The extended-stay segment is leading the lodging industry back to prosperity. The third quarter was the best in the history of the segment, according to a report from The Highland Group, an Atlanta-based consulting and investment advisory firm.

Some highlights of the report:

• Room revenues for the third quarter were nearly $1.7 billion, up 12.6 percent over 2009 and the highest of any quarter in history. Year-to-date revenues approached $4.7 billion, the highest since 2008. The upscale category led the segment with a 13.4-percent increase in revenues during the quarter.

• Extended-stay hotels sold more room nights in the first nine months of the year than in any other year since Highland has followed the segment. Third-quarter demand rose 12.1 percent, with the mid-priced category leading with a 13.7-percent increase. “We didn’t really see any surprises in the third-quarter performance (of the extended-stay segment), but the growth in demand was much stronger than anyone would have thought it would be at the start of 2010,” says Mark Skinner, a partner in The Highland Group.

• Third-quarter occupancy was 76.8 percent, up more than six points from the same period last year. While all price categories were above 70-percent occupancy, upscale was the leader at 78.7 percent.

• Following six consecutive quarters of decline, average rate turned slightly positive in the third quarter, up 0.4 percent. Both the economy (down 2.4 percent) and mid-scale (down 0.9 percent) price categories experienced rate depression, while the upscale group posted a 0.8-percent increase in prices. For the year, extended stay rates are down 3.7 percent and are about equivalent to mid-2006 levels.

• Strong growth in demand and minimal rate increases powered a 9.3-percent rise in RevPAR during the quarter. By comparison, the overall hotel industry posted an 8.4-percent rise in RevPAR during the same period.

• Further fueling the segment’s recovery are low levels of supply growth. Rooms supply is up three percent in 2010, the slowest rate of growth in at least 15 years and a sharp contrast to a 7.2-percent gain last year. According to Skinner, the segment probably won’t experience a “significant increase in supply growth until 2013.”