Extended Stay America reported a decline in occupancy during
the third quarter as a result of ongoing renovations across its portfolio.
Companywide occupancy dropped to 78.3 percent from 79.3 percent
in the third quarter of 2014. Extended Stay saw 1.8 percent, or 128,000, of its
room nights displaced from renovation during the quarter, an increase from the
0.4 percent of nights displaced last year. CFO Jonathan Halkyard said the
properties under renovation saw a 12.5 percentage point year-over-year decline
in occupancy, “which we expected.” More than 400 of ESA’s 682 properties have
been renovated, and 53 unrenovated hotels will exit
the portfolio this quarter. The full renovation program is slated for
completion by early 2017.
Halkyard said the company is shifting its business mix toward
higher-paying, shorter-stay guests. That drove the company to “sacrifice some
occupancy” as it figured out how to drive rate within different length-of-stay
segments, he said.
Extended Stay’s average daily rate increased 8 percent year
over year to $64.95, once more driven by renovated properties, as well as a new
revenue management system.
The company completed its corporate sales reorganization
during the quarter, hiring 16 salespeople to expand its centralized team.
Halkyard said performance from corporate accounts, which make up about 40
percent of Extended Stay’s business, has improved year-over-year and the
company expects even better results now that the sales reorganization is done.
“We are right in the middle of our discussions with our
corporate accounts for 2016, but when I look at where we stand versus where we
were a year ago, with many more renovated hotels and a much more effective
sales organization, we’re in a great position for those discussions,” Halkyard
said.
Halkyard added that approximately 20 percent of the
company’s business comes from corporate negotiated rates and it's too soon to
forecast rate increases.