The bigger players in this segment have been operating corporate housing or serviced apartment companies for decades, but recently the rise of peer-to-peer providers like Airbnb has focused more attention on outside-the-box lodging options for business travel.
“Research shows the alternative accommodation space is growing at twice the rate of the broader lodging space,” says Jon Wohlfert, founding partner and co-CEO of RESIDE Worldwide, Inc. “In addition to awareness, the growth is driven by the rapidly expanding need for flexible, shorter-term living options desired by business travelers from both the Millennial and Baby Boomers sets.”
After all, those traveling for a long-term project, an internship or relocation have a unique set of needs, such as a full kitchen, separate and multiple bedrooms and more space.
Consider the Highland Group’s 2018 US Extended-Stay Lodging: Mid-Year Report, which revealed that for the fourth straight quarter, the demand for extended stay hotels has outpaced supply despite the addition of more than 30,000 new extended-stay suites/rooms over the past year. The report also noted extended stay RevPAR grew 4.4 percent year over year in the second quarter of 2018 and currently has the strongest demand growth trend seen since the post-recession recovery.
Scott Brennan, chief growth officer and founder of RoomIt, which offers more than 300,000 extended stay or apartment-style properties, notes the long-term lodging segment is becoming more relevant to corporate travelers.
“Whether a long-term or short-term stay is needed, these accommodations are becoming increasingly popular as they continue to offer additional availability when other occupancy is high, and they often offer more opportunity for savings,” he says. “Extended stay brands are also making an effort to create more choice by forming different sub-brands to match travelers’ unique styles.”
Jenny Bulgrin, market manager, corporate mobility, relocation and extended stays for Airbnb for Work, says travelers are seeing advantages outside of just having more space. Specifically this points to a trend that offers guests more choice and personalization.
“Moving can be stressful, and the experience of staying at an Airbnb can ease fears and really get someone positively immersed in the local culture,” according to Bulgrin. “Airbnb allows employees to check out a neighborhood or school district before moving.”
The current travel landscape has changed significantly, says T.J. Spencer, vice president of global sales at Oakwood. The focus is on the individual business traveler faced with an increasing number of choices. “We will continue to see investment in the segment as services and amenities keep pace with guest requirements and all facets of technology are upgraded,” he says.
Extended Stay America’s research shows that more than 20 percent of the room night demand in the US is for stays of five nights or more; however, the extended stay supply is approximately 8 percent of the rooms available.
Therefore, says Tom Buoy, EVP of revenue for Extended Stay America, what is attractive about this segment is not only the returns associated with the asset type but also that there’s so much unaccommodated demand, leaving a lot of opportunity for growth. “The hospitality industry runs 65 percent occupancy,” Buoy says. “This segment, depending upon the tier, is running probably 15 points higher from an occupancy standpoint.”
Evolution & RevolutionFor the past 20 years, the long-term stay market was a tale of two choices, an extended stay hotel or a corporate/serviced apartment. While the biggest advantage of long-term housing has always been more space, the segment is transforming to keep up with changing travel patterns and demographics.
In 2018, many of these players are offering more hotel-like offerings and making it more convenient for travel managers to book. However, Wohlfert says hotel brands have saturated the market with extended stay hotels in the economy, midscale and upscale segment, while corporate/serviced apartment companies have grown substantially, bringing about consolidation.
At one time, the choice of furnished and serviced apartments was closely tied to relocation, which was heavily mandated by employers. And with most long-term assignments between one to five years, the need was for larger, apartment-style spaces to accommodate families.
However, Spencer notes space is no longer necessarily the key criteria driving higher prices; rather travelers of all types have come to expect a certain level of service and value. And everyone, from hotels to extended stay properties, is focused on delivering outstanding and unexpected customer service.
“This segment is no longer strictly devoted to corporate travel,” he says. “Now, these types of accommodations are being associated more closely with business and leisure travel; the lines are being blurred as the definition of ‘work’ changes.” With more independent workers looking for short-term housing, cost and location are factors. “They may be digital nomads,” Spencer says. “Or they might just want the flexibility of going to the beach after work.
”The segment continues to mature, though in some cases critical elements such as quality standards, payment processes and real-time distribution capabilities may be inconsistent. “In order to adequately meet the needs of business travelers, accommodations must have high security alertness, competence, strong policies and efficient protocols in place to address a multitude of issues important to business travel programs,” Brennan says.
Appealing to Customers
In some properties, long stays – which RoomIt considers to be more than five nights – can represent up to 35 percent of total bookings, according to Brennan. “We also know that many travelers book this type of accommodation through other channels, whether direct or through relocation companies, which is why awareness that these accommodations are available in-program is so important.”
Bulgrin notes many Airbnb hosts offer discounts for extended stays, calculated on a percentage basis. In the past year alone, Airbnb for Work has seen stays of 14 days or longer grow nearly three times.
“In terms of numbers, we’re seeing extended stays and relocations being booked on Airbnb for many different reasons – ranging from long business trips or training sessions that require several weeks away, to on-site projects that can last up to a year,” Bulgrin says.
Individual travelers are looking for options and flexibility to maintain their normal routines during an extended stay, Spencer says, but they also expect the consistency and convenience of a hotel.
That market demand has prompted InterContinental Hotels Group to revamp the design of its Staybridge Suites properties, one of IHG’s two extended stay hotel brands. According to Mike Greenup, Staybridge Suites vice president of brand management, “As business travel needs change, so do our hotels. The new Staybridge Suites design was developed around guest insights, hotel feedback and key trends in hospitality, bringing an even more home-like feel to the brand.”
Travelers place high priority on such features as communal work spaces and technology. A recent survey revealed that the average traveler brings at least three or more personal devices that require charging. In response, Extended Stay America increased its Internet bandwidth and added more outlets and USB ports.
“When it comes to maximizing space, Extended Stay America has spent a lot of time researching and observing the needs of our guests and using that feedback to design our rooms,” Buoy says.
The Traditional Hotel
A number of traditional hoteliers are also getting into the long-term arena, offering up a greater selection of “suite” products that include the amenities that attract extended stay guests.
For example, Hyatt and Accor have been dipping their toes in the apartment/ home sharing business with investments in One Fine Stay and Oasis Collection, respectively.
Adrian Kurre, global head of Homewood Suites and Home2 Suites by Hilton, says the long-term lodging market is not only changing, but growing. And one of the huge drivers of that growth is the rising demand for a wider range of extended stay products.
The dramatic growth of both Hilton extended stay brands mirrors these trends. Homewood Suites closed Q2 with 468 open properties and 112 in the pipeline, while Home2 Suites finished the quarter having 237 open properties with 417 more in the pipeline.
“Much of this growth is the result of the shifting and expanding demographics of the typical extended stay guest,” Kurre says. “Extended stay has always been a popular business travel option, but with a rise of travelers mixing business with pleasure, it is seeing an increase in leisure travelers, as well. We’v
e also seen a rise in business travelers looking for an extended stay option outside of the traditional suburban market.”This new demand has led Hilton to expand its presence in urban, “surban” (neighborhoods just outside the urban core that still offer urban amenities) and desirable coastal areas, both domestically and, in the case of Homewood Suites, in target international markets.
InterContinental Hotel Group is another serious player in the competitive extended stay sweepstakes, with two entries, Candlewood Suites, which has a total of 333 properties located throughout North America and an additional 99 in the pipeline, and Staybridge Suites, with a global presence of 255 properties with 160 more in the pipeline.
This trend was also behind Choice Hotels’ acquisition in February of WoodSpring Suites, the fastest-growing economy extended stay brand. “The addition of WoodSpring Suites nearly tripled the size of Choice’s extended stay footprint, which now offers more than 350 properties, and complements other brands in our extended-stay portfolio: MainStay Suites and Suburban Extended Stay,” says Ralph Thiergart, vice president and general manager, extended-stay brands at Choice Hotels.
Connecting with Travel Managers
In many companies the long-term travel booking process sits outside the traditional lodging booking process. With this in mind, Wohlfert says, RESIDE has developed proprietary tools within the 3Sixty platform that aggregates traditional lodging and long-term lodging on an integrated platform. This flexible architecture also allows easy integrations with other corporate travel management systems including Concur.
Brennan says RoomIt works with companies that aggregate content from different extended stay lodging sources so it can ensure travelers always have a breadth of choice and are able to find accommodations in the locations they need, even in less-populated markets.
Airbnb for Work is able to support long term extended stay clients within their workflows, connecting with corporate mobility programs and relocation management companies alike.
But beyond booking tools and corporate rates, the secret of appealing to a long-term guest has always been making them feel as comfortable on the road as they do at home. It goes without saying, “The longer your trip, the more space you desire. After a few days, a hotel room feels too small,” Wohlfert says. And, he adds, that’s especially true with Millennial travelers.
But setting aside the generational differences, business travelers of all ages seem to appreciate the value-added, homelike amenities offered by these properties, as well as the comfort and convenience they provide.
