Extended-stay strength compels shift in strategy, rates
 
Extended-stay strength compels shift in strategy, rates
24 JULY 2020 8:22 AM

Resilient guest interest in extended stay has pushed hotels in other segments to court and cater more to those guests.

REPORT FROM THE U.S.—Hotel demand clearly has shown more staying power in the extended-stay segment than other parts of the industry during the downturn.

Because of that, many properties designed for more traditional transient demand have had to make operational shifts to court and cater to more long-stay guests.

Cory Chambers, SVP and chief revenue officer for Hospitality Ventures Management Group, said his company has made such efforts across its portfolio, including The Courtyard by Marriott Atlanta Marietta/I-75 North and the SpringHill Suites by Marriott Orange Beach at The Wharf in Orange Beach, Alabama.

“We’ve done long-term stay rates, we’ve relaxed cancellation perimeters, and we’ve also adjusted operations to meet extended-stay guests’ needs, with things like less frequent housekeeping,” he said, noting there’s also been a shift in F&B to include amenities such as grab-and-go breakfasts.

Many of the operational changes have been a “win-win” for the hotels and guests as wants and expectations shift during the pandemic, he said.

“Hotel guests don’t necessarily want a hotel staff person in their room on a daily basis, anyway,” he said.

Chambers said finding the right pricing model for long-stay guests requires some changes in how traditional hotels negotiate rates and quantify those of their competitors.

“You have to find where your market is pricing, particularly in the extended-stay segment,” he said.

Beyond looking at the publicly available rates for nearby extended-stay hotels, a shift to long-stay requires an understanding of how that segment is different.

“If extended-stay hotel number 1 is charging $130 a night, but their tier 1 rate for five nights and beyond is $119, that’s important to know,” he said.

Guest behavior is also important to understand.

“Are they negotiating one-offs with direct buyers? That’s one of the fundamental differences in extended-stay and traditional hotels,” he said. “The extended-stay model is built on long-term individual and small buyer reservations, so a 90-day booking for one room may be a directly negotiated rate in a normal situation, whereas a traditional hotel wouldn’t negotiate one-offs like that.”

He said that often boils down to guests seeing a rate advertised online then calling a hotel directly to ask the front desk or general manager if they can offer a better rate.

Patrick Short, VP of operations at Peachtree Hospitality Management, said his company’s extended-stay properties have clearly outperformed.

One way Peachtree has tried to capture more long-stay guests at its traditional hotels has been changing the pricing model.

“Like many hotels, we sharpened the offerings in non-extended-stay hotels to capture any guests that prefer other options versus an extended-stay hotel with flexible pricing by length of stay,” he said.

He noted that while the pricing plan has changed, the marketing strategy has not.

“We are not marketing (to extended-stay guests) differently than all of our other hotels,” he said. “We design our marketing plans to fit where the majority of customers search.”

Doug Dreher, president and CEO of The Hotel Group, said his company has had success in shifting resources to extended-stay properties over traditional hotels.

“In a suburban destination where we had both a select-service hotel and an extended-stay, we made the decision to suspend operations at the select-service hotel and to keep the extended-stay open. We have been very pleased with the results as the extended-stay has been able to capture a wide variety guests from numerous market segments that are seeking a guestroom that can provide efficiencies and floor space, given the ongoing impacts from COVID,” he said.

He described the efforts to find new demand at traditional hotels as guerrilla marketing, seeking out “relocation companies, real estate offices (and) traveling nurses” as supplements.

“At several of our hotels, our directors of sales are working actual front-desk shifts,” he said. “It has been amazing the extended-stay business they have found working those shifts. A quick conversation with one guest has turned into multiple (guests) staying 30-plus nights.”

Thom Geshay, president of Davidson Hotels & Resorts, said his company is looking “toward every segment of traveler” in the muted demand environment, which has led to an effort to capture more extended-stay guests, even though that segment is not part of their portfolio.

This has been a big focus at the all-suite property Beach House Suites by The Don CeSar in St. Pete Beach, Florida.

“We created packages to entice guests to come and stay longer,” he said. “Showing them it was safe to get out of their homes and they could effectively social distance from the comfort of a large suite with full kitchen.”

Changing the offering
Traditional hotel rooms and stays aren’t set up for extended-stay guests, which means key changes must be made to accommodate them, sources said.

Dreher said his company made sure to identify the most important elements needed to most efficiently adapt.

“We have identified the amenities that have value to an extended-stay guest—(for example,) onsite laundry, microwaves, refrigerators—and focused on them,” he said.

Geshay described the amenities at each property as “highly customized.”

“Depending on the hotel, we have determined what that guest might need, and then package and deliver it in a way to protect all those involved,” he said. “In doing that, we’ve removed anything not absolutely needed by the guest to de-clutter the guestroom, and (are) very thoughtful and intentional in what is included for their stay. It does not necessarily mean less amenities, but rather different offerings, or customized requests to ensure safety and cleanliness.”

He said his company has “targeted many groups of people that we knew needed to travel at this time,” such as first responders and medical personnel.

Chambers said food and beverage has had to be revamped, including evening receptions or breakfasts more associated with traditional extended-stay. He said hotels have also had to make more of an effort, from the earliest stage of selling rooms, to connect guests with nearby resources, such as restaurants that deliver and grocery stores.

“Most of our hotels have a pantry, and sometimes it’s about giving people an allowance in these outlets,” he said. “Some other things we’ve tried is packages with gift cards or gas cards to help them offset their other ancillary spend during travel.”

How long will it last?
Chambers said there could be long-term benefits to courting extended-stay demand, as it can help provide base business in a low corporate travel environment.

“You have to be willing to price accordingly and use it to fill gaps and holes (in demand) rather than it being a front-and-center strategy,” he said, noting the overall demand available now is small and hoteliers must be willing to chase anything out there.

“As short-term business travel comes back, we shift back to our more traditional strategies, but that’s not going to happen overnight,” he said.

Sources generally agreed the shift is a short- to medium-term phenomenon that will dissipate gradually as business travel returns.

“Once the business and group travelers return, it likely will shift back,” Short said. “There will always be demand for extended-stay. We believe the perceived increase in extended-stay is simply because other segments aside from leisure are not currently traveling.”

“There may be a short-term spike in demand as travelers are not able to get out and explore the cities they are traveling to due to business suspensions and local ordinances, and they feel comfortable in a larger room with a kitchen, but I don’t see a long-term major shift away from full-service hotels to extended-stay,” Geshay said. “That said, the extended-stay segment will continue to be strong.”

Perspective from the brands
Brand executives said they’ve been supporting their properties and franchisees in adjusting to the shift in demand.

“While we aren’t undertaking any specific marketing efforts, we have been actively providing resources to our hotel teams at the local level to help them influence decision-making and attract guests in their own backyards. We are pleased with the work our teams on the ground have been doing to help achieve this,” said Bill Duncan, global head of focused service and all suites brands for Hilton.

He said his company is “adapting our F&B offerings appropriately across the board” to reflect the shift as fully functioning kitchens are the “lifeblood” of its long-stay brands.

“We now offer a grab-and-go breakfast option in our extended-stay brands that guests can take with them or prepare in the comfort and safety of their own rooms,” he said. “We have elevated offerings in our retail spaces to provide more options, including staple meals with longer a shelf life, which also increase revenue opportunities within these outlets. In addition, we are elevating our alliances with local grocery shopping services like Instacart, and hotels have undertaken efforts to market these attractive options to guests at the local level.”

Anna Scozzafava, VP of brand strategy and operations, extended stay, for Choice Hotels International, said a shift in demand to extended-stay is evident not just from guests but also developers, who are drawn in by the more efficient operating model.

Choice is also looking to push its extended-stay expertise into non-extended-stay brands.

“Many Choice-branded hotels outside of the extended-stay segment continue to house guests traveling for long-term stay occasions, notably including essential critical infrastructure workers during the pandemic,” she said. “Our data shows that there was almost a 50% increase in seven-plus night stays in June 2020, as compared to June 2019. From a pricing perspective, we continue to offer long-term discounted rates across all of our brands, and on top of that, implement various promotions to encourage longer stays.”

She said the relatively strong extended-stay demand will be lasting.

“The steady growth in occupancy reinforces the long-term growth and resilience we expect to see in this segment in coming years,” Scozzafava said. “For the month of March, Choice Hotels’ extended-stay brands achieved an average occupancy level of over 68%, compared to the U.S. hotel industry average of approximately 40%. In April, the company’s extended-stay portfolio attained a 60% occupancy level, which more than doubled the industry average of 25%. Choice’s extended-stay brand portfolio continued their impressive performance in May with an average occupancy of 67%.”

How Extended Stay America is seizing the moment
One company that has had to do relatively little to adapt its operating model is Extended Stay America, which operates solely in the extended-stay segment.

CEO Bruce Haase said that while the company’s pricing model has remained the same through the crisis, executives have “refocused on our long-term guests.”

“We also used specific discounts to target the segments that were most likely to travel during these times,” he said. “We found maintaining flexibility and agility in our pricing helped us capture demand as demand was changing quickly.”

He said leveraging business intelligence—and looking beyond just hotel competitors—is key to getting the right pricing in the segment.

“To provide that value we use a variety of price-shopping tools to ensure we know where our products and segments are positioned relative to our competitors, including hotels and apartments,” Haase said. “By closely monitoring how each segment at each hotel is performing, we are quickly able to adjust our pricing to ensure we are providing the value our guests expect.”

The company has an “omni-channel digital marketing approach,” which expands its distribution strategy beyond traditional hotel channels. That includes apartment listing sites.

“As the only lodging company in the world that is exclusively focused on serving the needs of the extended-stay guest, ESA’s marketing strategy seeks to optimally position the brand with guests requiring long-term accommodations,” he said.

“Sites like Apartments.com* align well with the segment of guests who choose a brand like ESA as an alternative to apartments which require credit checks, long-term commitments and high initial expense. Featuring ESA on these platforms increases brand awareness and introduces the brand to an audience segment that may not have previously considered an extended-stay hotel.”

*Editor’s note: Apartments.com is part of the CoStar Group along with Hotel News Now’s parent company STR.

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