New Extended Stay America Management Ignites Post-Bankruptcy Corporate Transient Focus - Business Travel News

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New Extended Stay America Management Ignites Post-Bankruptcy Corporate Transient Focus

December 03, 2012 - 02:35 PM ET

By Michael B. Baker

Extended Stay America is intensifying its pitch to corporate travel buyers, including those with transient hotel needs, as the midprice extended stay hotel company embarks on brandwide renovation and unification.

Following some rocky years, including a 2009 Chapter 11 bankruptcy filing, Extended Stay America, which owns and operates about 700 hotels across the United States and Canada, pulled in new leadership at the beginning of this year. Atop the new management team is CEO Jim Donald, an industry outsider who previously served as Starbucks Corp.'s president and CEO.

"I've taken companies in and out of bankruptcy before"—including grocery-store chain Pathmark—"and it brings a mentality that is not productive for business," Donald said. "There's no risk-taking or driving change, and they're trying to scrimp on investments, running as if they're still in bankruptcy. You can't get guests to stay with you when you do that."

Through daily voicemail messages, weekly videos and monthly town hall meetings with employees, Donald has tried to foster a mentality that's "still [financially] tight but not trying to get the last drop of blood out of a patient," he said. As such, hotels have been updating carpets, workplaces, televisions, furniture and bedding, and the renovations will have touched about 90 percent of chain properties by the end of January 2013, he said. Properties have undergone about $400 million in renovation since the bankruptcy, said chief marketing officer Thomas Seddon, who joined the company earlier this year from the same role at InterContinental Hotels Group.

The company also is unifying its brands. Such previous brand designations as Extended Stay Deluxe and Homestead Studio Suites are fading in favor of a single Extended Stay America brand. Crossland will remain as an economy extended-stay brand, Donald said.

The company is not, however, currently looking to grow its portfolio, according to Donald.

Buoyed by the renovations and unification, Extended Stay America is "going after corporations with a whole new energy level," Donald said.

"We're starting to see a different market being open to us," Seddon said. "We're having a big push in the RFP season with BTN Corporate Travel 100-type customers, being much more appropriate now for the needs they have."

The typical Extended Stay America guest stays three or four weeks at a time, but the company is looking to attract more guests who stay for four to five days at a higher price point.

"We're not getting out of our niche," Donald said. "We think we can still capture the lion's share of extended-stay business, but through initiatives including renovations, there's another group out there."

The company is pitching its value and distribution as selling points for corporations. Its chief competitors in the midprice extended-stay tier are IHG's Candlewood Suites and Marriott International's TownePlace Suites, both of which are priced about $20 to $30 more on average with a smaller footprint than Extended Stay America, Donald said.

Extended Stay America's performance on TripAdvisor also is improving, Seddon said, which helps to court corporate business.

"In April, we had zero hotels with five-star ratings and 90 hotels with four to 4.5 stars," he said. "Now we have 10 with five stars and 177 in the four-to-4.5 range. We can see the sentiment start to change, which is a useful proof point for corporate travel managers who might be risk-adverse."

Additionally, the company has redesigned its sales team under executive vice president of sales Jon Wohlfert, who joined the company in 2011, Seddon said. The restructuring has allowed Extended Stay America to better manage its two sales sides: large accounts and property-by-property sales efforts, he said.

Results in the current request-for-proposals season so far have Seddon optimistic.

"We're starting to feel like we're getting good traction," he said. "There are still conservative travel managers, but the ones willing to take risks and motivated to control inflationary costs are interested in our story."

Seddon added he thought the company would benefit if more travel buyers moved to a hotel program model similar to Google's, in which travelers operate off a per diem rate and can pocket the difference when they stay for less rather than get reimbursed directly for hotel costs. Conversely, daily Extended Stay America rates typically are priced well below U.S federal government per diem levels, encouraging government travelers to stay at "the nicest hotel they can get" within their capped limit, he said, as they cannot retain any leftovers.

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