Hotels See Long-Term Prospects in the Extended-Stay Market
Workers’ lives have been changing in the 1990s, and the hotel industry is among those scrambling to adjust.
Two major trends--more short-term contractors and an increased need for intense technological training--have been boosting demand for less expensive ways to put people up for longer periods. Indeed, the hotel industry thinks the long-term sector may be a gold mine of a market.
The extended-stay marketplace has exploded in recent months, with many of the major hotel chains announcing new chains to compete in what some analysts think will be the next hot-growth market in the business travel segment.
“We’re seeing large numbers of business travelers on-site for training classes for more than seven days at a time,” said Steve Lunceford, a spokesman for Choice Hotels. “What we’ve found is that those people want something a little more than a bed in a box.”
And with corporate downsizing, companies are not only trying to save money on business travel, they are also relying more on outside contractors to do work formerly done by employees. As a result, more contractors and consultants are staying in hotels for longer periods during short-term jobs, he said.
Among the new chains announced recently is Marriott International’s TownePlace Suites. Marriott, which plans to break ground on the first TownePlace Suites in Virginia this summer, expects to spend $25 million for five of them this year. Rates will range from $45 to $60, compared with the more expensive Marriott Residence Inns, where rates range from $70 to $105, spokesman Gordon Lambourne said.
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Marriott is joining a field that already includes such names as Candlewood Hotels, a joint venture of Doubletree Corp. and Jack DeBoer, founder of Residence Inns; Extended Stay America, brainchild of H. Wayne Huizenga, founder of Blockbuster Entertainment; StudioPlus; Sierra Suites by Summerfield Hotel Corp.; and MainStay Suites, a chain being launched this fall by Choice Hotels International, which also franchises such names as Comfort, Quality, Econo Lodge and Rodeway. Wyndham Hotels is also developing an extended-stay hotel.
Choice, which owns about 78 of the 3,600 hotels that bear its brand names, has committed $200 million to build and operate the first MainStay properties, Lunceford said. “That’s how hot we believe this particular market niche is.” Choice Hotels expects to have 10 MainStay properties by the end of next year.
Extended-stay hotels share several traits. Most sacrifice a showy lobby in favor of amenities such as full kitchens stocked with dishes and utensils, more in-room work space, ironing boards, direct-dial phones with voicemail and on-site business centers. In some chains, such as Marriott and Choice, the rate goes down the longer you stay. In exchange, guests sacrifice some service.
MainStay, for example, changes linens every third day of a stay, and instead of a front-desk clerk, the hotel is testing an automated check-in system.
The trade-offs appear to be acceptable to the traveler on a budget.
Shirley Miller, a senior training analyst for USAir Group, who spends an average of five days a month on the road, is always looking for places to stay that feel more like a home or apartment than a standard hotel room.
“It can be very depressing being away from home so much, so I’ve tried to find something more on the principle of an extended-stay-type facility,” she said. But since they aren’t always available, she sometimes has to improvise. For example, in one city she visits regularly for training, she negotiated a corporate rate at a local bed-and-breakfast instead of staying at the Holiday Inn recommended by her company. She prefers the bed-and-breakfast because she can cook there, it’s homey and she has more room to get her work done.
Steve Lazarus agrees. As a computer consultant and trainer for the food service industry, he is on the road more than he’s at home.
“There are a lot of us outside contractors out there as trainers and consultants,” he said. “I think there’s a population that’s sick and tired of paying $160 a night when we don’t use the tennis courts.”
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Lazarus said he’s looking forward to more options in the extended-stay category so he can save his stays at higher-priced hotels for vacations.
“Extended-stay is definitely a growing market,” according to Marriott’s Lambourne. “Clearly there is a need for it.”
One of the difficulties in assessing the market is that it falls between the traditional hotel and an apartment categories, said Chuck Ross, vice president of Smith Travel Research, a Tennessee-based hotel industry research firm.
Currently there are only 337 extended-stay hotels out of the 30,000 properties with more than 20 rooms in the United States. Thus, extended-stay rooms represent only a tiny fraction--about 1.2%--of the total rooms on the market. “From the inventory, it does appear to be an under-serviced market,” Ross said. “But we don’t have a feel yet for how big the market is or what its potential is.”
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