Midpriced Brands Join Extended Stay Party

<FONT SIZE="+2"><B><H1>All-SUITE/EXTENDED STAY HOTELS</H1>

<H1>Midpriced Brands Join Extended Stay Party

</H1></B>By Linda Humphrey

Spurred by the success of upscale extended stay hotels, a slew of new brands is staking out the midpriced arena, opening their first hotels with exceptional occupancies.

The new breed, priced below $65, typically features one room with a full kitchen, work desk with direct-dial phone number and weekly housekeeping. The all-new-construction brands also feature tiered pricing based on length of stay, and expect longer stays than their higher-priced counterparts.

Wyndham's Homegate Studios & Suites recently joined this year's new entrants, which include Candlewood Hotels, Extended Stay America, Hawthorn Suites Ltd., La Quinta Inn & Suites, Choice Hotels' MainStay Suites, Sierra Suites, Sumner Suites, TownePlace Suites by Marriott and Woodfin Suites.

Industry sources speculate that John Q. Hammons Hotels is devising an extended stay brand as well, called Second Home or A Suite Home, although Hammons denied the reports. And StudioPlus, a regional chain that had cornered the midpriced extended stay market for a decade, has launched aggressive expansion plans.

While the new brands aim for the midpriced block, the upper-tier extended stays-such as Hawthorn Suites, Residence Inn, Homewood Suites and Summerfield Suites-are quietly mushrooming their properties. "We still think that the up end of the market is very, very underserved," said Rufus Schriber, brand vice president of Residence Inn by Marriott.

The new midpriced brands plan to lure travelers from traditional hotels, higher-priced extended stay brands and corporate apartments, scooping up the rising number of road warriors on extended assignments. "We call them mid-career, pink-slipped consultant types," said Jim Anhut, vice president and brand manager for Choice Hotels' MainStay Suites. The shift in the economy toward corporate restructuring, relocation and global trade also has spawned the "techno hobo," or the freelance technology guru, Anhut said. "We're the beneficiary of this more mobile society," said George Johnson Jr., president and chief executive of Extended Stay America.

According to the U.S. Travel Data Center, 24 percent of all business trips last four to nine nights, and 5 percent last 10 nights or more. The U.S. Lodger Panel, an independent survey of 180,000 travelers funded by Holiday Inn and Promus Hotels, found that stays of 15 or more nights have increased by 7 percent compounded annual growth since 1985. Yet, extended stay hotels currently account for only 1.5 percent of all hotel rooms, said Chuck Ross, vice president of Smith Travel Research.

The depth of the extended stay market is elusive because apartment complexes currently satisfy the demand, Ross said. But hoteliers believe that the potential is great.

"Despite all the press about this extended stay business and everyone rushing in, if you add up every extended stay property in the universe you would maybe come up with 350," Schriber said. "And of those, 222 of them are Residence Inns."

Four of the new brands actually have been spawned by "disciples of the Residence Inn team," noted Anhut, a former Residence player. Residence Inn founder and Summerfield Suites co-founder Jack DeBoer created Candlewood, the original Residence Inn team launched Sierra and Marriott devised TownePlace.

"We always knew that the market had a lower price point that was very large and underserved," said Rob Mossburg, executive vice president and general manager of Sierra Suites, which launched Residence in 1975 and sold to Marriott in 1987. "We took the Residence Inn chain from 20 to 100 hotels in two years, so there wasn't time to focus on anything else."

The industry defines extended stay as five nights or longer, although most of the new brands expect stays of two to five weeks.

"After three or four nights, hotels become inadequate for most guests," Anhut said. "After 30 days, people seek out apartments. In the middle of that is this gap for a stay of two or three weeks. So you've now got hotels for days, extended stay hotels for weeks and apartments for months."

As the new brands debut their first properties, phenomenal occupancies are backing up the hype. For instance, the first Sierra Suites hotel, which debuted July 15 in Atlanta, has run over 80 percent occupied at a $60 rate since its opening, Mossburg said.

The upscales, meanwhile, are barreling down an aggressive growth track. Residence Inn-the pioneer in developing this market on a national basis-plans to double over the next four to five years. "All the hoopla has been on the midpriced end of the market, while we're quietly putting a whole bunch of Residence Inns up," Schriber said. "When the dust settles on '96, we will have broken ground on more than 30 new Inns." Priced at about $88.50 per night, the brand clocked in at 86 percent occupancy this year.

Homewood Suites, priced at about $88.94, plans to double its portfolio by next year to 50 or 60 hotels and is shooting for 100 hotels by the year 2000. The 25-property Summerfield Suites, the costliest brand at about $112, plans to add between five and seven new properties a year.

While no new high-tier challenger has yet surfaced, Extended Stay America plans next year to branch into segments, the way Marriott has done.

The upmarket brands also run up against traditional hotels that cater to extended stays in certain markets, such as those in entertainment industry-laden West Hollywood. Longer-term guests bunk down in 1,200 of the city's 1,800 rooms, many of which come equipped with kitchen facilities, grocery-shopping services, in-room fax machines and fireplaces, said Haley Powers, executive director of the West Hollywood Convention & Visitors Bureau. The Sunset Marquis Hotel and Villas even boasts its own recording studio and screening room. With occupancies of 74 percent, the area outperforms Los Angeles, which checks in at 62 percent occupancy.

The midpriced group will actually garner longer stays than their upscale counterparts, careening into the corporate-apartment market, said consultant Peggy Berg, president of the Atlanta-based Highland Group. "When someone's coming in for an assignment that lasts six or eight weeks, the company is more likely to house people in a facility that's more economical," she said.

Many travelers sign a 30-day apartment lease but stay for only two or three weeks because the price still beats an $80-to-$90-a-night hotel tab, Anhut said. "And corporate travel professionals are not smitten with having to manage an inventory of corporate apartments," he noted.

Oakwood International, the world's largest corporate housing company with 17,000 apartments, sometimes grants leases of fewer than 30 days, but "it's a business we really don't want to get into," said president Jim Klein. "We don't want the turnover, the peaks and valleys of occupancy. We don't want to go head-to-head with the hotels."

Oakwood's average stay has increased over the past 10 years, from 45 to 65 days, Klein said. Current rates average $2,200 per month.

But the new brands will lure most of their guests from traditional economy hotels. The Sierra Suites in Atlanta, for example, slices its clientele as "a small piece from corporate apartments, a small piece from the upscale extended stays and the majority from the Hamptons, Fairfields and Ramadas of the world," Mossburg said.

Several chains, however, suspect the new market won't stretch so far. "They're all competing for that one-week-stay type of person," Klein said. "I think the market is going to be oversaturated real soon."

"This midpriced extended stay is being billed as the Second Coming, but I question the depth of that market," said John Russel, HFS hospitality division president. "Budget extended stay, on the other hand, is a huge, deep market."

Some companies are hedging their bets by combining different types of rooms under one roof. La Quinta unveiled a new-build prototype this summer featuring standard rooms, suites and extended stay rooms in one complex. "We are concerned about the market's ability to sustain all the new extended stay business, and that's why we believe that putting a certain number of extended stay rooms in our properties is a better way for us to go," said senior vice president of marketing Steve Hickey. "We don't want to be totally dependent on that." The La Quinta Inn & Suites add a dry bar, microwave, refrigerator and in-room coffee to king rooms. Four properties have premiered so far, garnering rates of $60 to $70 for extended stays. Another 12 are on tap for year-end, and 36 more are slated for the end of next year.

U.S. Franchise Systems also plans to mix short and long stays with the launch of the $65-per-night Hawthorn Suites Ltd. The all-studio brand is set to debut in Fenton, Mo., this summer, followed by Tempe, Ariz., in 1998. "Some markets just don't have the volume of corporate business to fill a completely extended stay hotel," said president Mike Leven.

HFS, which purchased Villager Lodge two years ago, devised a system "to convert a non-performing hotel to extended stay," Russel said. Older economy hotels-41 percent of all economy hotels are more than 20 years old-find themselves at a disadvantage when a new construction moves in next door, Russel said, so HFS has converted 16 such properties to the Villager brand in the past year and a half. Housing more 'in-betweeners'-those in between jobs and marriages-than business travelers, HFS' 52-property Villager Lodge, priced at $175 to $200 weekly, is raking in occupancies north of 70 percent.

All the brands are toying with exporting their concept overseas-"people don't just bop over to Europe or Asia for a day or two," Anhut said-although for now they are set on growing their stateside portfolios.

The six-month-old Extended Stay America, founded by Johnson and Blockbuster Video founder H. Wayne Huizenga, has launched the most ambitious development plan to date. "We plan to blanket the country," Johnson said. Touting weekly rates of $189 to $269-a notch lower than its contenders-the chain features 300-square-foot studios, kitchens, laundry rooms and weekly housekeeping. It foregoes pools, health clubs, restaurants, meeting rooms and a 24-hour front desk in favor of lower rates.

Kitchens come equipped with two-burner cooktop, microwave, coffeemaker and full-size refrigerator, "because you can't fit a half-gallon of ice cream in a mini fridge," Johnson said. The chain, whose guests average stays of five weeks, has 24 properties and 41 under construction; it plans to sign at least 16 deals each month.

The 10-year-old StudioPlus, meanwhile, has built "a very successful but regional brand," Smith's Ross said. The chain, with rates of $35 to $50 a night, is set to challenge the new brands, with plans to swell from 29 to 100 properties by the end of 1998.

A Crop Of New Properties

Candlewood Hotels, a joint venture between Jack DeBoer and Doubletree Corp., debuted its first property last May in Wichita, Kan. Priced at $45 to $55 per night, the 350-square-foot studios feature full kitchens, VCRs, CD players, free washers and dryers and 25-cent soft drinks. The chain currently has two properties on tap and 20 sites under contract.

TownePlace Suites by Marriott, set to open its first property this January in Newport News, Va., will feature studios with full kitchens, weekly housekeeping with twice-weekly towel and trash service, 24-hour staffed front desk, exercise room, outdoor pool and laundry room. Stays of four to 29 days will yield nightly rates of about $49. The brand, which also will offer two-bedroom suites, plans 15 to 25 properties by the end of next year.

Sierra Suites, developed by the creators of Residence Inn and Summerfield Suites, features $55-to-$65-per-night studios with full kitchens, weekly housekeeping, twice-weekly towel service, outdoor pool, health club and free breakfast. Short-term rates fall into the $79-per-night range; week-long stays average $59 a night.

Premiering its first property in Atlanta last July, the brand, which owns all its properties, has another four on tap, 15 under contract and plans to open 15 to 20 per year.

Choice Hotels' MainStay Suites, which opened its first hotel last week in Plano, Texas, features a mix of studios and one-bedroom suites with free breakfast and evening social hour, full kitchen, weekly housekeeping plus daily "light touch" cleaning, laundry and a pool or other recreational amenity. Studios in Plano cost $69 for one to three nights, dropping to $49 for stays of four nights or longer.

While an "automated host" will check in guests during off hours, properties will be staffed around the clock. MainStay plans to break ground on seven to 10 sites by year-end, to open 15 or 20 by the end of next year and to build 170 to 200 by the year 2000.

Wyndham has taken over management of six extended stay hotels in Texas, which the chain will convert to the new Homegate Studios & Suites. Under an agreement with Homegate Hospitality Inc., Wyndham eventually will manage up to 60 Homegate properties.