N.Y. Extended Stay Market Stepped Up Since September

The opening last month of the 145-suite Inn at Fox Hollow, an extended stay property in Woodbury, Long Island, was the latest evidence that extended stay lodging remains a viable option for buyers in the metropolitan New York area post-Sept. 11.

In fact, the market for extended stay and corporate housing may have grown even stronger in the past six months in Manhattan at the same time transient stays declined precipitously, a consequence of both Sept. 11 and the weakened national economy. As a result, existing Manhattan business hotels, such as the 285-room Flatotel and the 130-room Buckingham, both located on the West Side in upper Midtown, announced they have repositioned themselves since Sept. 11 as extended stay properties.

Manhattan-based corporate housing provider Furnished Quarters is planning to expand its inventory of apartments, while all-suite hotel company Manhattan East Suite Hotels, which operates 10 properties in the city, reported it is seeing significantly more extended stay traffic than usual.

"Our utilization studies showed that the upscale extended stay market in Nassau County, Long Island, was seriously underserved," said Kevin Moran, Inn at Fox Hollow general manager. Moran defines extended stay as five nights or longer.

"Most of the interest we're seeing initially is related to projects companies in the area are undertaking that require the use of consultants. In a stronger economy, companies might be more willing to add permanent staff. Now they're happy to bring in consultants, even though it means providing them with accommodations."

While the property builds its extended stay base, mostly targeting companies along the nearby Route 110 corridor, Moran said he will use transient stays to fill any shortfall. "There's always a potential downside here. In booking a one- or two-night stay, for example, you run the risk of not having a room available on those nights, if a call comes in for a stay of one month or longer," he said. "As you grow the extended stay piece, you're able to cut back on the transient piece."

Relative to Manhattan, the Long Island lodging market came through the 2001 downturn in fairly good shape, according to Pearl Kamer, chief economist for the Long Island Association. "Long Island's hotels were coming off a period of extremely robust demand, with occupancy rates rising for eight years from 1993 to 2000," Kamer said. While rates declined in 2001, the drop was partially due to 500 new rooms that came online during the year.

Kamer said six hotels with a total of 772 rooms were slated to open this year, but only the Inn at Fox Hollow was targeting the unmet needs of the extended stay traveler.

At the Flatotel, the top 19 floors of the 46-story tower on West 52 Street are reserved for extended stay business, while the 16 floors directly below cater to transient business. "The extended stay floors are comprised solely of suites that are strongly residential in feel," said Brenda Pesce, vice president of sales and marketing, noting that the building originally was constructed in the mid-1980s as an apartment house.

"The needs of extended stay guests differ significantly from those of transient guests and we try to address each," said Pesce, who defined extended stay business as 30 nights or longer. As is traditional at extended stay properties, the longer the stay, the lower the nightly rate.

Similarly, The Buckingham Hotel on West 57 Street has repositioned itself as an extended stay property, following an extensive room renovation. Ironically, its new identity brings the property full circle since it was known as a residential hotel when it first opened in 1929. "Many of the suites are so large—up to 825 square feet—that they can easily provide a home away from home," said Stephen Shapiro, managing partner. "While some guests expect to be long-term residents, taking an annual lease, three months to six months seems more likely to be the average length of stay. Given this, many guests tire of eating in restaurants and opt to bring food in." Accordingly, all units are equipped with kitchens and the larger the unit, the more elaborate the kitchen.

By contrast, a corporate housing provider, such as Furnished Quarters, works solely with self-contained apartments. "We presently have 425 units in different parts of Manhattan and expect to have 500 by the end of the year," said Steven Brown, president. "In some cases, the units are in townhouses where each unit is a fully furnished corporate apartment. In other cases, units will be in high-rise doorman buildings, while other units are regular rentals."

Because Furnished Quarters is locally based, Brown said the apartments are outfitted in a New York style that's very design-conscious and the opposite of generic. "It's a highly individual feel that our guests respond to," he said. "We pride ourselves on knowing the New York market. In fact, we have as customer service van that's available 24 hours a day, seven days a week, to respond promptly to maintenance and other guest needs. So we're very hands on in this way."

While none of the hotels in the Manhattan East Suite collection, which includes the 209-room Benjamin Hotel on East 50 Street, are dedicated to extended stay use, the percentage of these stays has grown in recent months. "Many companies are still going through changes related to Sept. 11 and their need for extended stay lodging has grown accordingly," said Robert Tully, chief marketing officer. "Essentially, it's the appeal of the suite. Buyers appreciate the value inherent in the extra space for a traveler who's going to use the room for much more than just a place to sleep for a night or two. In many cases, the second room of the suite is being used as a temporary office until more permanent surroundings can be found."

Indeed, post-Sept. 11, many companies unexpectedly had to shift their New York operations to other parts of the city. "For companies whose downtown headquarters no longer exist, it's meant finding new office space in midtown. Then it requires bringing in people like IT consultants for months at a time to help rebuild computer networks," Flatotel's Pesce said.

Even for companies still located downtown, many consultants and trainers prefer to stay in Midtown.

"Between the cultural opportunities and retail options here, midtown can be quite appealing for the traveler who's here for months at a time," The Buckingham's Shapiro said. He pointed to Carnegie Hall as an example of the close-by cultural amenities travelers could take advantage of, given the hotel's West 57th Street location.

In a larger sense, buyers' increased need for extended stay and corporate housing solutions is likely to continue until the economy stabilizes, according to Furnished Quarters' Brown. "A number of companies are still in the process of downsizing," he said, "so they're reluctant to add to full-time staff until the economic dust settles."

In hindsight, a New York extended stay or corporate housing provider whose inventory was dispersed around the city was better equipped to deal with the market post-Sept. 11 than one whose inventory was concentrated downtown. "We never wanted to be married to a particular market like financial services," Brown said. "Consequently, only 8 percent of our units were in the Wall Street area."