The recession and business cost-cutting has hurt the hotel industry over the past two years—with one exception: extended-stay hotels.
As business travel tailed off in this market during the economic downturn, leisure travelers stepped in.
Occupancy in this part of the business rose 8.9% in July from a year earlier and demand was up 14.1%, according to data from hotel-industry research and consulting firm Smith Travel Research Inc.
Even “if you look back in 2009, this was still a strong segment,” says Chad Church, director of special services at STR.
“The leisure segment became very important and it actually held on” as other business dwindled, says Bill Duncan, head of global brand management for Homewood Suites and Home2 Suites, both operated by Hilton Worldwide Inc.
Homewood saw growth in the number of leisure travelers in 2009 from 2008, says Mr. Duncan. “Leisure travelers were making their decisions way in advance, planning it out and looking for the biggest bang for their buck.”
Indeed, pricing is one of extended-stay’s biggest competitive advantages, says Scott Berman, hospitality- and leisure-industry analyst at PricewaterhouseCoopers LLP.
Because their room rates decrease as the length of guest stays increases, the hotels have the ability to offer rooms at various prices along their spectrum. They can give incentives by offering a long-term, lower rate to a short-term guest.
“The extended-stay crowd can modulate its rates more than a traditional hotel because of that business model built on weekly and monthly travel,” says Mr. Berman. “They appear to have had more flexibility with pricing, and that obviously plays very well in this economy.”
Perceptions of overall value burnish extended-stay’s allure, Mr. Berman says. For example, InterContinental Hotels Group’s two extended-stay brands—the upscale Staybridge Suites and the midscale Candlewood Suites—provide free Internet access and free personal laundry to guests.
Extended-stay is defined as at least four consecutive nights at one property.
With suites that typically include a bedroom, sitting area and a kitchen, the extended-stay segment usually seeks to attract long-term business travelers.
“We appeal to Hollywood, television and movie-production companies who want that anonymity while on location in New York City but who also want the spaciousness of a home,” says Larry Korman, partner in luxury boutique extended-stay brand AKA.
More space and more amenities help to deepen the leisure-client base, too. “When I travel with my three kids I need the kitchen and the space,” says Gina LaBarre, IHG’s vice president of brand delivery.
All this suggests that the bankruptcy filing of Extended Stay Inc. last year may not be indicative of conditions in this part of the market. Overall industry demand in 2009 was down 6% from the previous year while demand for extended-stay accommodation rose 2.6%, according to STR.
Resort Airport Reopens
The Gustavo Rojas Pinilla airport on Colombia’s San Andrés Island reopened on Wednesday after workers cleared away the wreckage of a Boeing 737 that crashed Monday during a thunderstorm.
This is an important step because the only way on and off the island is by air. “To transport tourists by boat is impossible because the archipelago is too far away from Colombia’s continental area,” says Norma Schoonewolff Mansang, secretary of tourism for the archipelago.
More than 3,000 tourists had been stranded on the island since the crash.
Travelers should contact airlines for more information.[...]
—Anna Prior
This article originally appeared in the August 19, 2010 edition of The Wall Street Journal.
