Extended stay is the place to be as a lodging category that continues to outperform
Even though the broader hotel industry in general has been hot of late, the extended stay segment finds itself in a sweet spot on hospitality trend lines. The category enjoyed a very good 2016, according to consultants Highland Group, with demand growth in Q4 the strongest of any quarter since Q1 in 2011.
Today, extended stay properties offer more than 400,000 rooms or 7.7 percent of total hotel rooms in the US hotel market. That’s an exponential increase over the last two decades, but still leaves plenty of room for growth. And the emphasis on making the hotel the guest’s “local” connection fits right in with how extended stay has long positioned itself.
For travel managers, extended stay looms large. According to a recent GBTA Foundation report, 19 percent of travel managers say they always or often send employees on international extended stay trips, with over half (56 percent) saying they send them at least once a year.
However, challenges remain. Longer business stays are different in nature than regular transient trips, says the report, and managing accommodations for them requires a better understanding of the extended stay product and when that option is the best choice for travel.
Think Local, Act LocalWith every hotel brand staking a claim to leadership on creating “local experiences,” extended stay is a natural fit: When guests stay for longer periods they want to know the neighborhood.
“Extended Stay hotels have a built-in advantage that the guests are simply there longer,” says Mike Wohl, vice president-operations, Sonesta ES Suites. “This creates opportunities to highlight those activities and neighborhoods that give a city its personality and culture. We also find as they get to know the staff our guests really learn the city from the people who live there,” Wohl adds.
“It's true that tying into the location/neighborhood is an important component of extended stay,” agrees Diane Mayer, vice president and global brand manager for Marriott’s extended stay brands which include Residence Inn and TownePlace Suites. “For example, we elevated our weekday social hour concept to ensure that each hotel is curating regional interactions for its guests.”
The demand to go local in cities around the country has prompted Hilton’s extended stay brands Homewood Suites and Home2 Suites to open more than 25 properties in major cities over the past 18 months, including downtown locales like Denver, Dallas and Atlanta.
“Part of the popularity of these locations is the opportunity for guests to really get a feel for the surrounding areas and assimilate into the local neighborhood and culture,” says Adrian Kurre, global brand head. “In fact, our most recent Homewood Suites’ Workstyles Study revealed that more than half of business travelers immerse themselves in local life as a form of relaxation, and the walkability factor in urban and ‘surban’ locations is key to integrating into the surrounding area.”
Validating this trend, a company called Local Measure which monitors social media activity for the travel and hospitality industry found that, “Despite their association with servicing business travelers, more people at extended stay properties post about having 'fun,’ rather than 'work.'”
Maximizing Macro TrendsIn addition to being in the right place at the right time in hospitality trends, extended stay is also well positioned for macro developments, particularly changes in the way travelers work.
“A growing number of Americans are making a living in jobs that are no longer place dependent,” says Tom Buoy, executive vice president for marketing and revenue management for Extended Stay America. “That might involve the growth of the gig economy. But there are a number of areas where more people are nomadic in their work – as many as 20 to 30 percent of all workers.”
Another employee category, Buoy explains, is the so-called super-commuter who travels more than 90 miles to work on a regular basis. “That might involve staying in a city from Monday and Thursday and returning home for the weekend – again work no longer fixed by location or where a company is situated.”
Similarly, says Buoy, there will be labor cost-saving moves toward matching independent consultants with projects to avoid hiring costs. “I think you will see travel managers involved with matching work forces to company needs,” he says.
According to Blair McSheffrey, vice president midscale and extended stay commercial performance, the Americas, for IHG which operates Candlewood Suites and Staybridge Suites, “There is strong demand for major industries that lend themselves to an extended stay product, such as construction, engineering, medical and healthcare industries. People go where the jobs are, and big infrastructure projects attract jobs.”
A Diversifying ConceptWith greater demand comes greater diversification as extended stay operators seek to move into new and niche markets. One change is the drift toward more upscale accommodations.
For example Oasis, an upscale home rental company, is now in 23 cities. Oasis CEO Parker Stanberry says the company “carefully vets” each apartment and each must meet a high standard.
What sets Oasis apart from an Airbnb or other vacation rental options, Stanberry maintains, is an onsite concierge who meets guests at check-in; curated city guides with special access to health clubs and other facilities; and a full-time staff in every city available 24/7.
“What we’re doing is a blend of the sharing economy/alternative accommodates trend with traditional hotel service,” says Stanberry. “Our aim is to bring a boutique hotel level of amenities and service into apartment rental. Trying to explain that concept to travel managers is a challenge but we think it’s the kind of solution they are looking for. It deals with the problems of safety and service – a reliable, comfortable option where you don’t have to sacrifice anything.’”
Aiming to remedy another headache for travel managers – booking – a company called Urbandoor has developed technology that “connects companies with apartments,” according to CEO Erik Eccles. “Our goal is to make this industry into an instant booking one.”
And extended stay products in the moderate price range are not sitting still. At Hilton, says Kurre, “Food and beverage offerings are an important way to provide an enhanced experience. Eighty percent of our all-suite guests enjoy the complimentary breakfast, with nearly 30 percent of Homewood guests and more than 40 percent of Embassy guests taking advantage of the evening reception.”
Says Buoy, “We spend a lot of time studying how guests use the existing product and how they stay in the space. As a result, we redesigned our rooms to feature smart storage, which is more like home. And we are reimagining common areas because we are mindful that our guests are now more social than in the past.”
Partnering With Travel ManagersPersonalization and customization are becoming larger factors in the extended stay-travel manager relationship. “We deploy a national representative,” says Wohl, “to help them understand the nuances of extended stay. Extended stay has always been treated a bit differently than other types of travel inside a company, and being able to help both the national travel manager and the local hosting manager is the best way for us to service our clients.”
At Extended Stay America, the focus is on buyer insight, Buoy says. “If we win an account we move to understand the needs of the traveling workforce and fit their needs to our service delivery system,” he explains. “For example, for some high-volume accounts we will create ‘welcome microsites’ with detailed resources specifically for that specific trip.”
Hilton’s sales process has become more streamlined, Kurre says. “Placing Homewood, Home2 and Embassy Suites by Hilton under one umbrella was designed to maximize efficiencies across operations, marketing and sales,” Kurre adds. “We now have a dedicated extended stay desk to assist in the education of travel managers.”
Marriott has fielded a dedicated extended stay sales team organized by industry to look for extended stay business in the group’s largest global sales accounts. “This team along with our sales training help our sales force explain to buyers that we offer not just a better product, but that we offer lower rates for longer stays and there are often tax benefits to keeping a suite for 30-plus days vs. having employees serially check in and out on a weekly basis.”
McSheffrey points to yet another problem in managing longer term accommodations. “An extended stay booking doesn’t always start out as an extended stay booking. For example, a group may be sent to work on a short-term project for a week that evolves into a longer-term project. For travel managers, it can be challenging to plan this on the front end or know how to categorize the booking upfront if there is not an extended stay option within a corporate travel program.”
Room to GrowWhat may make life easier for travel manager is the ongoing “blurring of lines” between extended stay and corporate housing which will mean better product in both areas and greater ease of availability.
At the recent Serviced Apartment Summit Americas in New York during a panel called “Blurred Lines – Dynamic Demand and Supply, and the Impact on Distribution,” Sean Worker, CEO of BridgeStreet Global Hospitality, said, “Sharing companies like Airbnb have created a halo affect by broadening where people might consider staying. By partnering with Airbnb, being available in the GDS and generally making it easier to book our product makes it easier for travel managers to accept us rather than considering us as alternative,” Worker said.
“Booking on the corporate side is still highly manual,” Severine Obertelli, head of sales and marketing, EMEA for Maxxton, agreed. “We need to make it possible to book a room quickly when they want it and how they want it.”
Eccles at Urbandoor says, “The travel manager is looking for a solution that offers duty of care and quality accommodations. We qualify apartments so that travelers enjoy many of the benefits and amenities of a hotel, along with a connection to us.”
Urbandoor is now in 400 markets, mostly in North America but recently expanded to Europe and soon to Asia/Pacific. “We want to put a better layer on top of what is now a bifurcated and niche marketplace,” says Eccles. “Hotel platforms don’t work well for apartments and that is where we saw the need. We’re not just a booking engine; we’re a platform.”
And some travel managers see extended stay hotels as adapting to new traveler patterns and tastes in response to the emergence of alternative forms of lodging. “For a long time though, a hotel was the only option open to the long-term business traveler,” according to Gabe Rizzi, president of Travel Leaders Corporate, a travel management company. “Today, the competition from non-traditional properties has forced hotels to innovate and design changes to close the ‘experience gap’ that Millennials are typically looking for in a non-traditional property.
Looking ahead, improved technology may create a larger pool of available accommodations. As Eccles says, “Occupancies are very high for corporate apartments but there are many apartments not easily available because of booking challenges.”
For all these micro and macro reasons, the future for extended stay and corporate housing seems bright. “There are 55,000 hotels with 5.2 million rooms in the marketplace in the US. A full 27 percent of the demand for those rooms is for stays of five nights or more,” Buoy maintains. “Meanwhile, only 7 percent of that inventory is considered extended stay, which is why our job is to create awareness and encourage trial and present ourselves as a viable alternative.”