Extended Stay Hotels Experience Shift In Booking Patterns

The number of nights business travelers typically spend at extended stay hotels has changed gradually during the past year. Either because of the weak economy or buyers' growing sophistication in booking this specialized lodging option, operators of leading U.S. extended stay brands last month reported an increase in the number of short, one-night-to-five-night bookings by business travelers. Similarly, they noted an increase in the number of long, true extended stay bookings of 30 nights or longer. What decreased proportionately was the number of midterm stays, typically six nights to 29 nights.

For buyers, this feedback will be useful as they fine-tune the extended stay portion of their hotel requests for proposals in anticipation of the upcoming negotiations that will determine 2003 rates. Buyers interested in soliciting bids from extended stay properties for their transient business will note that the increase in one-night-to-five-night stays indicates that operators will be eager to respond to these RFPs. Likewise, stays of 30 nights and longer generally are considered to be the most profitable for the extended stay brands, so operators also will compete aggressively to get that segment of buyers' business.

While they may disagree on the exact number of nights that define the short- and the midterm lengths of stay, extended stay brands generally divide the business into three categories. "We sometimes split that six-nights to 29-nights a couple of different ways, but by and large it's how we define the tiers," said Tim Sheldon, senior vice president for brand management of extended stay lodging at Marriott International. "What you might see by market are some pricing adjustments. But, directionally, the tiers give us the framework with which we price our products." Marriott's extended stay brands include Residence Inn and TownePlace Suites.

"Nightly stays bumped up a bit in the overall mix and stays of over a week have been down," said Mike Wilson, vice president of marketing for ExtendedStay America, who attributed the change to the state of the economy. In fact, for buyers facing reduced travel budgets this year, economy and midprice extended stay brands frequently made sense for their transient programs.

The shift has been felt in the majority of U.S. markets. "The one-night-to- five-night category used to be 30 percent to 35 percent of the business, but now it's more like 40 percent to 45 percent," said Jeff Waldes, vice president of sales for Summerfield Suites by Wyndham. "Most of this transient use has taken away from the middle tier, which is definitely the big loser in the deal."

Midterm business particularly has been vulnerable because that is the length of stay where many training programs typically fall. "In a slowing economy, training is the first place companies tend to cut," said Michael Miller, vice president of sales for LodgeWorks. "Companies will move online or to teleconferencing for training."

Training programs that already were budgeted went forward. "Consequently, it took a few months before the effect of the down economy was felt. Once the training contracts ran out, they weren't renewed," Miller said. LodgeWorks owns and operates Sierra Suites, franchises a number of Summerfield Suites and manages a number of Hawthorn Suites, which is a unit of U.S. Franchise Systems.

By contrast, long-term projects that made up a lot of the 30-night-plus stays have tended to go forward. Relocations fall into this category as well.

Even with the shifting pattern, the average length of stay at many brands in the past year has been approximately 14 nights. "Given that that's an average, you get the bulk of the extended stay bookings staying below 14 nights," said Jim Holthouser, senior vice president for brand management of Homewood Suites by Hilton. "You have fewer bookings at the 15 or more night level, but they account for more room nights."

Longer-term bookings have proven more remunerative for operators due to operating efficiencies. "We prefer to have the longer length of stay guest in the house because of the limited amount of employees we have per property," said Gary DeLapp, president and CEO of Homestead Studio Suites. "It just creates a better environment for us than if we have more short-stay guests."

Thirty-night stays ensure revenue. "You get a guarantee over a longer period of time," said Brenda Raley, senior director of MainStay Suites, a unit of Choice Hotels International. "You don't have any vacant rooms. You're getting revenue from every available room."

More short-stay guests mean more stress on management at the property level. "You turn the rooms over more frequently, which creates more pressure on the front desk and also the housekeeping department," DeLapp said.

In classic extended stay pricing, the longer the stay, the less expensive the room per night. Consequently, some operators prefer the middle-tier stay. "We love the five-day- to-29-day business because it allows us to minimize the discounting necessary to attract 30-plus day business," said Jim Anhut, senior vice president and brand manager of Staybridge Suites by Holiday Inn.

Transient stays also can be profitable. "The short stays work for us in terms of profitability, if we have the correct mix of extended stay," said David Redfern, vice president of sales and marketing for Candlewood Suites.

The difference in rate between the short transient stay and the 30-plus night stay has varied by product type. "Lower price point products would offer less of a discount, perhaps 10 percent to 15 percent," Anhut said, "while higher price point hotels may offer more than 30 percent off the single-day rate."

Anhut said many municipalities don't add sales or convention and visitors bureau taxes on stays of more than 30 days, further reducing the cost of these stays.

Profitability for the brands has been about length of stay and rate. "We see the customers staying 30 nights or longer being most profitable," Marriott's Sheldon said. "The caveat is it depends on what price they pay."

"Buyers have started to understand the increased value for travelers for trips of varying duration," said Steve Hymans, vice president for brand marketing at Hawthorn Suites. "Hotels have added a fourth length-of-stay tier in response to buyers' needs."