Extended stays provide an additional path to hotel revenue by offering rooms and amenities that provide a more home-like experience for guests. Recent reports show that more than 51 million extended-stay rooms were available in the U.S. in Q1 2023, up 43% from 2016. What’s more, these rooms proved more resilient during COVID than their transient counterparts, leading to increased investor attention.
And demand among developers is only growing. In 2022, Wyndham launched its newest construction brand: ECHO Suites Extended Stay by Wyndham®. As noted by CEO Geoff Ballotti, ECHO is “the fastest growing brand in our development pipeline.” Hotel owners are eager to take advantage of the long-term opportunity for success that extended-stay hotels offer.
Extended Stay: The Basics
Extended stays can range from one week to one month, with the average amount of time variable across market segments.
For example, upscale or luxury brand segments see stays of 5-7 nights. A potential guest might include a C-suite executive in town overseeing the opening of a new satellite office. On the other hand, economy segments average 21-28 nights of extended stay. Guests might include construction crews working on week- or month-long infrastructure projects, relocated families looking for their new homes, or guests making extended visits to immediate family.
One key difference between transient and extended-stay hotels is in-room amenities, such as a full kitchen with a full-size fridge, microwave, electric cooktop, and sink to prepare meals. Transient guests, those staying for only one or two nights, typically eat at hotel restaurants or leave the property for their meals. Extended-stay guests, though, often prefer to store and prepare their own food, especially if they are staying for several weeks. Having a full kitchen makes it possible for extended-stay guests to both save money and maintain the same eating habits or lifestyle choices they have at home.
What’s Driving the Extended-Stay Demand?
Factors such as municipal population growth, local infrastructure projects, and the rise of remote work all influence extended-stay demand.
Population Growth
In cities with substantial population growth, extended-stay hotels are often in demand. This is because families considering a move or looking for homes in the area often carry out fact-finding missions to determine their options. Extended-stay brands provide a staging ground for these efforts. Families may also find themselves between homes as they wait for real estate possession dates in hot markets, making 3-4 week extended stays a more cost-effective alternative than trying to rent an apartment or home.
One way to find the right market for extended-stay projects is to look at both federal and municipal data. For example, hotel owners can leverage data from the United States Census Bureau, which shows recent significant population growth in U.S. cities such as Fort Worth, Texas; Phoenix, Arizona; and Charlotte, North Carolina. In addition, states such as Georgia and Virginia are also seeing growth.
Owners should also consider the impact of temporary population fluctuations on municipal data. Cities with large universities or colleges often see an influx of visitors when school years end, providing a predictable uptick in demand for extended-stay options.
Infrastructure Projects
Both private and public infrastructure projects can also help drive demand for extended stays. This is because infrastructure projects — from factories to tunnels and bridges — often require years and thousands of employees. However, the nature of these projects creates demand for different types of employees at different times.
Consider a new factory. During the initial build stage, welders are often in high demand. Other trades are brought in once the structure has been created and secured, and the demand continues with maintenance and remodels. As a result, cities with abundant infrastructure projects offer a market opportunity for extended stays.
For hotel owners, finding the right location for an extended-stay hotel means following the money. As the official White House website noted, $1.6 billion in federal grant funds has been allocated to upgrade the existing Brent Spence Bridge in Cincinnati, Ohio and Covington, Kentucky, with construction slated to start later this year. Forbes, meanwhile, points to efforts from private companies. Chipmaker Intel is building two plants in Chandler, Arizona, for $30 billion each, while Samsung is spending $25 billion for a new plant in Taylor, Texas. These are not quick projects but lengthy ones that continue to drive hotel demand after the structures are built.
Remote Work
Remote work also plays a role in extended stays. If employees can effectively work from hotel rooms, they can stay longer and enjoy “extended weekends” when their work is done. This creates opportunities for hoteliers in cities with significant tourist traffic. In addition to attracting transient stays that only book for the weekend, there’s now an opportunity to capture extended-stay interest from guests looking to balance work and play.
Reports indicate that over 70% of companies are permanently allowing some type of remote work. The extended-stay market isn’t going anywhere. Extended stay options allow guests to work during the day and then enjoy their evenings exploring the city or relaxing in their rooms.
Identify the Market
Hoteliers need to identify their target market to make the most of extended-stay options. For example, if the primary source of extended-stay revenue is workers involved with infrastructure projects, owners should focus on cost-effective rentals that emphasize comfort since workers typically use the rooms for cooking and sleeping.
If families searching for real estate form the core guest base, owners may want to include additional amenities such as access to laundry facilities or fitness centers. There’s also a market for families visiting relatives for extended periods but prefer — or need — to stay near rather than with family. Extended stay rooms offer the amenities of a home at an affordable price.
To make the most of extended stay opportunities, owners should seek out markets that combine at least two of the three drivers listed above. For example, cities with a combination of large-scale infrastructure projects and significant population growth set the stage for long-term extended-stay demand.
La Quinta Hawthorn Dual Brand Pflugerville, TX
Benefits of Extended Stay for Owners
There are several benefits of extended stay for owners.
First is the comparable revenue per available room (RevPAR) with transient brands. While occupancy tends to be higher with extended stays, the average daily rate (ADR) may be lower. Steady occupancy, however, closes the gap since extended stays are less dependent on conditions such as weather or local events.
Consider a hypothetical example that puts transient room ADR at $90 and extended stay ADR at $75. In this example, occupancy comes in at 60% for transient brands and 80% for extended stays. Multiplying ADR by occupancy rate gives us RevPAR: For our hypothetical transient hotel, this value is $54, while for our hypothetical extended-stay hotel, RevPAR is $60.
Next is the overall cost. According to CFRA research analyst Siye Desta, “Extended-stay hotels are cheaper to build and finance for new construction and conversions compared to higher-end hotels.” Extended-stay hotels can also help lower total operating costs. For example, with guests staying for longer periods, fewer housecleaning staff are required since rooms are changed over less often.
Extended stay owners can also drive similar RevPAR to transient hotels with fewer guests. Since guests stay longer and are likely to return if owners keep them happy, owners can spend less on finding and attracting new guests.
Does Extended-Stay Investment Make Sense in 2023?
The reliability of extended-stay revenue over the last few years has driven an uptick in attention.
It’s the sustained success of this model over time, however, that suggests it is a solid investment for owners. Even during the pandemic, extended stays displayed stability compared to their transient counterparts. And as remote work has become commonplace, extended-stay options offer the potential for guests to combine business and leisure — often called bleisure — by making reservations that begin midweek and extend into the weekend. It’s also possible for owners to get the best of both worlds with a dual-brand approach that offers transient and extended stays on the same property, such as the La Quinta/Hawthorn hotel model from Wyndham. Guests who book three- or four-night stays and enjoy their experience can transition to extended stay rooms and help drive consistent RevPAR.
This result is a market that shows both short-term growth and long-term reliability. With the lower cost of building extended-stay properties and returning guests, extended-stay options allow owners to access the dual benefits of higher occupancy rates and increased RevPAR compared to traditional, transient stays.
Considering an extended-stay model to help drive long-term revenue? Speak with a member of Wyndham’s development team to see if extended-stay investment aligns with your business goals.