Strong Extended Stay Tier Results Prompt Renovations, Development

Escalating demand, billowing supply growth and increased daily rates are thrusting the extended stay sector to even higher prominence in the hotel industry. The segment continues to flourish amid record growth that has propelled hoteliers to inject more capital into the sector toward further property development and design improvements, and has led corporate travel managers to outfit their hotel programs with more extended stay offerings.

"A dominating conversation for us at this past National Business Travel Association convention regarded corporate travel managers bulking up their hotel programs with extended stay," said Bill Duncan, vice president of marketing and sales for Homewood Suites by Hilton. "Customers are really focusing on enhancing their managed travel programs with extended stay and getting their arms around it. At NBTA, more so than in years past, people really focused on extended stay."

The strong numbers for the extended stay sector affirm travel buyers' further reconnaissance of the extended stay tier. According to the Highland Group, a hotel consulting firm that specializes in extended stay properties, the rate of extended stay supply growth in 2005 was 14 times greater than overall hotel supply growth, with the tier adding 14,000 new rooms. The Highland Group forecasted a 4 percent annual increase in supply through 2010.

InterContinental Hotels Group is focused on expanding its extended stay holdings, as it turns its attention toward further development of its Staybridge Suites and Candlewood Suites brands.

"The biggest story with Staybridge is its growth and development," said Robert Radomski, vice president of brand management for Staybridge. "Our pipeline is right around 100 and that's an all-time high for us." Staybridge currently has 92 properties operating and will open its 100th hotel by the end of the year. "That will get us to that milestone faster than any other upscale extended stay brand," Radomski added.

Staybridge's sibling, Candlewood Suites, also is ramping up its development efforts, even straying from traditional suburban builds to urban development. "We've just signed an agreement to build in New York City, which will be our first move into a major metropolitan market since acquiring the brand back in 2004," said Gina LaBarre, Candlewood Suites' vice president of brand management. The property is expected to open in the spring of 2008 on 39th St. and 8th Ave., adjacent to another IHG select-service brand, Holiday Inn Express. "Our Express owners are making a run into extended stay and pairing Candlewood with it," Candlewood's LaBarre said.

Both escalating demand and increasing average daily rates substantiate owners and developers who are venturing into the extended stay tier. The Highland Group reported in 2005 that year-over-year room night demand was up 8.2 percent, its fastest growth in five years, and that average rates were at record highs across all extended stay segments, resulting in an aggregate average rate growth of 7.2 percent.

"Occupancies and demand have been strong and there has been no ill effect due to escalating gas prices," according to Gary DeLapp, president and CEO of HVM LLC, which operates Extended Stay Hotels. "Rates are up at all levels." Extended Stay Hotels is in the midst of upgrading and repositioning much of its inventory under its Extended Stay Deluxe flag, which it hopes will bring a higher return on investment and nab some marketshare from the likes of TownePlace by Marriott and Candlewood Suites.

The incandescent performance of extended stay, along with the recent entry of Hyatt's Summerfield Suites and the imminent arrival of Starwood's Extended Stay by Westin brand, is forcing the tier's two traditional top guns to open up their coffers and invest in their properties.

Marriott's Residence Inn and Hilton's Homewood Suites are concentrating on new development and redesign. Homewood Suites' Duncan said the brand on July 20 opened new hotels in Irving, Texas; Wichita, Kan.; and Indianapolis. Duncan said that Homewood had 120 deals in the pipeline and 38 properties currently under construction.

Duncan also pointed to the brand's international expansion. Homewood already has four hotels open in Canada, with three more under construction. It hopes to have 12 hotels opened in Canada within a year and a half. "We are very excited about international expansion," he said.

An even bolder move for Homewood would be into the Far East. "We envision a move into China and India," Duncan said. "There is a tremendous population base there without a lot of branded hotels. It seems like the next frontier."

Residence Inn is focusing on new design in its properties, recently launching its Generation 7 design, which officials said will imbue rooms with a more comfortable, functional and bright feel.

"It's more modern and vibrant—closer to a 21st century residence," according to Katie Tyson, vice president of Marriott Extended Stay brands. The new design concept debuted at the Residence Inn in Dulles, Va.

Marriott also is revamping its other extended stay offering, TownePlace Suites, with new guest services and a redesign under the idea of reflecting how the guest lives when on extended stay, or "real living," as Tyson called it. The first of the new repositioned TownePlaces will open in Gaithersburg, Md., in September.