Extended-Stay Hotels Are a Hot Commodity

Extended-stay hotels, which are easier to build and have higher margins than their full-service counterparts, have become a red-hot commodity.

Major hotel chains, including Hilton, Marriott and Hyatt all have announced new extended-stay brands this year, following Best Western and Wyndham, who rolled out new brands last year.

Blackstone and Starwood Capital also have been busy in the extended-stay hotel space. The partners teamed to buy the hotel operator Extended Stay America for $6B in 2021; last year, they bought 111 WoodSpring Suites properties for $1.5B.

Economical construction due to efficient designs, lower operating costs thanks to longer stays by guests and an expanding market are driving the extended-stay lodging expansion, according to a report in the New York Times.

Extended-stay hotels have become a popular choice for remote workers—who have been taking a lot of “business-leisure” trips—and construction crews who are moving across the country to build roads, bridges and renewable energy projects funded by the infrastructure bill passed by Congress in 2021 and the Inflation Reduction Act, the report said.

“Over half of the newly negotiated corporate business accounts our team has signed over the last 12 months have been infrastructure-related,” Geoff Ballotti, Wyndham’s CEO, told the Times. “This will be years of construction with contractor workers needing rooms, and that’s really been what’s driving the demand.”

Without accoutrements like atrium lobbies, full-service restaurants and other large spaces, extended-stay hotels are configured to devote more of the property’s footprint to revenue-generating guest rooms.

Because the hotel guests are staying longer, these properties are less expensive to operate. Many extended-stay hotels provide weekly rather than daily housekeeping; having fewer daily check-ins and checkouts enables operators to use fewer front desk employees.

According to a study by Actabl, a hotel management software firm, labor costs at full-service hotels were about 24% higher in 2022 than the previous year, while costs at extended-stay hotels rose about 12%, primarily due to reduced housekeeping expenses.

Efficiencies are being built into the designs for new extended-stay hotels.

Hilton, which is planning to start opening its new extended-stay hotels in H2 2024—the brand doesn’t have a name yet, so they’re calling it Project H3—is designing the rooms so that bathrooms require only a single fire sprinkler, light fixtures can be plugged in behind the bed to minimize the number of electrical lines and a single type of vinyl floor tile is used throughout the suite, the report said.

Hyatt is planning to open 100 of its new Hyatt Studio extended-stay hotels next year. Marriott announced in June that it is developing a new extended-stay brand with the working name Project MidX Studios that will begin operating in early 2025. The first hotels in Wyndham’s new ECHO Suites brand are on schedule to open by the end of this year.

Extended-stay hotels suites, which typically have kitchens with full-sized refrigerators and stoves, also are becoming attractive options for leisure travelers who are tightening their belts due to higher prices for airfares and restaurant meals.