Extended Stay America has yet to see "a big bump in
corporate demand" in 2017, CEO Gerry Lopez said during the
company's first-quarter earnings call. The company instead saw increased demand from shorter-stay
guests from online travel agencies, offsetting "small declines" in
corporate business and stays longer than 30 nights. Lopez said ESA remains
optimistic that business confidence, increases in corporate earnings and potential
infrastructure investments will lead to increased demand "over the medium
term."
"Given the nature of projects being talked about, we
have Extended Stay very well positioned to capture this potential volume [of
project work]," Lopez said, adding that the brand is insulated from the
economic pressures seen in urban gateway markets. "Lower corporate taxes
and infrastructure spending, whether public or private, spells projects, and
projects are what fuel our best business."
ESA saw year-over-year gains in both occupancy and average
daily rate during the quarter. ADR rose 0.8 percent to $64.99, while occupancy
increased 90 basis points to 70.4 percent. Net income grew 8.9 percent to $16.1
million.
The company is nearly finished with its systemwide
renovation that began more than five years ago. ESA completed 24 hotel renovations
during the quarter, and the final 21 in the company's 629-property portfolio
should be fully renovated by the end of the second quarter.
ESA is also making progress on its plans to franchise
and construct new hotels for the first time in a decade. It is starting its
franchise sales this quarter, and the company's asset sales team has signed
five purchase sale agreements for land to build ESA's new prototype hotel.
"We expect to begin construction at one or two sites, perhaps as early as
Q4 of this year, and ramp-up in 2018 and 2019," Lopez said.
EVP and chief asset merchant Jim Alderman said the
company is looking to construct properties in areas where ESA already has a
presence and is experiencing success. "We look for the high-growth states,
the [healthcare] activity, the tech," Alderman said. "Generally, we're
looking at infill and suburban locations in the major cities where you see most
of the significant growth in the country." Growth states that Alderman
mentioned include Colorado, Texas and Arizona.