For the few true luxury extended-stay brands in the market, the challenge is to find ways to be different and unique enough from Airbnb, serviced apartments and traditional luxury hotels that offer longer stays.
REPORT FROM THE U.S.—Most common in gateway urban cities in the U.S., luxury extended-stay hotels typically require bookings of 30 nights or more and include a kitchen or kitchenette, but unlike serviced apartments, they do not require a lease.
It’s a largely underserved market, as only a few true luxury extended-stay brands exist, but it’s one that is increasingly faced with the challenge of distinguishing itself from the likes of home rental providers such as Airbnb, and even traditional luxury hotels which are offering longer stays.
Mark Skinner, a partner at the Highland Group, acknowledged there is some crossover between luxury extended-stay hotels (generally confined to cities such as New York, Philadelphia, Washington, D.C., San Francisco, Los Angeles and Chicago) and serviced apartments. There also are some hybrid products out there, he said.
The inclusion of a kitchen, a distinguishing feature, has become less important in the luxury segment, which opens the door for more competitors, Skinner said.
One of the reasons traditional luxury hotels, such as the Ritz Carltons of the world, can compete in the luxury extended-stay segment is because “as you go higher up the price chain, there’s very little cooking actually done in the rooms,” Skinner said.
“So you can compete for the longer-term traveler at the luxury segment without putting a kitchen in your room,” he said.
Some luxury hotel chains have kitchens in a handful of their traditional guestrooms or may have residences that were part of the development and might be used as timeshares, he said. When the owners are away, he said, “they can put them back in the rental pool of the hotel (to be) sold essentially as an apartment … geared toward the longer-term guest.”
Many traditional hotels also offer a wet bar and more storage space for luggage and clothing to appeal to the longer-term guest, he said.
Strong performance of extended-stay hotels makes it an attractive segment.
According to December 2018 data from STR, parent company of Hotel News Now, extended-stay hotels in the U.S. averaged 75.8% occupancy (up 0.2% from December 2017), with year-over-year demand growth of 6.5% edging out supply growth of 6.3%.
What the luxury long-term stay brands are doing
Larry Korman, co-CEO of Korman Communities and president of AKA, said in an email interview he recognized early on that “there was a growing demand for this type of offering, particularly for the traveler who appreciated design, spaciousness, value and personalized service.”
Over time, AKA has been evolving and refining its offerings to stay ahead of the curve in luxury extended-stay, he said. Each of the AKA properties have amenities that include lounges, fitness centers, complimentary meeting spaces and Wi-Fi, private cinemas, in-suite dining and 24-hour front-desk assistance.
Whether the guest is renovating their home, is newly relocated or on a temporary business assignment, every touch-point at the property “is an opportunity to make a positive impression,” Korman said.
He added his philosophy of offering a customizable experience without being obtrusive to the guest sets AKA apart from other options in the market. AKA blends “the style of hospitality of an intimate hotel with the space and comfort of a luxury residence,” which “brings the best of both worlds,” he said.
The brand currently has 12 properties in metropolitan areas such as New York, Philadelphia, Washington, D.C., L.A. and London, and is exploring expansion opportunities in markets such as Miami, New York, Chicago, San Francisco, Europe and Asia. Korman said AKA is aiming to open two to three new properties per year.
“Given growth in the extended-stay segment and the evolving travel patterns of the leisure and corporate traveler, we do anticipate more options developing on the supply side with existing and new players increasing their presence in the market,” he said.
Overall, the alternative-accommodations macro concept has grown globally and become more appealing to consumers, both in leisure and corporate travel, Korman said. That has led to various levels of offerings, new subcategories and new industry vocabulary, causing some confusion for consumers, he said.
“As the market becomes more crowded, both the opportunity and the challenge, which we embrace, is to maintain an ongoing dialogue with the public—both consumers and the travel industry—to educate them about our specific offering, reinforce what makes AKA distinctive in the market, then to remain focused when delivering on those promises,” he said.
Skinner added that Airbnb, to a degree, plays within the same field as luxury extended-stay.
The higher-valued Airbnb properties do compete for that longer-term traveler more so than the business traveler, he said.
“Business travelers tend to be more loyal to branded properties, but definitely in the leisure segment (Airbnb) competes in some markets,” he said.
As a result of legislation in cities such as New York and San Francisco which restrict Airbnb from renting out properties for less than 30 consecutive nights, those properties “become less competitive with traditional hotels and more competitive with serviced apartments,” Skinner said.
Rosewood Sand Hill in Menlo Park, California, a resort-style property that offers both traditional hotel rooms and villas for extended stays, has a unique resort setting which sets it apart from competitors, according to managing director Philip Meyer.
Long-term guests at Rosewood Sand Hill have full access to amenities such as housekeeping services, room service, the pool and fitness center, the spa and a Michelin-star restaurant. At the same time, there’s a sense of community at the property, Meyer said.
“You don’t always get that flexibility with Airbnb,” he said.
Typical length of stay at the villas can range from months to years. In some instances, guests who only planned to stay temporarily end up extending stays much longer, he said.
“Once they settle in, get their comfort level and experience, we see a lot of extensions,” he said.
Guests include business travelers, sports teams, musical artists and families needing temporary housing, he said. The property is also close to Stanford University, which draws visiting parents who may make it “home for a month or two.”
Korman said AKA rewards longer stays with lower rates, which compared to a traditional luxury hotel, “deliver higher value based on prime locations, quality furnishings, spaciousness and luxury amenities and services.”
Rates also vary by location, he added.
At the Rosewood Sand Hill, the pricing model typically begins with a nightly rate, Meyer said.
“That could be translated out from there, so we’ll bid on a monthly basis and then it sort of goes from there depending on the length of stay and the time of year,” he said.
He said Rosewood also is unique in that it does not have a loyalty program.