The performance of extended stay hotels in the first half of 2024 is “a tale of two quarters,” according to The Highland Group, a consultancy. In its report on the first six months of the year, the company reported that revenue per available room (RevPAR} declined in the first quarter. However, three consecutive months of increasing occupancy, average daily rate (ADR) and RevPAR in the second quarter reversed a four-month declining RevPAR trend, and a small gain in that metric was recorded for the first half of the year.

Highlights from the report included:

• Room revenues were up 3.4% through the first half of the year and 5.1% in the second quarter
• Occupancy fell 0.2% in the first half of the year, although it gained 1% in the second quarter
• The segment enjoyed an occupancy premium of 11 percentage points compared with all hotels
• The second quarter saw the highest number of rooms under construction in four years

Extended stay rooms reported under construction at mid-2024 approached 45,000. This is a 62% increase compared with one year ago and a 10% gain over the last six months. However, not all the rooms will have actually started construction, and recent trends indicate that about 60% of these rooms can expect to open over the next 12 months. If so, the absolute increase in extended stay room supply will be less than 5% over the next year, and the growth in annualized room nights available will be lower than that.

Mark Skinner, partner at The Highland Group, said, “Despite headline-grabbing large increases in extended stay rooms under construction, the annualized increase in room nights available over the next year should be well below the long-term average, and the near-term risk of over supply nationally is very low.”

Image: Marriott