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Report: U.S. extended-stay hotels saw all-time highs in third quarter

Upscale properties in the segment, still lagging behind industry average, set record for revenue

Report: U.S. extended-stay hotels saw all-time highs in third quarter

EXTENDED-STAY HOTELS in the U.S. had a very strong third quarter as performance across several metrics set all-time highs, especially for economy and mid-price segments, according to a report from hotel investment advisors The Highland Group. The upscale segment, which is lagging the overall hotel industry recovery, set a new third quarter record for room revenue this year.

The three extended-stay segments saw record highs in 14 different metrics including demand, occupancy, ADR and RevPAR in the third quarter, excluding room supply, the U.S. Extended-Stay Hotels: Third Quarter 2021 report said.


According to the report, economy extended-stay hotels set four new records, mid-price reported two and the upscale segment set a new high for demand during the first nine months of 2021.

Demand and room revenue for the segment reached all-time high in the third quarter, while occupancy increased by 14 points compared to all hotels, the report said. The economy segment has set new records for occupancy, ADR and RevPAR and supply growth in this sector returned to pre-pandemic level during the period.

"The 6.3 percent supply gain in the third quarter is generally consistent with annual increases before the pandemic. This is about three times the rate of supply growth pre-pandemic, indicating the pandemic continues to have a greater impact on overall room supply growth compared to extended-stay," the report said. "The rate of demand growth for extended-stay hotels is moderating but, excluding the second quarter, the 25.7 percent gain in demand in Q3 was greater than during any quarter ever reported."

STR reported total U.S. room supply gained 5.9 percent in the third quarter of 2021 compared to same period last year.

The room revenues for extended-stay hotels for the third quarter hit $4.24 billion, which is the highest ever reported across all three segments. The year-to-date room revenues stand at $10.61 billion which is within 3 percent of the previous high set in 2019.

According to the report, upscale extended-stay hotels lost more revenue, 12 percent lower than in 2019, during the pandemic than economy and mid-price segments and are rebuilding faster.

“Occupancy for economy and mid-price extended-stay hotels in the quarter under review were 83.3 percent and 78.5 percent respectively, which is the highest ever reported for the quarter. The upscale segment is still 5 to 6 points below where it has been since 2014 except for 2020. Relatively low occupancy in the upscale segment, which accounts for more than 40 percent of extended-stay room supply, negatively impacts overall extended-stay occupancy,” the report added.

However, 78.8 percent occupancy in the segment is 14 percentage points higher than the 64.8 percent STR reported for the US hotel industry.

The report added: “Year-to-date occupancy for mid-price and upscale extended-stay hotels remains below the typical level since 2014. The economy segment, however, set another new record. All extended-stay segments accelerated the ADR recovery during the period with economy and mid-price hotels setting new third quarter records. The bottom-up recovery and a relatively high concentration of rooms in urban locations, some of which are well behind the extended-stay hotel recovery, are limiting the rebound in upscale extended-stay hotel average rate.”

The Highland Group report pointed out that the boost in summer season travel benefitted upscale extended-stay hotel rates than other sectors.

“The upscale segment is leading the RevPAR recovery for extended-stay hotels but 59.1 percent growth in third quarter was well behind the 83.8 percent and 91.2 percent STR reported for the overall hotel industry and all upscale hotels respectively. RevPAR for economy extended-stay hotels set new third quarter and year-to-date records. The mid-price segment set a new quarter record but stayed about $4 below its 2019 level year-to-date,” the report concluded.

The September report by the group has said that economy and mid-price extended-stay hotels lead recovery in the sector.

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