Hotel companies seem to be tripping over themselves these days in an effort to attract Millennials. But it may well be a lodging concept that’s slightly older than these 80s generation travelers that is in the best position to capitalize on trends being driven by this younger demographic.

That concept is extended stay and it meets all the current buzz requirements:

Sense of community – From their inception extended stay hotels have held social events for those away from home for long periods. And there are public spaces for getting together – including amenities like barbecue grills, fire pits, pools, and even a basketball court.

DIY – Most extended stay accommodations offer kitchens so that guests can prepare their own meals – ideal for cost-savings and to avoid having to eat in restaurants.

Lodging Promo

WiFi – Extended stay has been ahead of the game in offering free quality wireless Internet.
Comfort on the road – With all the stress of travel, hotels are trying to provide calming refuges, long a selling point for extended stay.

Experiential travel – With guests in place for weeks and months at a time, there is more opportunity to get to know the destination, and extended stay hotels are taking steps to create those memorable experiences.

It’s no wonder that extended stay is booming. Even in an industry where rate and occupancy are strong, extended stay outstrips its “traditional” competitors. According to the Highland Group, consultants who have monitored the category for decades, extended stay hotels enjoyed the fastest quarterly gain in revenue in more than nine years during the second quarter of 2015. Most of the gain in revenue was through average rate, which was up more than 8 percent over a year ago.

In addition, occupancy in upscale extended stay ($100-plus a night) was the highest in ten years; second quarter demand growth was the fastest in five years and second quarter room revenue growth the fastest since 2006.

“Occupancy typically runs about 15 points higher than the industry as a whole,” says Diane Mayer, vice president and global brand manager for Residence Inn, Marriott’s upscale extended stay brand. “Right now our occupancy is 80 percent brand wide.”

Not surprisingly, extended stay rooms are being built at a record rate and according to Mark Skinner, a partner with Highland Group, supply should finally meet demand in the next year or two at which point rates might stabilize. However, he says, rate increases should remain well above inflation before starting to moderate in 2016.

“Probably the biggest thing in extended stay is growth in both the upscale and midscale categories,” says Bill Duncan, global head, brand management for Home2 Suites by Hilton and Homewood Suites by Hilton. “It’s growing in popularity for both extended stay and transient travelers. Guests love and crave space. Travel managers love it because team members are happier and more productive.”

Many travel managers agree that there’s a growing interest in the market. “More and more people are asking for extended stay as the product becomes more understood and as the hotels have moved into new markets,” says Kevin Hamilton, executive vice president of sales for Conlin Travel, a TMC in Ann Arbor, MI. “Of the 100,000 room nights we book a year, about 12 percent is extended stay and that’s growing.”

Transient travelers are increasingly turning to extended stay, and even serviced apartments for trips of one or two nights, according to Sean Worker, CEO, BridgeStreet Global Hospitality, a big player in the serviced apartment arena. “It’s all about the purpose of the trip. We find that people who might have stayed with a branded extended stay hotel are looking at us as an alternative that offers the same level of predictability, quality and conforms to their travel program. That audience is literally thinking ‘out of the box,’” Worker says.

Are We There Yet?
Extended stay operators say their product already meets the needs of today’s travelers, but they are making additional efforts to enhance that appeal. “Extended stay is moving in parallel fashion with hotels to meet changing needs and demographics,” says Skinner. “That means communal space, good WiFi and being business friendly.”

Craig Partin, vice president-sales for Furnished Quarters, another serviced apartment provider, says, “Millennial road warriors are driving the popularity of extended stay. These travelers desire a community and home-like atmosphere more than any previous generation.”

An exploding trend in hospitality has hotels playing the role of local guide; it’s a part extended stay fits into nicely since guests are on property for such a long time. “The extended stay guest wants to know what their new neighborhood is like because it might be their home for six months,” explains Loren Nalewanski, vice president, global brand management for TownePlace Suites by Marriott.

“The feedback we get from our sales team is that a few years ago the suite was the priority,” says Nalewanski. “Today it’s about getting out of that space into lively social spaces. Executives in the past were programmed from morning to night and it was all about productivity; now it’s about being more balanced.”

“People are accumulating memories and not points,” says Worker. “We deliver experiences. You could be staring at a piazza in Milan having an illy coffee – or sitting in a penthouse looking at St. Paul’s Cathedral in London. Our guests want an authentic experience – your shoes are off, your shorts on, in an urban cocoon and not a box. You have all the Internet you need with a perfect hotel suite, a concierge, great services – and it all conforms with corporate expense report and risk management policies.”

It’s a lifestyle choice that appeals across all business traveler age groups, says Duncan. “We have purposely set out to meet the needs of all demographics including Millennials so we are aiming for a new social setting. We have always had that with our manager’s receptions but we are trying for new kinds of seating, zones and spaces.”

Coping with Compliance
“This is not your dad’s extended stay,“ says Donna Brokowski, general manager, partner solutions group for Travel and Transport, a TMC in Omaha, NE. “They have workout equipment in the room and healthy food; and people are often more social on the road than at home.”

And for Thomas Klein, supervisor of the travel department at CHG Health Services, which sends doctors on assignment around the world, the trend fits in with his travelers’ ideal lifestyles. “For the most part our doctors and nurses like having a kitchen for their personal use,” Klein explains. “Physicians tend to try to stay healthy so don’t eat out a lot.”

“For corporate travel planners,” says Mayer, “the result is much happier employees who do not come home depleted with their batteries down to zero. Staying at extended stay means they can maintain themselves at a minimum or even find time to do things they like.”

As demand grows for extended stay, some travel managers see the category as fitting in with more flexible compliance standards. And extended stay operators in turn are recognizing the move toward flexibility among younger travelers who are accustomed to controlling their own purchases – travel and otherwise.

“Our guests frequently book their own travel as long as there is compliance with policy,” Worker says. “Many companies view our product as an enhancement to the employee experience and so compliance is becoming more flexible in our direction.”
“Business travelers are acting more like leisure travelers,” says Thomas Seddon, CMO for Extended Stay America. “Travelers can book for themselves and don’t have to go through arcane processes. Why not let people get creative in how they spend their budgets?”

Over 40 percent of the business for Extended Stay America involves negotiated corporate accounts, according to Seddon. The trend, he says, “is for more progressive companies to move away from reimbursement to lump sum payments. Instead of ‘we will move you to a new city and pick up your lodging for three months;’ it’s ‘we will move you and here’s $10,000.’” It’s a situation where everybody wins, Seddon maintains.

Technology and consumerization of the travel experience is playing a big part in the changes as well, says Patricia Hintze, vice president – global sales for Oakwood Worldwide, a serviced apartment company. “Individual travelers are accustomed to booking their personal travel and this is driving the corporate housing industry to adapt with more options to book online, mobile friendly websites and apps.”

Teamwork At HQ
Even as individuals take more control over their travel, another emerging trend in corporate travel offices is an enhanced team approach to handling extended stay. “HR gets involved a lot, but in the past five years everything is about purchasing,” says Hamilton of Conlin Travel.

“Oftentimes, the decisions on where to stay are made by the project manager or human resources, but working within the parameters set by budget managers. You have to have relationships with all these folks,” Seddon advises.

As everywhere in the managed travel space, the procurement department is playing a larger part in decisions around long-term lodging. “Procurement is becoming more involved in travel policy for extended stay,” says MJ Paschall, senior vice president for AKA Serviced Residences, which offers corporate housing at the high end of the market. “Further, over the last three years the firewall between mobility (relocation) and travel management has come down. There is more sharing of information. Procurement is corralling a lot of the information to ensure the best value,” Paschall notes.

“Corporate housing operators must be in touch with a team of contacts – the travel manager, purchasing, HR,” she adds. “You need relationships with all these people or you won’t get a look.”

Travel managers say it’s often a good idea to deal directly with the property. “If it’s a complicated destination like New York City we might work directly with a property to see if we can get a better rate for a longer stay,” says Ron DiLeo, chief commercial officer with New York-based Altour. “We might even work with a regular hotel room operator for a longer stay if the traveler doesn’t need a kitchen and a separate room.”CHG found similar results with individual properties, according to Klein “Three years ago we found it hard to negotiate with national brands because they stuck to their tiered pricing based on length of stay (the longer the stay the lower the rate). We started negotiating for discounts with specific hotels and have had better luck. However, we recently set up appointments for meetings with brands on a regional and national basis to see if we can work something out.”

Blurring the Lines
While serviced apartments (which do not include daily housekeeping and usually do not have front desks or restaurants) and corporate housing have been seen as distinctly separate products from extended stay, the lines are starting to blur in the marketplace as serviced apartments move into extended stay territory.

“In the last three years we are starting to gain recognition as a true part of the extended stay product,” says Worker at BridgeStreet, “and we satisfy the needs of travel managers. Of the thousands of people we work with the majority of decision makers are travel managers.”

Worker says that after 2008, “choices had to be made. We were narrowly labeled as being for relocations What has changed is a lot of awareness. We position ourselves as a hospitality brand and platform. We employ the same language and services as a hotel company. We took something complicated and made it simpler.”

Sometimes it’s hard to tell corporate housing from a hotel, especially in the case of upscale products like AKA which owns and operates luxury buildings in a number of cities, says Paschall. “The new conversation we’re having with travel managers is that we are condo spaces but with all the services you need. We can check all the hotel boxes – loyalty program, dry cleaning, airport transport and even the ability to stock the fridge.”

 As a result, travel managers and HR are no longer thinking of extended stay and longer-term relocation lodging as being on two separate tracks. “We are starting to see a blending of the travel and mobility programs at some companies,” explains Patricia Hintze of Oakwood Worldwide. “They realize that the needs of a longer-term business traveler can be met with the same solution as an employee relocating. Corporate housing is part of the company’s travel policy and is offered to employees through their travel portals as they book their trip,” she says.

The extended stay concept is moving overseas – but with some challenges. Homewood Suites is making its first forays out of North America and into Latin America and the Caribbean. The product is different there, says Duncan, because it is difficult to have rooms with large space in some locations.

“This product is not understood globally,” Mayer explains. “Even in Europe it’s a new concept. And in emerging markets there is almost no mid-tier product at all – it’s either luxury or cheap, with nothing in between. We see a ton of opportunity because demand for extended stay in emerging markets like the Middle East and Africa is even greater than here and that’s where our greatest growth will be.”

There doesn’t seem to be any stopping extended stay’s growth. It’s an idea whose time has come and will not wear out its welcome anytime soon.