. The RevPAR trends from year to year are similar over these 20 years. The difference came in 2020, when extended stays lost far less revenue than traditional hotels,” Skinner said.
During Covid, extended stays served as a safe place for those on the frontline. “[Extended stays] are conducive to social distancing, so there was a shift toward extended-stay hotels, especially among first responders and health-care professionals that traveled the country to help out areas that had high [cases of] Covid.”
They also worked well as places to stay for those who spent much of their pre-Covid days around those most vulnerable. “Imagine you were living in a household that was multigenerational [at the time] Covid hit, you may not have felt safe coming back from work with older and very young people in the house because they were more susceptible,” he said. “Some families had members that needed to move out of their household and find temporary accommodation. The extended stay is the ideal alternative for that.”
And there was the equally attractive low cost. “[There is] the lower price point; there were relatively few employees on-site, so your personal contact was limited. You could prepare all your meals in the rooms; they all have kitchens,” Skinner said.
“At lower price point [hotels], especially, there was a significant residential component to the guest mix,” he added, “residential component” meaning certain guests had a longer than average length of stay. “People who are essentially living there are not affected by changes in travel because that’s not why they’re there.”
Beyond Covid, it’s not difficult to see why hotels are expanding their extended stays—it’s that sweet ROI, baby. “The investment returns [of extended stays] tend to be higher than traditional hotels of comparable price,” Skinner said.
This greater investment return is something planners can see as well if they go extended. Skinner continued: “If [groups] stay in extended-stay hotels, they tend to stay in mid to upper price points; if they have an event that lasts several days, extended stays could be a less expensive and better equipped alternative to a traditional hotel.”