The extended-stay segment is not immune to the challenges the hotel industry is facing during the current recession, but it has weathered the storm better than most. Extended-stay hotels historically have focused on attracting hotel guests for longer periods of time than traditional hotels and often quote weekly and monthly, along with nightly rates. While this segment often has targeted the business

 Nationwide, the hotel industry registered a 2.6 percent year-to-date room-supply growth rate through November 2008 versus the extended-stay growth rate of 9.2 percent. Demand for extended-stay hotels also has outpaced the total industry average. While the industry at large has experienced a decline in demand of 1.5 percent year-to-date through November, the extended-stay segment grew room demand by 3.5 percent. The chart below tells an interesting story with the 12-month moving average for demand across extended stay segments and non-extended stay hotels in the U.S.

As the graph shows, extended stay continually outperforms non-extended stay in demand growth. Seeing the trend above, it should not come as a surprise that the extended-stay segment continued to outperform in September, October and November of 2008. It’s no secret the hotel industry as a whole suffered significant slumps in demand during those three months, but the extended-stay segment bucked that trend. As illustrated by the chart below, extended stay has outperformed the industry nationwide and maintained a positive room-demand growth rate in September, October and November. 

Upscale extended-stay performance

Demand growth in the total extended-stay segment has been driven primarily by upscale brands. STR defines upscale extended-stay brands as those falling in the luxury, upper-upscale, upscale or midscale-with-food-and-beverage chain scales. The upscale category accounts for about 42.5 percent of total room supply in the extended-stay segment.

Through November 2008, the upscale extended-stay segment experienced a 6.2 percent year-to-date demand growth rate. However, during the same time period, the upscale extended-stay segment registered a 9.5 percent growth in supply. The tremendous supply growth in the segment pushed the 2008 year-to-date occupancy growth rate to -3 percent. Although demand has outpaced the national average, room-rate growth in the upscale extended stay segment has trended below the national average. Room rates for the upscale extended-stay segment registered a 1.4 percent growth rate year-to-date compared to 2007 (2.8 percent for the total U.S.).

Midscale/economy extended-stay performance

Midscale/economy extended-stay properties have not experienced the same rate of demand growth as the upscale portion of the segment, but it has outpaced the total industry average. STR defines midscale/economy extended-stay brands as those falling in the midscale-without-food-and-beverage and economy chain scales.

As of November 2008, the midscale/economy segment experienced a room demand growth rate of -0.4 percent and a room-supply growth rate of 8.5 percent. With negative demand growth and soaring room supply, occupancy in the midscale/economy extended-stay segment declined 6 percent year-to-date. Rate growth in the segment has remained positive, with a year-to-date average-daily-rate growth rate of 2 percent.