Report: Total extended-stay hotels achieved fourth quarter milestones in 2023
The quarter also saw the lowest occupancy in 10 years
By Vishnu Rageev RFeb 09, 2024
TOTAL EXTENDED-STAY HOTELS achieved new fourth-quarter milestones in 2023, setting records in supply, demand, ADR, RevPAR, and room revenues, according to The Highland Group. Despite this, occupancy declined alongside the broader hotel industry trend, with slower growth in ADR and RevPAR throughout the year. Consequently, extended-stay hotel RevPAR experienced its smallest fourth quarter increase since 2019, excluding contractionary periods.
Extended-stay hotel supply growth increased marginally in 2023 but remained very low, the report said. The last time supply growth consistently hovered around its current level was from the fourth quarter of 2010 through the third quarter of 2014. Throughout this period, supply increases stayed below their long-term historical average for 20 consecutive quarters, while the federal funds rate was about 10 times higher than its current level.
With interest rates and construction costs expected to stay relatively high, the risk of extended stay hotel oversupply nationally is low in the near term, despite the launch of several new brands, The Highland Group said.
Fourth quarter highlights for extended-stay hotels include:
Lowest occupancy in a decade
Second lowest net gain in new rooms in ten years
Record-high revenues across all segments
Room revenues up 3.3 percent compared to the previous year
RevPAR increased by 1 percent compared to fourth quarter of 2022
Average occupancy 12 points higher than all hotels
Supply dynamics in Q4
At the close of the fourth quarter of 2023, there were 580,562 extended-stay hotel rooms in operation, The Highland Group said. Excluding the pandemic-disrupted year of 2020, the net gain of 12,792 rooms over the past year doubled compared to the previous year but still represented the smallest annual increase since 2013.
The 13 percent rise in economy extended-stay supply, coupled with a decrease in mid-price segment rooms, is primarily attributed to conversions, the report added. New construction in the economy segment is estimated to account for approximately 3 percent of open rooms compared to the previous year.
Supply change comparisons have been influenced by re-branding, which entails moving rooms between segments in The Highland Group’s database, as well as the de-flagging of hotels that no longer meet brand standards. Moreover, some hotels have been sold to multi-family apartment companies and municipalities, further impacting the comparison, the report added.
This pattern is likely to continue into the first half of 2024 as several older extended-stay hotels remain on the market. However, the total year-over-year increase in extended-stay supply compared to 2022 is expected to remain well below the long-term average.
Demand up in economy, upscale segments
The economy and upscale extended-stay hotel segments saw record-high demand in the fourth quarter of 2023, the report said. However, demand in the mid-price segment dropped by 2 percent compared to the fourth quarterof 2022. The mid-price segment's supply contraction due to re-branding negatively impacted demand while boosting it in the economy segment.
Total extended-stay hotel demand increased by 1.2 percent, a favorable contrast to the 0.6 percent decline reported by STR/CoStar for the overall hotel industry in the fourth quarter.
The rate of room revenue increase has declined since the significant gains observed after 2020. While fourth quarter 2023 growth resembled that of the third quarter, the total revenue increase for the fourth quarter marked the smallest percentage change in total extended-stay hotel revenue over the past 20 years, excluding contractionary periods.
Nevertheless, it surpassed the 2.4 percent increase estimated by STR/CoStar for the overall hotel industry, the report added.
Occupancy dips
In the fourth quarter, all three extended-stay segments witnessed a decline in occupancy for the first time in three years, marking the third consecutive quarter with lower total extended-stay occupancy compared to 2022, The Highland Group said. All three extended-stay segments achieved record-high ADR in the fourth quarter of 2023. Mid-price was the only segment to report a stronger ADR increase compared to the overall hotel industry in the fourth quarter.
Economy extended-stay hotels faced their third successive quarterly decline in RevPAR in the fourth quarter, although the drop was less than in the previous two quarters and notably lower than the 5.2 percent decrease STR/CoStar reported for all economy class hotels. Mid-price and upscale extended-stay hotels similarly reported their lowest quarterly RevPAR gain of the year in the fourth quarter.
Extended-stay hotels' occupancy premium above the overall hotel industry averaged about 11 percent from 2016 through 2019, following a typical pattern over the last 25 years, The Highland Group added. This premium tends to rise during contractionary periods and widened substantially during the pandemic-induced downturn, peaking at 21 percent in the fourth quarter of 2020.
At 12.3 percentage points in the fourth quarter of 2023, the premium remains unchanged from a year ago and about one point higher than in the fourth quarters from 2016 through 2019.
ADR, RevPAR growth
The Highland Group report further indicated that extended-stay hotels increased ADR slightly faster than the overall hotel industry from 2016 through 2019. Relative growth accelerated in 2020, with the ratio peaking at 88 percent before declining to 76 percent to 78 percent over the past two years as the overall hotel industry recovered ADR more quickly due to much deeper losses during the pandemic. In the fourth quarter of 2023, the ratio of extended-stay hotel ADR to overall hotel industry ADR was about two points lower than in 2016.
Relative RevPAR followed a similar trajectory, accelerating gains from 2016 through 2019 and peaking at a ratio of 132 percent in the fourth quarter of 2020. As the overall hotel industry recovered RevPAR more quickly, the extended-stay hotel’s RevPAR ratio declined to 91.4 percent in the fourth quarter of 2023, approximately the same as in the fourth quarter of 2016.
Economy extended-stay hotels show one of the highest RevPAR recovery ratios in the hotel industry, reaching 121 percent compared to fourth quarter of 2019. Leading the recovery, these hotels were the first to report a full annual RevPAR rebound in 2021. Despite a decline in RevPAR over the last year, economy extended-stay hotels achieved significant gains compared to economy hotels overall.
Mid-price extended-stay hotels swiftly returned to their pre-pandemic RevPAR level, remaining one of the hotel industry’s strongest performing segments. They also made gains compared to all mid-price hotels. In the fourth quarter of 2019, the ratio of mid-price extended-stay hotel RevPAR to all mid-price hotel RevPAR was 97 percent. Four years later, despite higher supply growth over the period, it increased to 107 percent.
Due to a higher concentration of rooms in urban sub-markets, upscale extended-stay hotels have been slower to recover compared to the overall extended-stay segment. Despite being fully recovered for over a year, the segment has experienced a decline in RevPAR relative to all upscale hotels since 2019.
Extended-stay hotels showed diverse performance compared to the overall hotel industry in December, with gains in supply, demand, and room revenues, according to The Highland Group.
More than 70 percent expect a RevPAR increase in Q4, according to HAMA survey.
Demand is the top concern, cited by 77.8 percent, up from 65 percent in spring.
Only 37 percent expect a U.S. recession in 2025, down from 49 percent earlier in the year.
MORE THAN 70 PERCENT of respondents to a Hospitality Asset Managers Association survey expect a 1 to 3 percent RevPAR increase in the fourth quarter. Demand is the top concern, cited by 77.8 percent of respondents, up from 65 percent in the spring survey.
HAMA’s “Fall 2025 Industry Outlook Survey” found that two-thirds of respondents are pursuing acquisitions, 80 percent plan renovations in the coming year and 57 percent are making or planning changes to brand affiliation or management strategies.
“With hopes high for a stronger fourth quarter, hotel asset managers continue to maintain an optimistic outlook,” said Chad Sorensen, HAMA president. “More than 70 percent of our members expect RevPAR to increase 1 to 3 percent and two-thirds are pursuing acquisitions. With 80 percent planning renovations in the coming year, we see an engaged community focused on performance.”
Conducted among 81 HAMA members, about one-third of the association, the survey reports expectations for revenue growth, property investments and acquisitions.
However, the top three most concerning issues were demand, ADR growth and tariffs, HAMA said.
RevPAR growth forecast
Looking into 2026, 72.8 percent expect 1 to 3 percent growth, 18.5 percent expect 4 to 6 percent, 7.4 percent anticipate flat results and 1.2 percent project a decline. Full-year RevPAR projections versus budget are more mixed: 49 percent expect 1 to 3 percent growth, 17 percent expect flat results, 12 percent expect 4 to 6 percent growth, 2 percent expect 7 percent or more and 19 percent expect declines.
Hotel asset managers note several market pressures, the report said. Other concerns include ADR growth at 51.9 percent, tariffs at 34.6 percent, wage increases at 33.3 percent and potential Federal Reserve rate changes at 32.1 percent. Management company performance at 25.9 percent, immigration and labor trends, union activity and insurance costs were also mentioned.
“The industry is at its highest level of concern around maintaining or increasing rates,” Sorensen said. “There’s pressure to build on the P&L going into 2026.”
Performance projections
Confidence in the broader economy has increased since spring, the survey found. Only 37 percent of respondents expect a U.S. recession in 2025, down from 49 percent earlier in the year.
When asked about properties exceeding gross operating profit forecasts, 59 percent of managers expect 0 to 25 percent of their hotels to surpass targets, 25 percent expect 26 to 50 percent, 10 percent expect 51 to 75 percent and 6 percent expect 76 to 100 percent. Additionally, 20 percent reported returning hotels to lenders or entering forced sales since the spring survey.
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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.
A PETITION FOR a referendum on Los Angeles’s proposed “Olympic Wage” ordinance, requiring a $30 minimum wage for hospitality workers by the 2028 Olympic Games, lacked sufficient signatures, according to the Los Angeles County Registrar. The ordinance will take effect, raising hotel worker wages from the current $22.50 to $25 next year, $27.50 in 2027 and $30 in 2028.
Mandatory health care benefits payments will also begin in 2026.
The L.A. Alliance for Tourism, Jobs and Progress sought a referendum to repeal the ordinance, approved by the city council four months ago. The petition needed about 93,000 signatures but fell short by about 9,000, according to Interim City Clerk Petty Santos.
The council approved the minimum wage increase for tourism workers in May 2023, despite opposition from business leaders citing a decline in international travel. The ordinance requires hotels with more than 60 rooms and businesses at Los Angeles International Airport to pay workers $30 an hour by 2028. It passed on a 12 to 3 vote, with Councilmembers John Lee, Traci Park and Monica Rodriguez opposed.
The L.A. Alliance submitted more than 140,000 signatures in June opposing the tourism wage ordinance, triggering a June 2026 repeal vote supported by airlines, hotels and concession businesses.
AAHOA called the ruling a setback for Los Angeles hotel owners, who will bear the costs of the mandate.
"This ruling is a major setback for Los Angeles' small business hotel owners, who will shoulder the burden of this mandate," said Kamalesh “KP” Patel, AAHOA chairman. "Instead of working with industry leaders, the city moved forward with a policy that ignores economic realities and jeopardizes the jobs and businesses that keep this city's hospitality sector operating and supporting economic growth. Family-owned hotels now face choices—cutting staff, halting hiring, or raising rates—just as Los Angeles prepares to host millions of visitors for the World Cup and 2028 Olympics. You can't build a city by breaking the backs of the small businesses that make it run."
Laura Lee Blake, AAHOA president and CEO, said members are proud to create jobs in their communities, but the ordinance imposes costs that will affect the entire city.
“Even with a delayed rollout, the mandate represents a 70 percent wage increase above California's 2025 minimum wage,” she said. “This approach could remove more than $114 million each year from hotels, funds that could instead be invested in keeping workers employed and ensuring Los Angeles remains a competitive destination. The mandate increases the risk of closures, layoffs and a weaker Los Angeles."
A recent report from the American Hotel & Lodging Association found Los Angeles is still dealing with the effects of the pandemic and recent wildfires. International visitation remains below 2019 levels, more than in any other major U.S. city.
India-based TBO will acquire U.S. wholesaler Classic Vacations for up to $125 million.
The deal combines TBO’s distribution platform with Classic’s advisor network.
Classic will remain independent while integrating TBO’s global inventory and digital tools.
TRAVEL BOUTIQUE ONLINE, an Indian travel distribution platform, will acquire U.S. travel wholesaler Classic Vacations LLC from Phoenix-based The Najafi Cos., entering the North American market. The deal is valued at up to $125 million.
Gurugram-based TBO is led by co-founders and joint MDs Gaurav Bhatnagar and Ankush Nijhawan.
“We’re thrilled to bring Classic Vacations into the TBO family – the company’s longstanding delivery of services has earned the trust of more than 10,000 travel advisors in the U.S. and their end customers, making Classic Vacations a seamless fit for our vision in the travel and tourism industry,” said Bhatnagar. “Classic Vacations is led by a strong team and will continue as an independent brand while leveraging TBO’s technology and distribution capabilities to grow its business.”
Classic Vacations reported revenues of $111 million and an operating EBITDA of $11.2 million for the financial year ending Dec. 31, 2024, the companies said in a joint statement. The company has a network of more than 10,000 travel advisors and suppliers.
The acquisition combines TBO’s distribution platform with Classic’s advisor network to strengthen their position in the outbound market, the statement said. Classic will continue as an independent brand while integrating TBO’s global inventory and digital tools.
Nijhawan said the acquisition furthers TBO’s investment in organic and inorganic growth.
“As we begin integrating Classic Vacations with TBO, we will remain open to similar strategic alliances going forward,” he said.
Classic Vacations was acquired from Expedia Group by The Najafi Cos. in 2021.
“This acquisition and partnership are a natural next step for our portfolio company Classic Vacations, and we’re happy to have worked successfully with them for the last four years, maximising the company’s strengths and expertise in luxury travel,” said Jahm Najafi, founder and CEO, The Najafi Companies.
Moelis & Co. LLC was the financial adviser and Ballard Spahr LLP the legal adviser to Classic Vacations. Cooley LLP served as legal adviser and PwC as financial and tax adviser to TBO.