Extended Stay America this year will introduce a new brand aimed at the higher end of the midscale market called Extended Stay America Premier Suites, and will rebrand the rest of its portfolio to Extended Stay America Suites, the company announced Thursday.
ESA Premier Suites, which will launch in the second quarter with 32 properties across the United States, will comprise new construction as well as renovated properties with upgraded amenities "to target higher-rated extended-stay guest segments." Average daily rates will fall in the range of $80 to $100 per night. New features include an enhanced breakfast offering, larger TVs, increased storage space and a signature bedding package, according to the company.
"We did a lot of research in putting this together," said ESA president and CEO Bruce Haase on a Friday earnings call. "We knew the brand was strong, but what surprised us a little bit was how strong this brand is at higher price points, across the entire segment. We have a lot of equity in terms of not only awareness but also in terms of trial, use and consideration. We saw an opportunity to marry that strong brand with some wide space we see in the industry between where we sit today and where Candlewood is, which is a pretty wide gap, and marry that with the footprint that we have in high [revenue per available room] markets with good corporate demand. We very carefully talked to B2B buyers, corporate accounts, and literally thousands of consumers and asked what they really wanted."
Haase added that the company is looking at markets for the new premier brand where there is a "cross-section of higher-rated corporate demand and high RevPAR markets and a product that we have that we believe will set the brand. We're being disciplined about it," he said.
The move comes as the extended-stay segment, particularly the economy and midscale tiers, has shown resilience compared with the performance of traditional hotels throughout the Covid-19 pandemic.
Q4 and Full-Year 2020 Results
The company's fourth-quarter comparable systemwide RevPAR was down 9.4 percent year over year, driven by a 7.3 percent decline in average daily rate and a 170 basis-point decline in occupancy to 73.7 percent. Full-year 2020 RevPAR was down 15 percent versus 2019, and was driven by an 11.6 percent decrease in ADR.
Net income for the quarter was $65.7 million compared with $23.8 million from Q4 2019, due to an asset sale, a decrease in corporate overhead expense and an income tax benefit, partially offset by a decline in comparable systemwide RevPAR. Net income for full year was $96.3 million versus $165.1 million in 2019.
ESA opened 17 hotels totaling 1,868 rooms in 2020. Its total pipeline includes 56 hotels with 6,788 rooms.
Limited 2021 Q1 guidance includes a comparable systemwide RevPAR year-over-year decline of 3 percent to 6 percent, which corresponds to a decrease of 9 percent to 12 percent compared with 2019, said ESA CFO David Clarkson. "January RevPAR was down approximately 4 percent [year over year] because of our higher current mix of long-stay business, while the year-over-year RevPAR decline in February was down in the range of 10 percent to 12 percent compared to pre-pandemic levels," he said. "Our absolute RevPAR is increasing month to month, which I also expect to be the case in March."
The company expects a first-quarter net income loss in the range of $4 million to $8 million.
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