Marriott Extends Reach Into Extended Stay Market

Marriott International's acquisition of ExecuStay late last month may be the validation needed to push interim housing into the sights of more travel buyers.

"Marriott stepping in is going to provide validation for the concept and type of corporation," said analyst Ted Mandigo, president of T.R. Mandigo & Co. in Chicago. "It's like when Marriott stepped into the timeshare industry: It certainly created a stronger validation, though it didn't create the huge jump in timeshare sales that some pundits spoke of."

Many industry experts believed Marriott would improve the timeshare business when it bought American Resorts and Monarch Resorts in 1984. Marriott Vacation Club International World, with 37 resorts in 18 cities, has "cleaned up" the timeshare image, but has not driven much in the way of timeshare sales, Mandigo said.

Until recently, corporate hotel programs rarely differentiated between short-term and long-term stays. But in the past couple of years, with double-digit rate increases and tight occupancies, some buyers have experimented with less expensive extended stay properties or even rented fully furnished apartments.

Marriott's purchase of ExecuStay for $52.9 million in cash and stock is significant because it's "a major hotel company making an entreé and validating this as a legitimate lodging segment," said Sandra Sawin, East Coast director of sales and marketing for Smith Corporate Living, a 2,000-property interim housing firm that will be a direct competitor of ExecuStay, with apartments in Boston, Chicago and Washington, D.C.

Marriott will add 6,000 apartments in 44 states to its portfolio mix. The average length of stay at the fully furnished apartments is 90 days, with rates running about $2,200 a month, said Lee LaRochelle, ExecuStay's senior vice president of operations.

"The interim market is a $3 billion business domestically and very fragmented, made up of small regional suppliers and a couple of national providers," LaRochelle said. "It's an untapped industry, and Marriott has tremendous competency. We have aggressive growth plans for the brand. We're going to impact the availability of apartments in major markets around the country and formulate a strategy for global solutions."

ExecuStay is not Marriott's first venture into the interim housing arena. It launched its luxury brand, Marriott Executive Residences, internationally last year. That brand is expected to break into the domestic market by 2000, while the company plans to expand ExecuStay internationally by 2001. The brand will grow by 50 percent within the next year, first targeting 10 international gateway cities, primarily in Europe and the Pacific Rim, including Hong Kong, London, Paris, Shanghai and Singapore.

The guestrooms are equipped with two-line telephones and other business amenities, while some locations include a fully equipped business center.

Marriott plans to integrate the new brand with Marriott's Home Solutions unit, which provides furniture, food and other amenities to its other brands.

Following the trend of its competitors, ExecuStay will offer direct billing to corporate customers and will discount rates based on volume and relationship, LaRochelle said. As an added bonus to the corporate market, Marriott will acquire or lease apartments in particular locations to meet specific customer needs.

"We're not locked into dedicated building," he said. "We'll take an apartment for a period of time for one customer and other times we'll make a longer term commitment for an apartment.