The Changing Business of Extended-Stay Hotels

Transcription

Homewood Suites by Hilton + Skift Present:
The Changing
Business of
Extended-Stay Hotels
As a niche segment, extended-stay hotels have come a long
way to become a specialized product in the hotel industry.
Because the demand for extended-stay hotels has increased,
operators and developers are innovating and expanding their
product offerings and locations in order to meet the needs of
their flourishing customer base.
If you have any questions
about the report, please contact
[email protected].
WWW.SKIFT.COM
WWW.HOMEWOODSUITES.COM
Homewood Suites by Hilton + Skift Present: The Changing Business of Extended-Stay Hotels
About us
At Homewood Suites, we believe life on the road should be more about life and
less about the road. Our studio, one-bedroom and two-bedroom suites provide
the space guests need to stretch out, work and relax.
Homewood Suites provides amenities to help guests stay in their routines while
away from home. Each spacious suite has a fully equipped kitchen and fullsize fridge and other appliances, as well as real dishes & cookware so guests
can whip up their favorite healthy meal right in the comfort of their room. We
even offer free grocery shopping service – just fill out the in-room shopping list
and groceries will be stocked in the fridge and pantry that day.
A free breakfast featuring daily assortments of hot items, waffles, yogurts and
cereals is something guests look forward to each morning. Also, on Monday
through Thursday nights, join us for free dinner and drinks* in the lodge. Have
a beer or glass of wine, our treat.
Keep up with emails and business needs with free Wi-Fi throughout the hotel, and
a business center with a fax, photocopier and printer. A 24-hour fitness center,
pool and sports court** also help guests maintain fitness routines while traveling.
Whether guests stay with us a few nights or a few months, we guarantee they
will stay comfortable and feel at home.
*Monday through Thursday only. Service of alcohol subject to local and state laws. Must be of legal drinking age.
**Available at select properties.
3
SKIFT REPORT 2014
SKIFT REPORT 2014
Executive summary
Homewood Suites by
Hilton Dallas Frisco
It’s the hotel segment that boasts the greatest profit margins, leadingedge revenue per available room and long-term guest relationships.
The extended-stay segment might be considered a unique animal, but
its performance begs to be considered the king of the jungle.
This report examines how the leading extended-stay brands and
operators are responding to consumer trends and market demands to
drive profitability and guest satisfaction, with an emphasis on increasing awareness of the extended-stay concept among consumers.
At the same time, extended-stay hotels have an eye to the future. The
definitive guest of an extended-stay hotel, the five-plus night guest,
has needs that are changing, much like the overall hotel industry. But
what sets these guests apart is their desire—their absolute requirement—for the comforts of home on long-term hotel stays.
The single-most defining characteristic of the extended-stay product
is the in-room full kitchen, but brands have worked hard to differentiate themselves with a uniquely developed customer service model for
their guests that includes evening receptions, limited housekeeping
and complimentary breakfast.
4
Bill Duncan, Global Head, brand management for Homewood Suites
by Hilton and Home2 Suites by Hilton, says the guest who has a longer
stay has different needs and those needs drive behavior:
• A focus on the stay experience and the living space.
• A desire to maintain their normal routine.
• A need to feel nurtured and taken care of while away
from home and loved ones.
5
SKIFT REPORT 2014
SKIFT REPORT 2014
Table of contents
About Skift
About Us 3
Skift is the largest industry
intelligence and marketing
platform in travel, providing
news, information, data and
services to all sectors of the
world’s largest industry.
Executive Summary 4
Introduction 7
Extended-Stay Consumer Awareness 9
Survey: Travelers choose midscale as the safe bet
Market Intelligence 13
Who are extended-stay customers?
Where do they come from?
Corporate travel insights: Q&A
The new generation of extended-stay travelers
Future Demands Affecting the Segment 17
Urban development: The new frontier for extended stay
Dual-flag developments: Easier entry into high barrier markets
International markets: Opportunities abound Luxury tier: A place to grow
Development Innovations and Opportunities 21
Owner/Investor Value Proposition 22
Fundamentals remain strong, and data shows why
The Extended-Stay Hotel: An Overview 24
Key Takeaways 26
About Skift 27
6
Based in New York City,
Skift has deep experience in
identifying and synthesizing
existing and emerging
trends, in its daily coverage
of the global travel industry,
through its Skift Trends
Reports and its data insight
from SkiftIQ competitive
intelligence service.Skift is
the business of travel.
Visit skift.com for more.
SKIFT REPORT 2014
Introduction
Homewood Suites
by Hilton Atlanta
Midtown lobby
Often considered a niche hotel segment that is unknown to the
average consumer, the extended-stay hotel segment has experienced a positive growth history and, according to industry experts,
the segment is expected to have a positive future.
This report presents the story of how the hotel industry developed
a demand for this specialized product, what operators and developers are doing today to meet the needs of customers and how the
extended-stay segment is likely to evolve in the future.
The birth of the extended-stay segment can be traced back to
apartment developer Jack DeBoer, who in 1975 established Residence
Inn, the first upscale all-suite hotel. In 1989, Homewood Suites, its
only true competitor in the upscale tier, was established. Both brands
were later acquired by large hotel companies: Homewood Suites was
scooped up by Hilton and Residence Inn was bought by Marriott.
DeBoer went on to establish other brands in the segment:
Summerfield Suites (which comprises the majority of the newer
Hyatt House brand), Candlewood Suites (now operated by IHG) and
Value Place.
The largest owner/operator extended-stay brand with 682
properties, Extended Stay America, was founded in 1995.
7
The newest brands to enter the segment are Home2 Suites by Hilton
and Hyatt House. Home2 Suites launched as a new-build brand in
2009 and its first property opened in 2011. Hyatt House established
its base of properties with conversions of Summerfield Suites in 2011.
The segment is on the minds of many hotel brand leaders, even
those who don’t operate within this category.
David Kong, CEO of Best Western International, said, in an
open-ended discussion with Hotel Management, that extended-stay
was a travel industry trend that had an impact on hotel deals and
operations: “The extended-stay segment has broad appeal to
travelers and developers. It is marginally more expensive to build,
but there are cost efficiencies in operations. Just about all major
hotel companies have launched extended-stay brand(s).”
The demand for the long-term stay is beyond what the niche
segment can accommodate, says Tom Seddon, CMO, Extended Stay
America. “The demand for stays of five-plus nights is 22 percent of
all room nights sold, yet only 7 percent of the supply is extendedstay, which is a big imbalance.”
In terms of performance metrics, the midyear 2014 average occupancy in the category was at its highest level in 12 years, at 76.9
percent, according to The 2014 US Extended-Stay Lodging Midyear
Report from The Highland Group. Supply growth was 2.5 percent
and demand growth was 5.0 percent in June year to date. Revenues
were up 10.6 percent for the segment for June YTD and second
quarter revenue increases were the fastest second-quarter increase
since 2006 at 11.3 percent growth, according to Highland.
“It’s a segment that has a product that is incredibly versatile,” says
Christian Kuhn, VP of marketing for Homewood Suites by Hilton
and Home2 Suites by Hilton. “Both for transient and longer term,
because it’s anchored by the full-size kitchen it gives the traveler
the best of all worlds even though it’s considered a niche. It makes it
easy to talk about—it works for everybody.”
Indeed, from private equity investors to regional developers, the
extended-stay segment enjoys a favorable reputation—but are
consumers coming along for the ride?
8
SKIFT REPORT 2014
Extended-stay consumer awareness
Built into the longer-stay guest relationship is
It’s a good position for a segment to be able
the ability to get valuable customer feedback
to get that valuable guest feedback, but
during the stays of five or more nights (the
industry players understand that there is
average stay is 14 days). While limited in
still work to do in terms of getting the word
number, the staff is trained to be welcoming,
out—improving consumer awareness and
accommodating and to seek out ways to make
acceptance of the extended-stay product as
guests feel at home.
applicable to their travels.
Tom Bardenett, president of the Crossroads
“We, as an industry, just haven’t done a good
Hospitality Division (select-service division)
job telling that story,” Seddon says. “We
of Interstate Hotels & Resorts and EVP of
need to introduce people to the category. If
operations, says it’s a very unique scenario
you had a choice of full kitchen why wouldn’t
for interaction.
you take it?”
“It’s one of the easier segments to actually
Owners share similar sentiment regarding the
operate—you don’t have to guess at their
need for explanation to new customers.
needs, because of the length of stay you
can establish a relationship with long-term
Navin Dimond, President and CEO of
guests so they continue to want to stay,”
Stonebridge Companies, an owner and
says Bardenett, whose company manages
developer of major hotel brands, including
several extended-stay brands, including 10
several extended-stay brands, says his sense is
Homewood Suites properties.
that the extended-stay concept is
misunderstood or not understood.
“They are a very open book, because they
are there so long, that interaction allows the
“If someone knows the product they under-
operator to really get to know their guests.”
stand it, but if they are a new customer, even
if it has ‘suites’ in the name, it doesn’t tell you
“The longer they stay the
more they’ll tell you what
they need.” -Tom Bardenett
it’s extended-stay, it doesn’t tell you about the
kitchen,” he says. “It’s not as well understood
as we’d like it to be.”
9
SKIFT REPORT 2014
“It’s not as well understood
as we’d like it to be.”
- Navin Dimond
beverage cost savings.
Dimond says it requires explaining the
website are finding extended-stay hotels
amenities and showing customers
most often by searching by hotel name,
photographs, videos and floor plans.
despite the fact that “kitchenette” is
A review of keyword search habits on
TripAdvisor indicates that visitors to the
offered as an amenity on the major city
“Once they see it they say they like it, but
hotel search pages. In fact, less than one
we need to make sure customers know
percent of site visitors are searching for
what we offer,” he says. “Our job as a
“kitchenette,” according to TripAdvisor
segment and a brand is to make sure we’re
data.
doing that.”
This suggests that most often, site visiBecause hotel selection is highly
tors already know an extended-stay brand
influenced by pricing, increased awareness
when they express interest in this type
of extended-stay amenities could do much
of accommodation, which does support
to persuade value-conscious travelers.
marketing intelligence that once someone
While there can be a $10 premium in a per-
stays at an extended-stay property, they
night comparison of room rates, travelers
have a high satisfaction rating. However,
might not realize that extended-stay hotels
had more visitors chosen the “kitchenette”
offer complimentary hot breakfasts,
amenity as a means of finding the product,
evening receptions with a selection of
it would suggest that visitors understand
snacks and of course, the full in-room
the extended-stay offering implied by a
kitchens that offer even more food and
guestroom with a kitchenette.
10
SKIFT REPORT 2014
Survey: Travelers pick midscale as the safe bet
In order to examine the extended-stay segment’s position among hotel options for travelers, we
conducted a series of surveys about their preferences in hotel type for trips of five-plus nights.
We used Google Consumer Surveys to conduct research on leisure trip and business trip preferences of U.S. adult Internet users.
The results indicate that respondents favored midscale hotels with restaurant, by a slight margin,
for both leisure and business trips of five-plus nights. But then all other hotel types were almost
equal in preference in the responses. In some ways, this is a win for extended-stay hotels, in that
the segment is keeping up with the industry and there is no aversion to this hotel type.
However, because the survey specifically asked travelers to consider their long-term stays, the
results should have favored the hotel type that offered amenities that are known to be important
to guests when a hotel stay surpasses the five-day mark. In addition, we referred to
extended-stay type as “upscale hotel with bedroom suite and full kitchen” to explain the product
offerings and eliminate any bias or inexperience with the extended-stay label.
In a comparison by age of respondents who chose this hotel type (upscale hotel with bedroom
suite and full kitchen) for a five-plus night leisure trip, interestingly, it was the younger respondents who slightly favored the segment (ages 18-34 years), yet the average age guest at an
extended-stay hotel is in their mid-40s.
11
SKIFT REPORT 2014
When surveying travelers about the most important amenities, respondents did not prioritize the
key differentiators of the extended-stay segment. Travelers said the most important amenity for
an extended leisure trip was complimentary breakfast. While this is definitely a strength of extended
stay, most midscale hotels offer free breakfast as well. Extended-stay hotels could focus on the
quality (usually a hot meal) of their breakfast to further differentiate themselves.
When surveying travelers about the most important amenities for an extended business trip,
respondents said the most important amenity was free Wi-Fi.
Further inquiry with survey respondents shows that there may be a small correlation between
those who have traveled for business in the past year and use of extended-stay hotels. Business
travelers were more likely than leisure travelers to have ever stayed in an extended-stay hotel.
12
SKIFT REPORT 2014
Market intelligence
Who are extended-stay customers?
want amenities to work rather than “fancy
stuff,” Seddon says. “This relates to
The average extended-stay travelers are in
generational trends and the idea of growing
their mid-40s. The average length of stay is
up self-service. Doing for yourself is now
14 days. The business mix is a target of 50
seen as the better way.”
percent extended-stay (5 or more nights)
and 50 percent transient (1-4 nights, typi-
Extended Stay America is halfway through
cally not part of a group) guests. This mix
a renovation program of all of its
hasn’t changed over time.
properties and has already invested $650
million, according to Seddon. The focus
When looking at the behavior of loyalty
is on refreshing the guestroom, but also
program members, Hilton Worldwide con-
improving operational aspects like the
sumer research shows that the loyal mid-
booking process.
career traveler profile drives the stays at
its focused-service properties. (Extended-
Homewood Suites by Hilton launched in
stay brands are commonly categorized as
2013 its Take Flight program for
a focused service within hotel companies
refurbishing older properties and adding
— they also are called select-service.)
brand standards to new hotels. The brand
is 25 years old this year with 350 locations,
Among guests who are not loyalty program
and desired to address some innovations in
members, business families and leisure
the guest experience.
families comprise the majority of focusedservice guests. At Hilton, this category
Each hotel will be affected differently by
includes: Homewood Suites by Hilton,
the program, says Duncan. “Owners of
Home2 Suites by Hilton, Hilton Garden Inn
more mature properties may decide to
and Hampton Hotels.
undergo a full, top-to-bottom renovation
that will include the Lodge, Front Porch,
Extended Stay Americas’ research
recreational areas, and in-suite upgrades,”
indicates that seven out of ten travelers
he says. “Owners of newer properties may
would rather have a kitchen than a fitness
only need to add the outdoor kitchen, a
room and among business travelers, they
new brand standard.”
13
SKIFT REPORT 2014
Where do guests come from?
“We spend a lot of time dispersed in organizations in human resources or IT or transporta-
No doubt, business travelers are a crucial
tion,” he says. “It’s harder to find the person
component of extended-stay demand, but
who is going to book the rooms, but generally
this target consumer covers a wide variety
once you do the word gets out pretty quickly.”
of industries and requires a specialized
sales approach.
The sales education process is paramount,
says Homewood’s Duncan. “We spend a lot
At the hotel level, a successful approach is to
of time with training and education to be able
identify strategic accounts and carve out by
to uncover and educate clients on the type of
market segment, says Steve Giblin, President
extended-stay business that is out there. A
and CEO of SilverBirch Hotels & Resorts,
big part of that is defining and explaining the
which operates four extended-stay hotels
specific product that will help you take care
in Canada in markets such as Vancouver,
of these customers. More importantly, most
Halifax, Edmonton and Mississauga, which
people don’t necessarily realize they have
includes Hilton Worldwide’s 99th and 100th
extended-stay business coming in.”
hotels in Canada, the dual-branded Hampton
Inn by Hilton and Homewood Suites by Hilton
Travel Leaders Worldwide, a global travel
Halifax-Downtown, Nova Scotia.
agency, has more than 2,600 extended-stay
hotels in its Worldwide Hotel Program with
Corporate travel insights
Q&A with Donna Brokowski, GM of partner
ings where we’re talking to a hotel company
solutions at Travel and Transport, one of the
and instead of one brand, there are four
largest travel management companies in
extended-stay brands within a company. So,
the U.S.
there tends to be brand confusion, because
of so many overlaps in the segment. When
Do you think extended-stay hotels
our customers are listening to the global
are relevant to your clients?
sales team from the hotel company, even the
Extended-stay fits into each type of verti-
sales people have a hard time explaining it.
cal, but many times in a different way. It has
evolved in the past 10 years. When it started it
Is it difficult to prove the value of cost
was about four companies that said they were
savings on extended-stay amenities?
going to make a hotel type with a kitchen and
There are a general amount of customers
one bedroom. Over the years, there’s been a
that put these hotels in the long-term stay
definite blurring of the lines, but extended-stay
category and tend to avoid them when it
being available in the GDS was a good move
comes to their bid season. It’s unfortunate
and also allowing the 1-4 night stay. Some of
because there is consistent measurable
our customers in corporate travel, they don’t
financial value in each one of these hotels. It
always just travel for two weeks, but if they are
takes a lot of discussion during RFP season,
introduced to the product on a regular basis,
when we’re doing analytics on bids. Are these
then when they go two weeks to six months
ancillaries something you can count in sav-
they’re comfortable with what it is.”
ings in your company? If yes, then you need
to take an extra look at these hotels. … The
Do brands do a good job of explaining
challenge is that every customer determines
the product?
savings differently. Savings on a travel-
I think we have some brand overload going
related expense is a difficult metric for some
on. I have been in quite a few customer meet-
corporate travel planners.
14
SKIFT REPORT 2014
bookings in the millions of dollars. Of its total
years, he doesn’t understand the array of
corporate bookings occurring from January
brands, and he comes with a different
to July 2014, 5.08 percent were in the upper
expectation about style and technology,”
tier of extended-stay and .93 percent were in
Mayer says.
the lower tier.
This guest wants the hotel to be fast and
Angie Licea, SVP of business operations,
transactional when they want it, and human
technology development & meetings at
and customized when they need it. “It is a
Travel Leaders Corporate, says the demand
very different definition of customer service,”
for long-term stays, particularly among
Mayer says. “It’s keeping us on our toes, but
corporate clients, occurs within these seg-
it’s a really exciting time for product
ments:
development.”
• Medical – temporary staffing
All hotels are now focused on the
• Retail & food service – restaurant openings
millennials — this demographic bolt that is
• Energy and gas – crisis recovery
coming, Highland’s Skinner says. “You’re
• Consulting firms
seeing the product designed more with that
generation in mind and technology is going to
“We find that among those clients in the
play a big part in that. It’s also the communal
energy and gas sectors, their travels are
spaces in lobbies, with lots of places where
typically last minute,” she adds. “What is
people can sit together in social settings.
needed in this space is flexibility around
They are already being made like a
booking and cancellations. Also, considering
Starbucks.”
how these travelers are putting themselves
in harm’s way in order to help the public in
Design in the mid-price and upscale is more
times of need, they seek amenities to make
modern than it used to be, he adds. Front
the stay more comfortable.”
desks are more open, which allows for interactive connection between staff and guests.
When asked if the extended-stay product
was meeting the needs of clients, Licea says it
However, Hilton’s Kuhn says the millennial
does: “Among those in the medical, retail and
target is still on the horizon. “They are a very
food-service segments, their stays are typical-
large cohort, but the thing is, the vast
ly booked way in advance and they typically do
majority are not traveling yet,” he says.
not have any additional requirements beyond
what is already offered by the properties.”
Hilton Worldwide’s VP of franchise
development for the Americas, Bill Fortier,
The new generation of extended-stay
echoes this sentiment.
travelers
“It’s misguided to try to develop a brand
The extended-stay guest is getting a lot
largely around just one generation of travel-
younger, very fast.
ers, because the desires of those travelers
change as they age,” he says. “The millennials
While the typical guests are in their mid-40s,
will grow up over the next decade, and we’ve
the target guest for Residence Inn is 33 years
got a whole lot of boomers out there, like me,
old, says Diane Mayer, VP and global brand
that don’t necessarily want to stay in a hotel
manager, Residence Inn by Marriott.
designed for our kids. Our brand teams are
constantly studying all of our customers and
Why?
work with our owners to adjust our products
to meet the needs of the travelers for each of
“This guest hasn’t been traveling for 20
our brands.”
years, maybe they’ve been traveling for two
15
SKIFT REPORT 2014
For Homewood Suites’ part, the focus is
This requires high chairs, crayons and coloring
on making sure the brands are reaching the
books in the lobby, but also quiet space for the
45-year-old travelers as they continue in
business traveler—in the same hotel, he says.
their careers, Kuhn adds.
The customer also expects ease of booking,
Another traveler trend is more
Giblin says.
families with children staying in
extended-stay hotels.
“The ease of booking has to evolve a bit, and
understanding of our pricing is something
“Many families will come and visit while the
customers need to understand,” he says.
(business traveler) is on a project,” Bardenett
“Many times it’s individuals booking, with no
says. “What happens is your business cus-
meeting planner. We need to get that out to
tomer can become a leisure customer.”
the market.”
16
SKIFT REPORT 2014
SKIFT REPORT 2014
Future demands affecting the segment
Homewood Suites by Hilton
NY/Midtown, Manhattan,
Times Square
Urban development: The new frontier
but that is picking up as evidenced by
for extended-stay
additions in major urban areas, he adds.
Urban areas have been receiving more at-
The brand’s latest prototype, Generation
tention for residential development with a
9.2, allows owners to take advantage of
focus on live-work locations. According to the
efficiencies in space, but stay relevant and
Urban Land Institute, 61 percent of Ameri-
timely with what’s going on in the market,
cans would choose smaller housing in favor of
Duncan says.
a shorter commute to work and 53 percent prefer neighborhoods close to shops,
The U.S. development opportunities are in
restaurants and offices. Now is the time for
urban markets, says Residence Inn’s Mayer.
extended-stay hotels to move out of com-
“Ten years ago, you could count on one hand
mercial areas and suburban corporate parks.
the number of urban properties, now we have
over 50.”
The urban evolution, has required the
extended-stay product to “bend and flex,”
The current Residence Inn hotel base is 15
according to Homewood’s Duncan.
percent urban and the development
pipeline is 40 percent urban locations.
“When you put extended-stay in an urban
setting, it’s just a little bit different in its think-
Mayer explains that in the past, the
ing,” he says. “What we had, we knew was
sentiment might have been that it took more
working and customers love our product and
experience to develop these products so,
service, but it’s not as easy to find the kind
“Why bother?”
of land we wanted and needed so we had to
think about it very differently.”
“Now the philosophy is: ‘I understand the
concept, there are huge occupancy
About 20 percent of Homewood’s pipe-
premiums,’” she says. “So, frankly, it’s
line is in urban developments, which is the
prohibitively expensive to develop full-service
strongest urban pipeline the brand has ever
hotels in New York City right now. Midtier in
had, according to Duncan. The brand has
Manhattan is a consumer need and an
had a slow and deliberate urban approach,
industry need. It’s a hole that needs to be
plugged.”
17
For the same reasons, the urban setting also
Duncan said the concept is a significant part
lends itself to adaptive reuse, according to
of the brand’s growth goals, but has been
Duncan, speaking to Commercial Property
used to facilitate development since 2005
Executive. “We are seeing more opportuni-
when a Hilton/Homewood Suites opened in
ties for adaptive reuse properties, like our
Philadelphia.
recently opened property in New York City’s
Midtown/Times Square-South neighbor-
“It allows us to get into markets that are very
hood, as the number of failed apartment
tight,” he says. “It also enables a larger key
and office complexes have provided ample
count with an opportunity for two brands to
options for development. Many of these
come together as one complex, which pro-
properties are located in urban areas, making
vides efficiency that can be effective in
them an appealing option for bringing hotel
getting open in those markets. That has
products into these markets when there are
turned out to be a tremendous story when
limited options for new construction.”
there’s not as much land to build hotels.”
Dual-flag projects: Easier entry
A Courtyard by Marriott/Residence Inn by
into high-barrier markets
Marriott combination project opened at LA
Live in July in Los Angeles.
The major hotel brands have turned to
double-flag developments containing an
Particularly in international markets where
extended-stay component to enter new
the extended-stay concept is truly foreign,
markets and high-barrier-to-entry markets.
the dual brand model forces everyone to
think about the differences of the two hotels
Some recent development examples just in
and think about putting the right guests in
the past year, include:
the right place, Mayer says.
The 501-room Hotel Melia in Atlanta will
International markets:
convert to a Crowne Plaza hotel and will be
Opportunities abound
converted into a 360-room Crowne Plaza and
a 102-room Staybridge Suites hotel. Other
The slow and steady supply growth of the
development plans for dual-branded IHG
segment within the U.S. has meant even
hotels include a Holiday Inn and Candlewood
slower development outside its borders.
Suites hotel in Joliet, Illinois, a Crowne Plaza
In addition, the unique operating model of
and Staybridge Suites hotel in San Diego.
extended-stay means that it’s not likely to be
the first development project in a market.
McKibbon Hotel Management will build
a hotel tower at the Epicentre uptown in
For instance, Canada is a mature market for
Charlotte, North Carolina, with an upscale AC
many extended-stay franchised brands. But
Hotel with 182 rooms and a 120-room
just ten years ago, there were no extended-
Residence Inn. The project is expected to
stay hotels in Canada, says Fortier. “It was a
begin construction in early 2015.
good experiment. The owner was surprised
at how deep those markets were, how
In August, the 352-room Hampton Inn and
accepting they were of added cost price per
Homewood Suites by Hilton Chicago Down-
room, how quickly customers migrated to
town/Magnificent Mile opened. Homewood
extended-stay.”
currently has 12 dual-brand properties open.
Homewood Suites has 16 properties open in
Canada.
18
SKIFT REPORT 2014
SKIFT REPORT 2014
Home2 Suites by Hilton
Queretaro, MX
He added that the lower price point product
While there is demand for the product based
for Hilton, Home2 Suites, is just starting to
on business travel and length of stays
move into the Canadian market. The brand’s
happening around the world, the extended-
first property opened in July in Edmonton.
stay segment is still in an immature state in
And it’s still about finding owners that want
most foreign markets.
to take that “leap of faith” for a product
somewhat new to the market.
“The concept doesn’t exist outside of the
U.S.” Mayer says. But that doesn’t mean
“They need to have faith in the businesses in
extended-stay development is at a standstill.
the market and they have to believe they can
The biggest pipeline for Residence Inn is in
charge an extra $10 dollars. It will happen and
the Middle East and Africa region, due to the
it will surprise owners.”
demand for extended-stay trips with
long-haul flights.
Home2 Suites opened a property in
Querétaro, Mexico, which shows promise for
One third of all stays are extended-stay,
this price point of extended-stay within Latin
three quarters of the guests want the
America, according to Fortier.
segment’s definitive features and amenities,
and less than 10 percent of the supply is
Duncan says a prototype specific to Latin
extended-stay, Mayer adds.
America is expected to launch in November,
with an emphasis on efficiencies of space
The customer is the same outside of the
that are customary outside of the U.S. while
U.S., it’s just a matter of how many are
retaining the key elements of the
there, Fortier says. The cost of construction
experience in the guestrooms and lobby/
is exacerbated in smaller markets or less
manager’s reception area.
sophisticated markets like Mexico City, he
says. “Owners are always going to find the
Hilton expects to open a total of 30
cheapest way in.”
Homewood Suites in all markets during 2014,
and opened the same number in 2013. At the
Mayer pointed to the dual-branded
close of the second quarter, the brand had
prototype as a strong international
350 properties open in the Americas.
development engine for Residence Inn.
The Courtyard/Residence Inn development
19
in Jazan, Saudi Arabia, saw the Courtyard
AKA currently has luxury extended-stay ho-
component open November of last year and
tels in New York (five locations), Philadelphia,
the Residence Inn component is scheduled
Washington, D.C., Los Angeles (Beverly Hills)
to open in October, 2014. Yet, it is important
and London. Its website identifies the brand
to note that the first Residence Inn in the
as long stay comfort and value and its guests
Middle East market just opened in 2012 —the
as short term furnished apartment residents
80-room Residence Inn by Marriott Manama
(with celebrity testimonials, to boot), and
Juffair in Bahrain.
is borne from a company, Korman Communities, focused on furnished apartments.
Luxury tier: A place for growth
AKA was created in 2005, to meet an unmet
need in major cities for luxury extended-stay
There is a shortage of luxury extended-stay
apartments with hotel services, according to
product, says Highland’s Skinner. The
the company. Korman created a new brand
majority of the existing product falls within
with the purchase, renovation, and reposi-
the upscale price point.
tioning of eight high-rise properties in urban
areas, including four in midtown Manhattan.
“That product has to go into an urban area,”
Skinner says. “There are challenges in those
The Affinia 50 Hotel offers incentives for
areas for finding sites, and also longer term in
weekly booking, such as discounts at the
urban tends to be corporate apartments.”
bar/lounge, credit for the hotel’s sundry
cupboard and free Wi-Fi. While also booking
Smaller brands such as AKA and Affinia have
short term hotel stays, the all-suite hotel
developed niches in major markets.
partners with FreshDirect for grocery
delivery and a local restaurant for room
service.
20
SKIFT REPORT 2014
SKIFT REPORT 2014
Development innovations
and opportunities
Homewood Suites
by Hilton Gen 9.2 prototype
Studio Suite
The newest prototypes in extended-stay
Changing expectations also allow for
reflect increased efficiencies of space while
guestroom changes.
still maintaining areas for working, sleeping and preparing meals, but over time the
For example, guests are not as particular
extended-stay room has decreased in size.
about closet space, says SilverBirch’s Giblin.
So the room can have an open spot, some-
“The biggest question we have to answer is
times a column that also houses the safe and
how do you deliver this notion of space and
coffee maker, with a place to hang clothes.
upscale product when there’s not as much
And moving toward a home feel, guests prefer
land to build hotels?” says Duncan. The newest
a couch to the typical guestroom chair, he
Homewood prototype allows for more studio
adds.
suites with an open floor plan while still delivering an experience that is in line with the brand.
In the area of increasing attention to health
and wellness, Giblin says his extended-stay
Mayer says the urban properties definitely
properties have made the fitness rooms
demand smaller, zoned guestrooms, but
bigger with better equipment and allowed for
deliver in other ways, such as the new high-
floor exercises by providing padded flooring
rise Residence Inn New York Manhattan/
throughout.
Central Park, which offers views of Central
Park despite rooms being one-third smaller.
21
Owner/investor value proposition
Extended-stay hotels have enjoyed a favor-
located in the top 25 U.S. markets.
able sentiment with owners and developers. Recent transactions demonstrate their
Moreover, Extended Stay America issued
positive position among private-equity firms,
a second stock offering in August, just 10
hotel developers and industry pundits.
months after its $565 million initial public offering in November, 2013.
In June, Starwood Capital Group entered
into an agreement to acquire all of the out-
Earlier in 2013, Value Place, an economy tier
standing stock of TMI Hospitality from the
franchised brand, received a $100 million
TMI Hospitality Employee Stock Ownership
investment from private-equity firm Lindsay
Plan. The acquisition includes 188 hotels,
Goldberg LLC, with planned successive
the management company and the
investments to fuel the brand’s growth.
development platform. Starwood Capital
owns 103 select-service hotels, according
Extended-stay properties also are changing
to a press release. Following the close of the
hands in smaller portfolio deals.
acquisition, the company will control 291
select-service and extended-stay hotels
Chatham Lodging Trust, a real estate invest-
across 39 states in the U.S.
ment trust, acquired four Residence Inns
by Marriott in Silicon Valley, comprising 751
Also in June, Bloomberg reported that
rooms, as part of the sale of the 51-hotel
Blackstone Group LP was nearing an agree-
portfolio for a net cash purchase price of
ment to buy a group of select-service
$272.6 million, or approximately $363,000
hotels from Clarion Partners LLC for about
per room. Chatham is considering the
$800 million. The agreement would be
expansion of all four hotels to increase the
for 47 extended-stay Residence Inn and
room count by 36 percent to a total of 1,023
Homewood Suites hotels, with a majority
rooms.
Fundamentals remain strong,
and data shows why
The fundamentals paint a favorable picture
Average daily rate is up 5.3 percent to
for the segment—at all price points. At its
$84.88 for June year to date, according to
most basic level, demand is outpacing sup-
Highland data.
ply, which is pushing occupancy and rate.
Rooms under construction were up 42.3
Supply growth is essentially at historical
percent over the past year, according to
lows, and there isn’t much concern for new
Highland. The upscale segment reported
rooms being added, according to Highland’s
the fastest rate of increase in new rooms,
Skinner. Most of the revenue per available
mainly due to new construction.
room growth is achieved through rates,
because occupancy is reaching record
“The most favored segment amongst
highs. “That doesn’t leave much more room
developers is the upscale extended-stay
for occupancy growth, so rates are going up
segment, most tend to be franchised
well above the rate of inflation.”
brands, and that’s pretty much true over
22
SKIFT REPORT 2014
SKIFT REPORT 2014
EXTENDED-STAY - DEMAND GROWTH
(ROOMS SOLD)
the last decade, the upscale segment has
grown the fastest, but what has also
happened now is that the shortage of
While the U.S. extended-stay segment led
the demand rebound in 2009, there was a
slight slump in 2012. Demand growth even
dipped into the negative at one point in
April, 2012. It is now on a healthy rebound.
economy extended-stay product in
several large markets has become noticed
and there is going to be a fairly rapid
expansion in the economy segment.”
2009
2010
2011
2012
2013
2014
(June YTD)
Skinner noted average occupancy in the
first quarter of 2014 was the highest
level in 13 years at 73.4 percent; demand
growth in that period was the strongest
since 2011 and RevPAR growth was the
2.7%
14.9%
5.3%
1.4%
3.5%
5.7%
SOURCE: STR
fastest since 2006.
EXTENDED-STAY - OCCUPANCY
The extended-stay segment led a bit on
Although the entire hotel industry is
susceptible to changes in the economic
climate, the extended-stay sector and its
inherent dependence on the long-term
business stay showed sensitivity during the
downturn. While it usually enjoys a
significant occupancy premium over the
U.S. industry average, occupancy dipped to
52.7 percent in late 2008. For reference, the
total U.S. average occupancy at the end of
2008 was 60.4 percent.
the demand recovery, when compared to
the entire U.S., according to Jan Freitag,
SVP, STR. Demand growth turned positive in June 2009 compared to December
2009 for the total U.S.
2009
2010
2011
2012
2013
2014
(June YTD)
SOURCE: STR
23
64.2%
70.2%
72.4%
72.5%
73.1%
74.9%
-
-
Respondents to a Ski survey about
extended trips favored midscale hotels
with a restaurant by a slight margin. But
all other hotel types were nearly equal in
preference.
kitchen) option for leisure trips.
Some of the key amenities
offered in the extended-stay
segment rank high with
travelers, yet are not the
most important.
:
:
: I don’t know what
an extended-stay
hotel is
With nearly half of traveling
Americans not having stayed in an
extended-stay hotel, there is much
opportunity for growth with the
potential customer base for this
segment, which oﬀers larger
guestrooms, bedroom suites, full
kitchens and complimentary
breakfast.
Key takeaways
• Robust fundamentals signal continued health of the extended-stay
segment in the U.S. With occupancy at its highest level in 13 years, rate will
continue to drive upward.
• The shortage of extended-stay rooms will continue to provide shelter to
the segment’s performance. Demand continues to outpace supply.
• The average extended-stay guest, while currently in their mid-40s, is
getting younger every day. Hotel companies are looking to this trend to
make design and operation decisions.
• It is an exciting time for development in this sector, as the product has
just started to reach many international markets and dual-branded
projects allow for development in high-barrier-to-entry markets.
• The extended-stay product is one of the most profitable hotels to
operate, after the initial investment premium during construction for the
hallmark amenities: full kitchens, larger suites and homelike furniture and
fixtures. The upscale tier has the most rooms under development.
• There is opportunity for increased awareness with consumers: While
guests who have stayed are satisfied and loyal, many travelers aren’t aware
of the key benefits of the product.
26
SKIFT REPORT 2014
About Skift
Skift is the largest industry intelligence and marketing platform in
travel, providing news, information, data and services to all sectors of
the world’s largest industry.
Based in New York City, Skift has deep experience in identifying and
synthesizing existing and emerging trends, in its daily coverage of the
global travel industry, through its Skift Trends Reports and its data
insight from SkiftIQ competitive intelligence service.Skift is the
business of travel.
Visit skift.com for more.
Like what you see?
Skift’s new content studio SkiftX helps brands such as Amadeus,
American Express, Egencia, Hilton, Peak Adventure Travel and others
create thought leadership in the global travel industry, through trends
reports, research, branded content, social media audits and other
content marketing initiatives, and helps distribute through its industry
marketing platform.
Contact us for more details:
Rafat Ali,
Founder & CEO, Skift
[email protected]
212-564-5830
27
SKIFT REPORT 2014

The Changing Business of Extended-Stay Hotels

Transcription

Similar documents

2016 SuperCAmp REVISED

Setting the Standard in Extended Stay

make yourself at home

HILTON COYLUMBRIDGE, AVIEMORE

1. Executive Summary

(Microsoft PowerPoint

BE AT HOME - Hilton Worldwide

Bonnyville and Whitecourt Microtel Inn and Suites by Wyndham are

Extended Stay Cafe - Synergy Hospitality: Philadelphia Hotel

Rochester NY Area Dance-O