Extended Stay Remains Strong

Any way you look at it — demand, occupancy, rate or RevPAR — extended-stay remains one of the most successful segments in the hotel business. The Highland Group recently reported second-quarter results for the sector, and all measurements are up.

RevPAR, for example, increased at double-digit rates for the second consecutive quarter. RevPARs for the mid-priced and upscale tiers were the highest since 2001, while economy RevPAR reached a record level.

New development within the segment is also gaining, as construction starts rose 71 percent compared to mid-year 2004 and are at the highest level in five years.

Extended-stay demand increased by 7.4 percent for the second quarter, well above the 3.4-percent rise in overall U.S. hotel demand for the period. Occupancy is also very healthy — 74.7 percent versus 62.2 percent for the entire industry — and at its highest mid-year level since 2000.

At the end of the second quarter, 16,921 extended-stay rooms were under construction. More than 9,000 of those rooms will open by the end of 2005, resulting in a 6.3-percent increase in supply for the year.

According to The Highland Group, the mid-priced segment showed the fastest rate of growth over the previous year, mostly due to the conversion of Wellesley Inn & Suites units to the Extended Stay America brand.

Despite the significant growth in supply, the consulting firm believes demand will continue to expand enough to absorb the additional rooms in the marketplace.

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