Report: Extended-stay hotels’ performance in June improved

The segment continues to see lower declines compared to national averages

Extended-stay hotels again performed above national averages again in June, seeing higher occupancy particularly in the economy segment, according to a report from hotel investment advisors The Highland Group.

IN JUNE, FOR a third straight month, extended-stay hotels in the U.S. saw improved performance, according to the latest report from hotel investment advisors The Highland Group. The segment continues to outperform other types of hotels.

Extended-stay hotels posted a 55.1 percent RevPar loss in June, the smallest decline in the three full months since the pandemic began impacting travel, according to The Highland Group’s “U.S. Extended-Stay Lodging Bulletin: June 2020.” That is compared to 60.6 percent STR reported for all hotels for the month.

Average occupancy for extended-stay hotels was 54 percent for the month compared to 42.2 percent for all hotels, the report said citing STR data. At 75.4 percent, economy extended-stay hotel occupancy is higher than any other lodging category by more than 20 percentage points.

“Economy and mid-price extended-stay hotels continue to post the highest occupancy of any hotel industry segment” said Mark Skinner, partner at The Highland Group.

The economy extended-stay segment had the best improvement in revenue loss in June over May, a fall of 6.3 percent compared to 10 percent the previous month. The segment was insulated from declines in transient and group travel by its relatively high share of longer-term, essentially residential guests and a large proportion of construction-related demand, according to the report.

Upscale extended-stay hotels saw a higher share of the overall decline of 63.1 percent for overall hotel room revenue during the month.

“Upscale extended-stay hotels operate more like traditional hotels than their economy or mid-price counterparts and their revenue decline was higher than the overall hotel industry average,” the report said. “The monthly decline in demand for upscale extended-stay hotels was also higher than the 46.1 percent STR reported for all US hotels but lower than the respective 55 percent and 75.1 percent reductions upscale and upper upscale hotels experienced.”

Occupancy declines for extended-stay also were lower in June than May.

“Like the overall hotel industry, the largest occupancy losses have occurred at higher price points and June was the second month in which upscale extended-stay hotel occupancy dipped below the overall hotel average. However, upscale extended-stay hotel occupancy remained higher than the 37.2 percent STR reported for all upscale hotels,” the report said.

Overall extended-stay ADR dropped 32.6 percent in June compared to one year ago. The closing of some mid-price and upscale extended-stay hotels distorted the distribution of rooms open compared to last year, and that coupled with large losses of higher rated guests contributed to that decline.

“The decline was lower than in May but ADR losses were slightly greater than the 31.5 percent decline STR reported for the overall hotel industry,” the report said.