287 | The Long Haul: Extended-stay hotels show their strength in a crisis




Lodging Leaders show

Summary: <br> {caption}THE LONG HAUL: A king suite is one room type of Everhome, an extended-stay brand Choice Hotels International launched in January. The company recently signed two ‘multi-pack’ deals with developers in California and Texas. Episode 287 of Lodging Leaders podcast explores the strength and resiliency of the extended-stay lodging sector as the coronavirus pandemic strains the financial performance of transient and group hotels.{/caption}<br> Lodging investors find a room with a kitchen is ‘a good place to be’ in the COVID-19 age<br> otels in the economy extended-stay category are riding the COVID-19 wave by providing a service that until recently many hospitality consumers had overlooked – the invitation to shelter in place as long as you want to at an affordable rate.<br> <a href="https://www.linkedin.com/in/acalexander/" target="_blank" rel="noopener noreferrer">Andrew Alexander</a>, president of <a href="https://www.redroof.com/" target="_blank" rel="noopener noreferrer">Red Roof</a>, said the economy segment is the sweet spot for the hoteliers these days. But it’s truly the saving grace for extended-stay hotels.<br> Red Roof added HomeTowne Studios to its brand family in 2018. It launched as a conversion brand and in April 2019, Red Roof rolled out a new-build prototype for the brand. And it’s proven to be a shining star.<br> HomeTowne Studios business performance is up compared to the second quarter of last year, Alexander said. “Economy extended stay is truly the perfect place to be when you have this kind of downturn,” he said. “People are not sure where their lives are going and this is a great place for them to be while in transition.”<br> HomeTowne Studios’ primary guest demographic is a mix of residents displaced because of an economic loss resulting from the coronavirus pandemic and essential workers such as health care professionals who do not want to risk taking the virus home or they want to live closer to the hospital where they’re needed.<br> Occupancy in HomeTowne Studios is more than 80 percent, Alexander said. Owners of economy extended-stay hotels are “having a good summer. It shows that the economy segment is a really good place to be,” he said.<br> Discounts Maintain Occupancy<br> <a href="https://highland-group.net/" target="_blank" rel="noopener noreferrer">The Highland Group</a> recently reported that extended-stay hotels in all price tiers reported a loss in occupancy over the first six months of the 2020, but the economy-segmented accommodations had a 4 percent drop while mid-price and upscale charted occupancy declines of 26 percent and 53 percent, respectively.<br> Extended-stay residents typically seek out the lowest price points as they plan to stay longer term. For that reason, <a href="https://www.linkedin.com/in/mark-skinner-09b29413/" target="_blank" rel="noopener noreferrer">Mark Skinner</a>, partner at The Highland Group and author of the report, expects to see a rate war of sorts.<br> He notes it’s a matter of time before hotels in the higher-priced tiers begin to lower their rates to compete. Although he doesn’t expect it to last for long.<br> “During contractionary periods extended-stay hotels tend to focus on occupancy more than rate,” Skinner said. “So the way to do that is to go after longer term guests at a discount. It happens in all three price segments, but particularly the change is more abrupt in the upscale end.”<br> The Highland Group’s report charts revenue losses in April among mid-price and upscale extended-stay hotels that are steeper than the economy segment. But it shows an across-the-board increase in room revenue, with the economy segment’s June room revenue nearing March levels.<br> <br> {caption}The Highland Group charts discounted rates in economy, mid-price and upscale extended-stay hotels in the first six months of the year. As the coronavirus pandemic hit the hospitality industry,