Research from Highland Group says segment did underperform overall industry in some metrics

Although extended stay hotels underperformed the overall hotel industry in terms of occupancy, average daily rate (ADR) and revenue per available room (RevPAR) gains, October was a very good month for the sector, according to a report from The Highland Group. Demand growth was the highest since March 2022, the increase in occupancy was the biggest in 21 months, the RevPAR gain was the greatest since June 2023, and the monthly growth in room revenues was the strongest in a year and a half.

Mark Skinner, partner at The Highland Group, said, “October was a very good month for extended stay hotels with four record high performance metrics compared with the last 30 months.”

The segment’s 6.6% room revenue increase in October was the seventh consecutive monthly gain and the largest increase since May 2023. Extended stay hotel revenue growth was ahead of the 5.1% increase STR/CoStar reported for the overall hotel industry.

Total extended stay demand gained 5.1% in October. Excluding the leap year impact in February, it was the largest monthly gain in demand in two and a half years and represented a positive change in demand in 22 of the last 23 months. Comparatively, STR/CoStar reported all hotel demand increased 3.2% in October.

The 1.9% increase in extended stay hotel occupancy in October was the greatest since January 2023. However, it was smaller than the 2.2% increase STR/CoStar estimated for all hotels. Extended stay hotel occupancy in October was 11.1 percentage points higher than the total hotel industry, which is consistent with the historical long-term average occupancy premium.

Following monthly declines in February and March, which were the first in three years, extended stay hotel ADR increased for the seventh successive month in October, and the gain (1.4%) was the second largest since November 2023. However, it was lower than the 1.8% increase STR/CoStar reported for the overall hotel industry.

Extended stay hotels’ 3.3% RevPAR increase in October was the strongest in 16 months but lower than the 4.1% gain in total hotel industry RevPAR as estimated by STR/CoStar.

Extended stay room supply gained 3.1% in October, which is an uptick compared with the average monthly increase over the last two years. October marked 37 consecutive months of 4% or less supply growth, and the calendar year change in supply has been less than 2% for two years. Both these metrics are well below the long-term average.

Image: Marriott