Extended Stay America's Plans for Portfolio Growth

• Attracting corporate customers
• Opening 80 new-construction hotels during the next five years
• ESA's shift to franchising 25 percent of its hotels by 2021

Extended Stay America plans to add new hotels for the first time in almost a decade, as the company nears the end of a years-long renovation of its 629 properties. The planned growth will depend partially on franchisees—a new concept for ESA—and its new hotels will focus on open-concept common spaces, as well as in-room furnishings that are customizable by the guests. Extended Stay America chief marketing officer Thomas Seddon spoke with BTN lodging editor Julie Sickel.

BTN: With the renovated and new-construction properties coming into the portfolio, which companies are Extended Stay America's biggest competitors?

Seddon: From a price point of view, we still expect to operate in roughly the same space. We have a really big price [advantage over] our two biggest extended-stay competitors, which are Candlewood Suites and TownePlace Suites. It's about a $25 price gap. We'd still see them as the brands that have the hotels that are the most similar to us, but the main place that we're pulling people out of is not Candlewood or TownePlace. That's because there just aren't as many of them around. Five out of six of the hotels in our competitive set are traditional hotels.

BTN: How are you capturing business from those traditional hotels?

Seddon: A good chunk of it is just letting people know we exist. It sounds funny, but it's true. When we ask people who are staying three and four weeks in a traditional hotel, "Why didn't you pick an extended-stay product with a kitchen?" oftentimes the answer is: "I didn't know it was available." On the sales side, we're talking to the companies and organizations that have people who travel for lengthy periods of time. We're often talking to different people inside those organizations. It's not always the person who's the formal corporate travel manager; sometimes the person we need to talk to is the person in charge of the intern program or the person in charge of project teams.

BTN: Who are your primary customers then?

Seddon: Our core customer is someone staying from a week to a month. Then, our secondary customer is someone staying longer than a month. Then, opportunistically, we'd go after people staying less than a week. Depending on how full we are, we are quite happy to take people for a night or a year, but we really would like to increase our share of people a week to a month, and then a month or longer is our second goal after that.

BTN: Where will you develop the new hotels?

Seddon: We're expecting to grow our owned hotels in coastal markets in and around the major metro areas where we already have a large number of hotels. For our franchisees, we're looking to partner with people more in the noncoastal states in the Midwest. We would expect a lot of hotel development there to still be in suburban metro markets.

BTN: How will ESA's model of doing business change with franchisees onboard?

Seddon: We like our owned and operated model and we'd like to keep the positive parts of that even if we introduce franchisees into the system. We want to make it really simple. For our corporate customers, they like the fact that we can negotiate rates across the whole country. They like the fact we can do direct billing. We want to keep a lot of those things that are really positive aspects of us being 100 percent owned and operated intact. We can do that with a smaller number of large [franchise] players, and a lot of developers find that interesting, too. They don't necessarily want to be one of a hundred franchisees we work with. We think we get a lot of positives from being able to act quickly by being able to act as one company. We want to be very careful [so] as we do bring other partners in, we don't lose those positive sides of what we've got.