Report: Extended-stay hotels’ Q1 RevPAR down 1.6 percent, revenue up 1.5 percent
Historical declines were noted in occupancy, ADR, and supply growth in first quarter
By Vishnu Rageev RMay 08, 2024
U.S. EXTENDED-STAY hotels experienced their first quarterly decline in RevPAR since the first quarter of 2021, according to The Highland Group. In the first quarter, the segment saw a 1.6 percent drop in RevPAR, despite a 1.5 percent increase in revenues. Demand increased by 1.7 percent, contrasting with a 2.8 percent fall in total hotel demand when excluding upper upscale and luxury segments.
STR/CoStar estimated that overall hotel RevPAR, excluding upper upscale and luxury segments, which have minimal extended-stay room supply, increased by 1.3 percent in the first quarter of 2024 compared to the same period in 2023.
The Highland Group’s 2024 First Quarter U.S. Extended-Stay Hotels report indicated that overall hotel RevPAR and room revenues declined by 1.1 percent and 0.9 percent year-to-date, respectively, excluding upper upscale and luxury segments.
The report said that extended-stay supply growth is expected to remain relatively low nationally in the foreseeable future, as interest rates are anticipated to stay high in the near term and construction costs continue to rise.
“If most forecasts for overall hotel industry performance are realized, extended-stay hotels are likely to reverse the trend of declining occupancy in the near future because demand has increased for 13 consecutive quarters and supply growth is very low,” said Mark Skinner, The Highland Group’s partner.
First quarter highlights:
ADR declines for the first time in three years
Lowest occupancy for 11 years
Second lowest supply growth in a decade
Demand gains 1.7 percent
Room revenues up 1.5 percent over last year
Average occupancy 13 points higher than all hotels
Hotel pipeline and supply dynamics
According to the report, approximately 585,403 extended-stay hotel rooms were operational at the end of the first quarter. Over the past year, excluding the pandemic-affected year of 2020, there was a net increase of 11,583 rooms, marking the second-lowest growth since 2013. This increase represents less than 40 percent of the average annual gain observed from 2016 to 2019.
The Highland Group said room nights available increased by 3.2 percent over the last year. However, when adjusting for the leap year in 2024, the increase was approximately 2 percent. Notably, there was a 15 percent surge in economy extended-stay supply, contrasting with a relatively modest gain in the mid-price segment, primarily due to conversions. New construction in the economy segment is estimated to be around 3 percent of rooms open compared to a year ago.
The report highlighted that supply change comparisons have been influenced by various factors, including rebranding, room reallocations across segments, de-flagging of hotels failing to meet brand standards, and sales to multi-family apartment companies and municipalities. This trend is expected to persist, especially through the first half of 2024, as several older extended-stay hotels remain on the market.
Furthermore, the report predicts that the full-year increase in total extended-stay supply compared to 2023 will remain well below the long-term average.
Peak demand
The first quarter witnessed peak demand in the economy and upscale extended-stay hotel segments, the report said. Total extended-stay demand increased by 1.7 percent over the past 12 months, inclusive of the leap year in 2024. This stands in stark contrast to STR/CoStar's reported 0.4 percent decline in demand for the overall hotel industry during the same period.
STR/CoStar estimated a 2.8 percent decline in total hotel demand, excluding luxury and upper upscale segments, in the first quarter compared to the same quarter in 2023.
Minimal revenue increase
The report highlighted that the 1.5 percent increase in extended-stay room revenues in the first quarter marked the lowest quarterly gain since the upward trend began in mid-2022. Meanwhile, STR/CoStar noted a 1.9 percent increase in total hotel industry room revenues for the same period. However, this figure dropped to a 0.9 percent decline when excluding upper upscale and luxury segments.
According to the report, total extended-stay hotel occupancy in the first quarter stood at 71.5 percent, a level not seen since 2013. Average occupancy was one half to two and a half points lower compared to first quarters from 2016 through 2019, with extended-stay hotels reporting lower occupancy in six of the last seven quarters.
The Highland Group also said that the economy extended-stay segment was the only segment to see a decrease in ADR in the first quarter. Coupled with the segment’s supply growth affected by conversions, this decline led to a drop in total extended-stay hotel ADR in the first quarter, marking the first contraction in quarterly ADR in three years. In contrast, STR/CoStar reported a 2.3 percent increase in total hotel industry ADR for the same period.
Furthermore, the quarterly RevPAR change mirrored the ADR pattern, with the economy segment spearheading the decline and influencing the overall change in total extended-stay RevPAR from the first quarter of 2023 to first quarter of 2024.
Trends in performance metrics
The report said that extended-stay hotels maintained an average occupancy premium over the overall hotel industry, averaging 11.7 percentage points from 2017 to 2019, a trend consistent over the last 25 years. This premium typically widens during economic downturns, notably peaking at 20 percent in the first quarter of 2021. By the first quarter of 2024, the extended-stay hotel's occupancy premium stood at 12.5 percentage points.
During the period from 2017 to 2019, extended-stay hotels experienced a slightly faster rise in ADR compared to the overall hotel industry. The relative growth spiked to 83 percent in 2021 before receding to 77 percent in the first quarter of 2022. After a minor increase last year, the ADR ratio fell to 75 percent in the first quarter of 2024.
The upper upscale and luxury segments have contributed somewhat to the overall hotel ADR growth. The relative RevPAR mirrored the ADR trends, accelerating gains from 2017 to 2019 and reaching a peak ratio of 119 percent in the first quarter of 2021. However, as the broader hotel industry rebounded in RevPAR more swiftly, the extended-stay hotel's RevPAR ratio dipped to 91 percent in the first quarter of 2024, slightly below its level compared to 2017.
Excluding the upper upscale and luxury segments from the estimate, the RevPAR ratio has shown a relatively modest decline over the past two years, with a slightly higher first-quarter ratio in 2024 compared to the same period in 2017. Although economy extended-stay hotel RevPAR declined in the first quarter of 2024 compared to the same period in 2023, the contraction was less severe than observed across all economy class hotels, maintaining an upward trend relative to all economy hotels.
Mid-price extended-stay hotels have made notable advancements compared to all mid-price hotels. In the first quarter of 2019, the ratio of mid-price extended-stay hotel RevPAR to all mid-price hotel RevPAR stood at 102 percent. Five years later, it rose to 111 percent, despite considerably higher supply growth over the period.
However, upscale extended-stay hotels, largely due to a high concentration of rooms in urban sub-markets, have lagged behind the overall extended-stay recovery since 2019. These hotels have also experienced a decline in RevPAR relative to all upscale hotels, although the gap has narrowed over the past year.
In April, The Highland Group reported a 0.2 percent decrease in total revenues from extended-stay hotel rooms for March, marking the first monthly decline in over three years. Despite facing challenges since the beginning of 2024, the segment experienced declines in most metrics compared to March 2023 but generally outperformed other hotel classes.
Howard Johnson is marking its 100th anniversary with fried clam–shaped soaps.
The soaps pay homage to an iconic HoJo menu item.
Available at select hotels and for online purchase starting Oct. 3.
HOWARD JOHNSON BY Wyndham marks a century with one of its most famous menu items, the fried clam strip. The brand is introducing limited-edition HoJo’s Original Fried Clam Soap, available at select Howard Johnson hotels across the U.S. and for online purchase beginning Oct. 3.
Designed to resemble the original food item, the soaps are infused with lemon, sea salt and butter in a nod to the butter-soaked rolls that once accompanied the fried clams, according to a statement by Wyndham.
“Howard Johnson is a brand woven into America’s cultural fabric and beloved by millions for generations,” said Marissa Yoss, HoJo’s head of marketing. “As we celebrate 100 years, our limited-edition fried clam soap is a fun, nostalgic tribute to the brand’s storied past and a playful nod to the retro-modern, family-friendly spirit that continues defining our hotels today.”
For World Waffle Day celebrations, Comfort Hotels hosted a one-day Waffle Lounge in New York City on Aug. 21.
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House introduces AFA to boost franchise model and hotel operations.
The act establishes a joint employer standard.
AHLA backs the bill, urging swift adoption.
THE HOUSE Of Representatives introduced the American Franchise Act, aimed at supporting the U.S. franchising sector, including 36,000 franchised hotels and 3 million workers nationwide. The American Hotel & Lodging Association, backed the bill, urging swift adoption to boost the franchise model and clarify joint employer standards.
The AFA amends the Fair Labor Standards Act and the National Labor Relations Act, which since 2015 have created uncertainty for franchisors and franchisees, AHLA said in a statement.
Rep. Kevin Hern (R-Oklahoma) and Don Davis (D-North Carolina) introduced the AFA.
“Hotel franchising is a pathway to the American Dream for many entrepreneurs,” said Rosanna Maietta, AHLA president and CEO. “It is a proven win-win business model that enables partnerships between franchisees and franchisors. The American Franchise Act codifies a clear joint employer definition and is essential to protecting this framework.”
AFA aims to protect the franchise model, which has long enabled women and minority entrepreneurs to run their own businesses with support from larger brands, the statement said. It will clarify the employment relationship by establishing a joint employer standard that protects workers and preserves franchisee autonomy.
Mitch Patel, AHLA board chair and Vision Hospitality Group CEO, said that as a hotel franchisee, he has seen how the model enabled him and others to achieve the American Dream.
“Throughout my career, my hotel business has employed thousands of people who have built lifelong careers in our industry,” he said. “The American Franchise Act is essential to preserving this foundation. For the benefit of both employers and employees, we strongly encourage the swift passage of this critical legislation.”
"As one of the few franchisees in Congress, I understand how damaging an ever-changing joint-employer rule is to the franchise business model,” said Hern. “I'm pleased that we were able to come together in a bipartisan effort to create legislation that safeguards small businesses and individuals working to achieve the American Dream across the country."
Davis said changes to joint-employer rules have created prolonged uncertainty in the industry.
“The American Franchise Act aims to restore stability by clarifying that franchisors and franchisees operate as independent employers while safeguarding workers through established labor standards,” he said.
Separately, a petition for a referendum on Los Angeles’s “Olympic Wage” ordinance, which sets a $30 minimum wage for hospitality workers by the 2028 Games, fell short of signatures. The ordinance will take effect, raising hotel wages from $22.50 to $25 next year, $27.50 in 2027 and $30 in 2028.
Noble broke ground on StudioRes Mobile Alabama at McGowin Park.
The 10th StudioRes expands Noble’s long-term accommodations platform.
Noble recently acquired 16 WoodSpring Suites properties through two portfolio transactions.
NOBLE INVESTMENT GROUP broke ground on StudioRes Mobile Alabama at McGowin Park, a retail center in Mobile, Alabama. It is Noble’s 10th property under Marriott International’s extended stay StudioRes brand.
“Noble is institutionalizing one of the most resilient and undersupplied segments at the intersection of hospitality, mobility and how people stay,” said Shah. “We are scaling a branded platform to capture secular demand that creates stable cash flow and long-term value.”
In May, Noble acquired 16 WoodSpring Suites properties through two portfolio transactions, expanding its platform in branded long-term accommodations.
Noah Silverman, Marriott International’s global development officer, U.S. & Canada, said breaking ground on the 10th StudioRes with Noble reflects the brand’s growth and the companies’ three-decade partnership.
“With both companies’ expertise in long-term accommodations, Marriott’s distribution channels, and the power of our nearly 248 million Marriott Bonvoy members, we are confident StudioRes is uniquely positioned to generate customer demand at scale, drive performance and sustain long-term growth,” he said.
Meanwhile, Marriott has more than 50 signed StudioRes projects, about half under construction, the statement said. The first StudioRes opened in Fort Myers, Florida.
Hersha Hotels & Resorts sold The Boxer Boston to Eurostars Hotels.
The company acquired the property in 2012 for $12.6 million.
The property now sold for $23.6 million.
HERSHA HOTELS & RESORTS sold The Boxer Boston, an 80-room hotel in Boston’s West End, to Eurostars Hotels, part of Spain’s Grupo Hotusa. The company, which reportedly acquired the property in 2012 for $12.6 million, received $23.6 million for it.
The seven-story hotel, built in 1904, is near TD Garden, the Charles River Esplanade, One Congress, North Station and Massachusetts General Hospital, said JLL Hotels & Hospitality, which brokered the sale. It also has a fitness center.
Hersha Hotels & Resorts is part of the Hersha Group, founded in 1984 by Hasu Shah. Jay Shah serves as senior advisor and his brother Neil Shah is president and CEO.
JLL Managing Director Alan Suzuki, Senior Director Matthew Enright and Associate Emily Zhang represented the seller.
"The Boxer’s prime location at the crossroads of Boston's West End, North End and Downtown districts, combined with its strong cash flow and its unencumbered status regarding brand and management, made this an exceptionally attractive investment," said Suzuki. "Boston continues to demonstrate resilient lodging fundamentals driven by its diverse demand generators, including world-class educational institutions, medical facilities, corporate presence and convention and leisure attractions."
The property will become the Spanish hotel chain Eurostars’ fifth U.S. hotel, supporting the group’s North American expansion, the statement said.
Amancio López Seijas, president of Grupo Hotusa and Eurostars Hotels Co., said the addition of Eurostars’ The Boxer strengthens the company’s presence in key locations and promotes urban tourism.
Peachtree recognized by Inc. and the Atlanta Business Chronicle.
Named to the 2025 Inc. 5000 list for the third year.
Chronicle’s Pacesetter Awards recognize metro Atlanta’s fastest-growing companies.
PEACHTREE GROUP ENTERED the 2025 Inc. 5000 list for the third consecutive year. The company also won the Atlanta Business Chronicle Pacesetter Awards as one of the city’s fastest-growing private companies.
The Inc. 5000 list provides a data-driven look at independent businesses with sustained success nationwide, while the Business Chronicle’s Pacesetter Awards recognize metro Atlanta’s fastest-growing privately held companies, Peachtree said in a statement.
“We are in the business of identifying and capitalizing on mispriced risk, and in today’s environment of disruption and dislocation, that has created strong tailwinds for our growth,” said Greg Friedman, managing principal and CEO. “These recognitions validate our ability to execute in complex markets, and we see significant opportunity ahead as we continue to scale our platform.”
The Atlanta-based investment firm, led by Friedman; Jatin Desai, managing principal and CFO and Mitul Patel, principal, oversees a diversified portfolio of more than $8 billion.