Ext. Stay Reports Poor Quarter

While the extended stay hotel segment has shown strong occupancy rates and room revenues during the current lodging industry downturn, the release yesterday of dismal second-quarter earnings by Extended Stay America-one of the segment's largest and fastest growing players-may be an indication that the bubble may be beginning to burst.

The national chain, which operates 449 hotels under three brand names, reported that quarterly earnings dropped 16 percent over the prior year. Revenue per available room declined 10 percent in the quarter. For buyers with significant extended stay demand in their hotel programs, the segment's declining fortunes means there may be greater leverage in upcoming negotiations for 2003 rates than in recent years.