Perhaps supply is finally catching up to demand in the extended-stay segment, at least based on the surface of a recent third-quarter report from The Highland Group. A closer looks reveals an expected decline in occupancy compared to last year, the result of a strong third quarter in 2007, coupled with an influx of supply growth this year. The drop in occupancy (4.7 percent vs. last year) wasn't as severe as expected, according to The Highland Group, and average rate was better than that of the overall hotel industry, keeping extended-stay RevPAR on par with the rest of lodging.

Extended-stay demand is still increasing (1.1 percent in the third quarter) and should finish up for 2008, even though overall hotel demand is down for the year (one percent, according to Smith Travel Research). The upscale extended-stay segment, according to the report, is driving the growth despite drops in economy and midscale extended-stay business.

Extended-stay room supply increased 6.1 percent in the third quarter vs. last year as more than 5,400 rooms opened. Similar numbers are expected for the final quarter, meaning close to 19,000 rooms will be added this year, nearly a seven-percent increase. The Highland Group projects a significant decline in supply growth next year because of the economy and credit crisis, meaning 2008 will be the peak of new supply for the foreseeable future.

RevPAR was up .1 percent in the third quarter and a one- or two-percent drop is predicted for the fourth quarter, not bad considering the country's economic woes and the increase in supply. RevPAR should remain about the same for the year, according to the report.