Extended stay still ‘golden child of US hotel industry’
Extended stay still ‘golden child of US hotel industry’
21 AUGUST 2020 7:43 AM

In his weekly video reviewing U.S. hotel performance, STR’s Jan Freitag said U.S. occupancy improved for the week ending 15 August and extended-stay hotels continue to win in terms of performance.

HENDERSONVILLE, Tennessee—Total U.S. occupancy improved for the week ending 15 August and the extended-stay segment continues to be the “golden child of the U.S. hotel industry,” STR’s SVP of lodging insights Jan Freitag said during his weekly video presentation.  

(STR is the parent company of HNN).

Total U.S. occupancy for the week stood at 50.2%, Freitag said, and while the number of COVID-19 cases continues to increase with 370,000 reported for the week, the rate of growth for the new cases is stalling.

“The good news is that the (revenue per available room) percent change is also getting better week by week by week,” he said. “It’s inching up and now it’s (slightly) better than -50%.”

As a result of the number of rooms sold continuing to increase, the number of people traveling via plane is also increasing. TSA reports it has checked more than 5 million people through American airports last week, Freitag said.

“It is worth pointing out that the 5 million number is 113,000 passengers higher than it was a week ago, so that’s a growth of 200% on the TSA side; it is 105,000 rooms higher on the room demand side, which actually only equates to 0.6% because of course the base is much higher on the room demand side,” he said.

He added that U.S. occupancy is over 50% but the trajectory is slow.

Europe continues to increase occupancy growth, which now stands at 44%, and in China last week, two out of three rooms were occupied as the country saw occupancy of 67.2%.

The trajectory in China is accelerating and STR is interested to see if that holds through August, Freitag added.

Extended-stay segment wins
The extended-stay segment is “really the golden child of the U.S. hotel industry right now,” Freitag said.

“Even in the trough on the week of 11 April, the lower-end, extended-stay properties sold just over half of all their rooms,” he said. “Now that number stands at under 73% for the total extended-stay segment and was selling two out of three rooms, certainly very, very good performance. It will likely not change very much going forward.”

The new forecast
STR and Tourism Economics presented their new forecast at last week’s online 2020 Hotel Data Conference event.

“The forecast is slightly worse than it was the last time around; we’re now suggesting that RevPAR is declining just over -52% and then rebounding next year at just under 38%,” Freitag said. “This of course is a demand story. Demand we expect to be down 39% this year and then up 30% again next year.”

He said the key performance metric to check on and follow closely is the room rate growth.

“We’re probably going to come in this year at ADR down 21% and that of course has a lot to do with mix shift; the lack of corporate transient and the complete lack of corporate group demand in Q3 and Q4,” Freitag said.

STR is suggesting ADR will be up just under 6% for 2021, which “implies that in Q3 and Q4 of next year we’re actually going to see a resurgence of corporate business travel and corporate group travel,” he added.

More hotels reopening
As the room demand trajectory continues, more hotels are reopening, Freitag said.

Fewer and fewer rooms will be temporarily closed if that trajectory continues, he said.

STR’s standard occupancy takes out temporarily closed properties and currently stands at 47%. STR has also introduced a new metric, total room inventory (TRI), which looks at occupancy assuming all rooms are open.

That number stands at 44.6%, meaning there’s a -5.2% difference between standard occupancy and TRI, he said.

For more from Freitag’s weekly update, watch the video below:

Editor’s note: The video included in this article was filmed by Jan Freitag, SVP of lodging insights at STR, on 19 August and edited and produced by CoStar Group. HNN is a division of STR, a CoStar Group company.

No Comments

Comments that include blatant advertisements or links to products or company websites will be removed to avoid instances of spam. Also, comments that include profanity, lewdness, personal attacks, solicitations or advertising, or other similarly inappropriate or offensive comments or material will be removed from the site. You are fully responsible for the content you post. The opinions expressed in comments do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Please report any violations to our editorial staff.