The recovery of the hotel industry in the United States is still a work in progress, but one segment appears poised to recover faster than the rest of the sector.
Extended-stay hotels have earned favor since the onset of the pandemic with a variety of consumers, keeping the segment strong, The Wall Street Journal reported. At the beginning of the pandemic, the properties were utilized by first responders, nurses and construction workers. More recently, vacationing families and IT workers have been filling rooms.
The hotels are typically occupied for at least a week and sometimes up to several months. Room rates tend to be below full-service hotels and guests often have access to things such as a kitchenette with appliances.
The properties also differ from other accommodation properties because they can save money by offering fewer amenities and lower staff counts. For example, housekeeping staff are needed because rooms are sometimes serviced once a week, instead of every day.
Ryan Meliker, president of Lodging Analytics Research & Consulting, told the Journal that extended-stay hotels can offer owners property margins of approximately 50 percent of revenue, about double the industry standard.
“They’re like ATMs with a roof,” Meliker said. “They print money.”
Revenue per available room fell in 2020 about 48 percent year-over-year across the hotel industry, Meliker told the Journal. The numbers were better for the extended-stay segment, closer to 33 percent. For the lowest-cost extended-stay options, it was less than 6 percent.
Meanwhile, hotel data tracker STR reported extended-stay hotels had an occupancy rate of 73.2 percent in 2021. Other sectors of the hotel industry combined to have a 55.9 percent occupancy rate.
Investors have been taking notice of extended-stay hotels. Earlier this month, Blackstone and Starwood Capital Group teamed up to acquire 111 WoodSpring Suites properties from Brookfield Asset Management for about $1.5 billion. Guests at WoodSpring Suites often stay for at least 30 days.
The companies paid $6.3 billion in March to acquire the 62,257-key portfolio of Extended Stay America, taking the country’s largest lodging REIT private. Other players in the sector include stayAPT Suites and AKA Hotels + Hotel Residences.
[WSJ] — Holden Walter-Warner