Extended Stay America during the first quarter of 2016 saw
mostly positive results as guest satisfaction scores climbed, corporate business
increased and the company inched closer to the finish line of its years-long
renovation project.
Total revenue for the quarter was flat year over year at
$287.6 million. But comparable hotel revenue, which looks only at the 629
properties in ESA's portfolio and excludes the 53 economy properties ESA sold
off last year, increased $16.9 million, or 6.3 percent. Chief financial
officer Jonathan Halkyard said the quarter's results put the company on strong footing
for the remainder of the year.
"Beyond revenue, guest experience scores also showed
consistent progress throughout the quarter and now stand at their highest
levels since our [initial public offering]," said CEO Gerardo Lopez. The
company has seen "a correlation across our system between the guest
satisfaction scores and our ability to drive rate," he added.
Average daily rate increased 9.5 percent year over year to
$64.47, while occupancy decreased 90 basis points to 69.5 percent. In
comparable hotel terms, ADR increased 5.9 percent and occupancy decreased 70
basis points.
As of March 31, ESA's systemwide renovations were 79 percent
complete. Now in its final and largest renovation phase, the company saw 1.9
percent of its total room nights displaced due to renovation, up from 1.2
percent of room nights last year.
Continued Gains in
Corporate
Lopez said ESA's
efforts in sales and marketing, implemented in the second half of last
year, now are "fully bearing fruit."
"Our corporate sales team posted its third consecutive
quarter of double-digit revenue increases in the first quarter, and
made up nearly 45 percent of total revenue in the quarter with both strong rate
and occupancy gains," Lopez said. "We are seeing new growth in
business from corporate clients that have historically used higher-priced
clients, with favorable reactions to the near-completion of the renovations of
our entire portfolio."
Chief marketing officer Tom Seddon said that new business from
corporates is being lured from a few different places. "We see it pulling from
traditional hotels without kitchens, because that's still a significant part of
the business," he said. "Just over a fifth of all extended-stay demand
is still staying in those hotels. We also see that we pull people out of serviced
apartments."
ESA expects the corporate sales team to continue to
outperform for the rest of the year, Lopez said. "The encouraging thing
is, this group of people, 160-some-odd, have really only been hitting the
streets hard for three
months, and the gains have been almost immediate." Lopez said
corporate sales could soon account for half of company revenue.
Shifting the Business
Mix
During recent quarters, ESA executives have been vocal about
shifting the company's business mix toward shorter-stay, higher-paying guests. Seddon
said the percentage of such guests at ESA during the first quarter increased about
3 points.
About 35 percent of ESA guests stayed one to six nights
during the quarter, while 23 percent stayed seven to 29 nights, and 42 percent stayed
for at least 30 nights, Seddon said. The company's new revenue management
system, implemented late last year, helped ESA drive shorter-stay business, Seddon
added, "because we can be more precise about filling in little values
around peak demand nights than we have been in the past. That's quite difficult
to do in the old manual system."
Past its RMS, Seddon said ESA has been doing little things
to drive revenue. One example is its Clean Plus housekeeping initiative, which
provides nightly cleaning services instead of traditional weekly cleaning at an
added cost. The program improved revenue per available room by 20 basis points,
Lopez said.
"We continue to be pleased with what we've seen in
terms of selling the upgrades for extra cleaning, and we actually have a focus
on a number of other items in other revenue, none of which would actually
appear very glamorous or dramatic," Seddon said. "We've
just realized there are a lot of things around the way that we collect things
like parking revenue and laundry revenue and some stuff that really just is not
very big-picture, but for us can make a lot of difference."