<H1> Extended Stay: All Hype?</H1>By Linda Humphrey
<I>New York </I>- Concerns of an impending overbuilding threat are unfounded, but an expected boom in the extended-stay segment won't live up to the hype, hotel analysts told attendees of the 18th Annual International Hospitality Investment Conference earlier this month.
Curbed by stricter lending practices, hotel companies added 56,000 new rooms last year, compared to 106,000 in 1988, said Randy Smith, chief executive officer of Smith Travel Research. Secondary markets accounted for 49 percent of new building. "Weaker hotels will be forced to close in 1997," he said. "We need to eliminate some of the old tired brands."
Hampton Inn has the most rooms under construction at 10,937, Smith said, and Marriott and Omni are the only upscale chains building. The few cities at risk for overbuilding include Orlando, New Orleans, San Antonio and Austin, said Stephen Rushmore, president of Hospitality Valuation Services in Mineola, N.Y.
Meanwhile, the new low-priced extended-stay market-which has spurred upstart brands such as Marriott's TownPlace Suites and Choice's MainStay Suites-has been overhyped, the analysts said. "It's a thin market," said Rushmore. "If diluted, occupancy will drop to 70 percent and below."
Barry Sternlicht, president and chief executive officer of the Starwood Capital Group, disagreed, saying, "the occupancy in these properties is staggering-85 to 86 percent." About 1,000 new extended-stay sites have been identified, he said.
The new brands also will cut into the corporate apartment market, said J. Willard Marriott, chairman and president of Marriott International Corp. "This type of product-with housekeeping once a week and six employees for 180 rooms-is unheard of in our business," he said.
But Smith said growth "will be nowhere near what we've seen projected. You have to separate the hype from reality."
Meanwhile, despite reports of an impending decline, business travel picked up last year, said Peter Yesawich, president and chief executive officer of Yesawich, Pepperdine & Brown, Inc., Orlando. Three out of 10 adults traveled on business last year, up from one in four in 1994, he said. Only 6 percent of business travelers had a corporate policy, and one-third worked for companies with fewer than 100 employees.