Hotel & Motel Management - March 17, 2008 - (Page 22) 22 Trends & Stats H&MM March 17, 2008 | HotelMotel.com www.HotelMotel.com/digital_edition Extended-stay hotel segment experiences marked growth IN THE details Segment fills industry niche Large growth in upper tier Atlanta top market Look for development abroad U.S. extended-stay hotels supply percent change full year 2003-2007 10 8 6 4 2 0 -2 2003 2004 2005 2006 2007 0.8 1.0 5.5 xx 6.0 3.8 2.7 1.5 0.5 0.4 -0.1 0.2 6.3 5.4 3.2 1.4 Upper tier Lower tier U.S. By Bobby Bowers H&MM Columnist E xtended-stay hotels occupy a unique niche in the lodging industry. The product is cost engineered to serve extended-stay guests, typically those staying three or more nights, but it also can provide accommodations to transient guests that desire a more “like home” experience. Smith Travel Research segments extended-stay hotels into two categories: upper tier (e.g. Residence Inn, Homewood Suites, Staybridge Suites) and lower tier (e.g. Extended Stay America, Candlewood Suites, TownePlace Suites). Since 2003, room supply in the upper tier extended-stay segment has grown significantly faster than the lower tier segment, though lower tier supply growth has picked up since 2005. The combined extended-stay segment increased its share of industry room supply from 5.2 percent in 2003 to 5.8 percent in 2007; revenue share moved from 4.7 percent to 5.6 percent. Both upper and lower tier extended-stay hotels enjoy occupancy premiums versus the total U.S. average. Over the last five years, upper tier extendedstay hotels have run premiums of about 4 percentage points versus lower tier properties. Occupancies have declined somewhat in both segments since 2005, as room demand growth has been unable to keep pace with strong supply increases. Upper tier extended-stay hotels enjoy significant average rate premiums versus lower tier properties. Upper tier’s average rate premium was just over $50 in 2003 and increased to just over $60 in 2007— a 20-percent gain. Revenue per available room growth, which has been driven largely by average daily rate increases, peaked in 2005 for both segments and has trailed total industry RevPAR growth in the subsequent two years. Not surprisingly, markets with a significant transient component have the highest number of extended-stay hotel rooms. Atlanta is the top U.S. extendedstay market, based on number of rooms, followed by Houston and Washington, D.C. At year-end 2007, there were more than 100 extended-stay hotels accounting for more than 12,000 rooms in the Atlanta market. The top 10 extendedstay markets account for over 600 hotels and more than 75,000 rooms—just below 30 percent of the total U.S. extendedstay supply. The outlook is bright for extendedstay hotels. There currently are 273 hotels with just over 30,000 rooms under construction in the United States. Look for continued development targeted in markets with strong extended-stay demand. Increasingly, extended-stay brands will look outside the U.S. for new development opportunities. hmm@questex.com Bobby Bowers is senior vice president of operations for Hendersonville, Tenn.-based Smith Travel Research. U.S. extended-stay hotels occupancy performance full year 2003-2007 90 Upper tier 76.4 74.0 70.3 67.1 Lower tier 80 74.6 71.8 75.6 71.2 74.3 70.5 70 60 50 2003 2004 2005 2006 2007 U.S. extended-stay hotels average room rate performance full year 2003-2007 130 110 $92.09 $94.92 Upper tier Lower tier $110.52 $101.82 $116.98 90 70 50 30 2003 2004 2005 2006 2007 $44.03 $45.25 $48.30 $53.28 $55.11 Top 10 extended-stay markets rooms December 2007 in thousands Atlanta Houston Washington D.C. Dallas Chicago Orlando Phoenix Denver Philadelphia Los Angeles 0 4.6 4.4 5.8 5.2 7.7 7.4 9.6 9.3 9.0 12.4 U.S. extended-stay hotels RevPAR percent change full year 2003-2007 20 Upper tier 15 12.3 9.9 7.1 7.7 7.9 8.5 7.4 6.1 4.0 2.4 0.5 7.8 5.7 Lower tier U.S. 10 5 0 -0.9 -2.2 -5 5 10 15 2003 2004 2005 2006 2007 © 2007 Smith Travel Research http://HotelMotel.com http://www.HotelMotel.com/digital_edition
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