As a road warrior for 35 years, Tanna Pearman has crisscrossed the country, staying in luxury hotels and roadside motels. His favorites are boxy convention hotels with cavernous lobbies that are easy to get lost in. But at the top of his list is extended-stay lodging.
With guest rooms large enough for both working and relaxing, extended-stay hotels make it easy to combine business calls and sightseeing tours, Ms. Pearman, a broker for Meetings Made Easy, a Las Vegas-based meeting planning company.
“It feels more like a living space than a sleeping room,” she says.
Ms. has many friends. Pearman these days. Interest in extended-stay hotels has grown, in part due to an increase in remote work as well as an increase in work crews moving from site to site for infrastructure investments in projects such as road building and green energy.
And because guests tend to stay longer and require less housekeeping, extended-stay hotels — especially those geared toward more cost-conscious travelers — are cheaper to build and operate. than their full-service counterparts. Recognizing the higher margins offered by side-of-the-highway lodgings, hotel companies are looking at them with fresh eyes, expanding their portfolios and adding new brands.
Hilton Worldwide, Hyatt Hotels and Marriott International have all introduced extended-stay brands this year — some so new that they don’t yet have official names. Last year, Best Western International and Wyndham Hotels & Resorts announced new brands in the category, following Choice Hotels, which started a new extended-stay chain in 2020.
“It’s as hot as it gets,” said Jan Freitag, national director of hospitality market analytics at real estate analytics firm CoStar.
Economical construction is a top priority for hotel operators. “It’s very well designed,” said Isaac Lake, head of Hilton’s Project H3 brand, the working name of the company’s new extended-stay hotels slated to begin opening in the second half of next year. year.
For example, he said, Project H3 rooms are designed so bathrooms only need a single fire sprinkler, light fixtures can be plugged into the back of the bed to reduce the number of power lines and a single type of vinyl floor tile is used instead of bulk. floor surfaces.
Without palatial lobbies, full-service restaurants and other large public spaces, more of the extended-stay property’s footprint has potential for profit, despite larger rooms. Longer stays also make them less operational: Weekly rather than daily housekeeping is the norm, and having fewer daily check-ins and checkouts reduces the number of front desk employees needed.
Labor costs at full-service hotels are about 24 percent higher in 2022 than last year, while costs at extended-stay hotels are up just under 12 percent, according to a study by Actabl, a maker of hotel management software.
“It’s mostly housekeeping — that’s where a lot of your work goes,” said Jim Chu, chief growth officer at Hyatt, which announced plans this year for a brand called Hyatt Studios. The company expects the first of what it says will be more than 100 of these hotels to open next year, he said.
The change in how people work is a big factor underpinning the trend, said Siye Desta, an equity analyst at CFRA Research. Laptop-toting workers who can do their jobs anywhere are driving the rise of hybrid business-leisure trips.
Hotel executives are moving quickly to take advantage of the shift to remote work. “Dislocation from offices allows people to work from other places,” said Noah Silverman, Marriott’s global development officer for the United States and Canada. “That’s a broader dynamic driving incremental business in extended-stay hotels.”
Marriott announced in June that it was developing a new extended-stay brand with the working name Project MidX Studios. Company officials said they expect to begin booking guests at the first properties in late 2024 or early 2025.
Extended-stay hotels may also appeal to leisure travelers looking for cheaper accommodations, Mr. Desta said. Inflation is cooling, but many Americans are still adjusting to higher prices for airline tickets and restaurant meals. They look for ways to save money, whether that means scheduling vacation days on a business trip or eating in their hotel room. (Extended-stay hotels usually have kitchens with full-size refrigerators and range tops.)
Paul Hensley said he commutes almost every week from his home in the Nashville area for his job at an e-commerce manufacturer. Hotel rooms with kitchens don’t just save him money, he says, they’re a boon for his waistline.
“I prefer to eat a little healthier on the road,” said Mr. Hensley, 57. “The fact that it’s a full kitchen — especially in this economy — you can buy food instead of eating out, to save a trip.”
Home-sharing platforms like Airbnb and Vrbo also offer lodging with kitchens and rooms to spread out, but industry experts say they cater to a separate market.
“I think the Airbnb customer is really looking for unique experiences,” said Mit Shah, chief executive of Noble Investment Group, a real estate investment management firm specializing in the travel and hospitality sectors.
But customers who choose home sharing can be stuck with unexpected costs like high cleaning fees or a property that isn’t as advertised. Hotel companies try to prevent this by imposing brand standards, Mr. Shah said.
“It brings a consistent standard of quality hospitality,” he said, which can reassure travelers. “They know what they’re getting,” he added.
Despite the wave of brand announcements, hotel investors expressed confidence that the market won’t be saturated anytime soon.
“The fact that there are potential new entrants in this space only speaks to the fact that this is a great core business and a compelling segment,” said Nadeem Meghji, head of real estate for the Americas at the private equity firm. that of Blackstone.
Blackstone has teamed up with Starwood Capital to buy hotel operator Extended Stay America for about $6 billion in 2021, a bet on the postpandemic rebound in travel. Last year, the two investment groups made another investment in this hotel category, buying 111 WoodSpring Suites properties for about $1.5 billion.
But growth is expected not only from a return to travel habits. Industry experts suggest that impact investment in roads, bridges, manufacturing and green energy could drive long-term sustainability for years.
“There are some secular tailwinds like US government spending on infrastructure,” said Mr. Desta, the CFRA analyst. “That’s also expected to help with long-term demand for extended stays.”
In the past two years, Congress has passed the Infrastructure Investment and Jobs Act, the Inflation Reduction Act and the CHIPS and Science Act, legislation meant to boost the economy, and hotel executives predict those laws will help to fill extended-stay rooms around the country with staff on the job for weeks or even months at a time.
“More than half of the newly negotiated corporate business accounts signed by our team in the past 12 months are infrastructure-related,” said Geoff Ballotti, president and chief executive of Wyndham. The hotel operator announced its ECHO Suites brand last year and said the first properties are slated to open by the end of the year.
“It’s going to be construction years with contractor workers needing rooms, and that’s really driving the demand,” Mr. Ballotti said.