The Highland Group's Mark Skinner talks:
- Extended-stay performance versus traditional hotels
- The effect of government cutbacks
- Hoteliers' views on rate discipline
Like the U.S. hotel industry as a whole, the extended-stay hotel sector has been beset in 2025 with declining occupancy and revenue per available room. Amid sluggish growth in both extended-stay demand and supply, Mark Skinner, partner at lodging industry research firm The Highland Group, spoke with BTN managing editor Chris Davis about the latest trends shaping extended-stay performance, the outlook heading into 2026 and what business travel buyers should expect in rate negotiations.
BTN: Can you give me a broad view of the extended-stay market right now? What are the key dynamics you're seeing?
Skinner: Both extended-stay demand and supply are still increasing. They're increasing at levels below their long-term average, and supply is increasing faster than demand. So occupancy is declining. Supply has increased faster than demand the last nine consecutive months.
For the last six months you've also had declining average daily rate, which means that for the last six months consecutively you've had declining revenue per available room for extended-stay hotels, but those declines have been less than corresponding classes of all hotels. So what you see is that essentially the hotel industry is in recession—six consecutive months of RevPAR [declines], I think that qualifies as a recession.
The only segment of the hotel industry that's not doing that is the luxury segment. But that really doesn't apply to extended-stay because there are virtually no luxury class extended-stay rooms. … Extended-stay goes from economy to upscale [with] the rest negligible.
If you look at a direct comparison, extended-stay hotels are doing better than corresponding classes of all hotels, which means that they're actually increasing market share despite declining RevPAR.
BTN: When extended-stay gains market share, is that more a function of demand outperforming or of supply dynamics?
Skinner: Well, it's not demand because [across] the last 35 months, extended-stay demand has increased in 34 of them. One of the reasons for that is there is a large amount of extended-stay business still housed in non-extended-stay hotels.
When these new [extended-stay properties] come out, they're brand-new, they've got a kitchen, they're very competitively priced… some of that business migrates from traditional hotels to extended-stay. I believe there is more seven-day-plus demand in non-extended-stay hotels than in extended-stay hotels, so we think that the outlook is for extended-stay hotels to continue to increase market share.
We think is the most likely outcome, because we are now in a declining RevPAR trend which is unlikely to reverse before maybe Q2 of next year, is that some of the extended-stay hotels in the pipeline will not get completed or they'll get delayed. So we think that supply growth is likely to plateau and may even decline.
BTN: How are broader economic conditions affecting the segment?
Skinner: I think two factors: government travel cutbacks and declining construction spending. Construction is a big generator of extended-stay demand and so is the federal government. I would say that demand would be growing more quickly had those two things not occurred.
There doesn't appear to be any basis for assuming that the cutbacks in government travel are going to change anytime soon. … That would continue to be a headwind against demand growth. But it's important to remember that even with these things going on, demand has been going up. Overall hotel demand has been going down. Not extended-stay.
With construction, you would assume that if interest rates do come down, it would spur some more construction, but your guess is as good as mine if they're going to come down and by how much.
BTN: Is the long-stay migration from traditional hotels into extended-stay still the dominant demand driver?
Skinner: Yes, I would say this. And if you look at the long term—I'm talking now 26 to 27 years—extended-stay demand on an annual basis has never declined from the previous year except in 2020.
It went through the post-9/11 recession increasing. It went through the Great Recession increasing. It has always managed to recover to a positive change except 2020.
BTN: Are you seeing any notable variations across demand segments so far this year?
Skinner: Not really. … Relative to corresponding classes of all hotels, economy extended-stay is the outperformer because economy-class hotels have really taken it on the chin and extended-stay hotels have felt the impact but nowhere near as much. So in relative terms, economy extended-stay is showing the most resilience of all.
BTN: Is that partly because the lower-tier leisure exposure in traditional hotels doesn't translate as much in extended-stay?
Skinner: Absolutely right.
BTN: We've seen several large hotel companies debut extended-stay brands in recent years. What's driving that, and what impact are those brands having?
Skinner: One of the big factors that was an impetus to these new brands… was the performance during 2020 and 2021. There was demonstrated resilience of extended-stay hotels at lower price points. So you saw these new brands get created.
It's important to remember that of all those new brands now under development, collectively there's probably less than 3,000 rooms open today. There are more than 600,000 extended-stay rooms total. So they cannot statistically have an impact on the overall number. Now they can impact on an individual market or sub-market basis, and they have, but collectively on the national basis, no.
BTN: Are we in more of a new-construction or conversion environment? What's happening in the pipeline?
Skinner: I think new development will favor new construction, but clearly there's been a tightening of underwriting standards and there has been a pullback in the speed of development. Some of the projects have been delayed, partly due to declining RevPAR, and entitlements as well are taking longer, construction is taking longer.
BTN: On pricing, are extended-stay operators trying to hold rate even as occupancy slips, similar to the broader hotel industry?
Skinner: In the last six months, the decline in average rate has been lower than the decline in occupancy … so, yes, that is true.
BTN: What should business travel buyers expect in 2026 extended-stay rate negotiations?
Skinner: I think that it'll be a competitive rate environment, at least through the first quarter of next year. I don't see rates turning around appreciably until, at the earliest, Q2 of next year.