Extended Stay America Answers 5 Common Questions from Investors, Developers About Extended-Stay
Rutherford, NJ
Extended Stay America Answers 5 Common Questions from Investors, Developers About Extended-Stay
Rutherford, NJ
Hotel Investment Today:
There is no question when it comes to the resiliency of extended-stay hotels, as demonstrated by the segment’s continued strong performance during the recent pandemic and today’s challenging economic times. As the leader in extended-stay, Extended Stay America is seeing strong interest from developers and investors to add extended-stay hotels to their portfolio, signaling exciting growth ahead. Here are our responses to the five common questions that developers and investors ask our Franchise Team to best maximize extended-stay opportunities.
Q: What are the biggest cost differences between the development of an extended-stay property and a traditional transient hotel, and how do franchisors lessen the impact through efficiencies in design, architecture, construction and supply cost?
A: Development costs can differ greatly between extended-stay and traditional transient hotels. Keep in mind that just like transient hotels, there are also segments within extended-stay from economy to upscale that have different brand standards such as room size, amenities and services. Because Extended Stay America solely focuses on midscale and economy extended-stay segments, we look to maximize the amount of rentable, or revenue-generating, space in our new construction prototypes. And properties are not required to have meeting, larger food preparation or entertainment spaces. In our Extended Stay America Premier Suites prototype, 71% of the building square footage is revenue generating.
In new hotel construction, there are many opportunities to drive efficiencies and reduce costs. We built 13 of our own Extended Stay America Premier Suites prototypes over the past few years. Our team oversees the entire process from the land purchase to opening of the hotels, including the oversight of construction, procurement of materials and general contractors. We’re in a unique position to translate our experience to our franchisees in an effort to save them time and money.
Q: What are the biggest cost differences between the renovation or conversion to an extended-stay versus a traditional hotel?
A: There are two areas franchisees need to evaluate when considering an extended-stay conversion. The first is whether a full kitchen can be added in each guestroom. At Extended Stay America, all guestrooms have kitchens that include a full-size refrigerator and cook top. Second, an extended-stay hotel will have a larger guest laundry room. A laundry room is very important for guests like traveling nurses, construction crews or military families staying for a week, months or even longer.
Q: It seems that every big brand wants a piece of the extended-stay sector, and everyone says marketing and loyalty programs are going to maximize profits. What questions should I ask about reservation delivery and marketing programs before I sign on?
A: First and foremost, you should ask about revenue contribution and channel profitability. For instance, Extended Stay America, has a strong emphasis on driving direct channel bookings. This includes B2B sales and call center support programs – both of which are provided to franchisees with no additional fees. We recently reported that 83.4% of reservations for Extended Stay America Premier Suites came from our direct channels. In contrast, OTA and Opaque channels are only responsible for driving 12.9%.
At Extended Stay America, we offer Extended Perks, a free membership program with an exclusive member rate and partner discounts with retailers. There are no points and as a result, the program has no cost to our franchisees.
Q: My portfolio is exclusively select-service. Now, I’m considering extended-stay. Where’s the biggest learning curve?
A: A big learning curve is the operating model of an extended-stay hotel, which is very different from a select-service transient property. Extended-stay hotels rely on high occupancy from long-term travelers to streamline the operating model, which in turn, simplifies labor management to improve the bottom line. In fact, 78.6% of consumed room nights at Extended Stay America Premier Suites were from 7-plus-night length of stays last year. Guests that stay longer require less housekeeping. Naturally, there are fewer check-ins and check-outs to service daily. Second, there is greater opportunity to save by offering a simplified breakfast. For instance, Extended Stay America Suites offers a grab and go breakfast to reduce overall food cost, labor for service and space required.
Q: Where are key market opportunities for extended-stay development?
A: When determining a potential location, it’s very important to really evaluate the current and future demand generators that are going to drive long-term guests into an extended-stay hotel. You need to look for markets where people are moving and what businesses are being added to a particular area. This may or may not be large metro areas. Be open to identifying opportunities in secondary and tertiary markets where there are many emerging essential business industries like supply chain, manufacturing, construction or medical. A strong franchisor will work closely with a franchisee to evaluate what works or does not work in a location, as well as targeted demand generators.
Extended Stay America is the largest company in the United States exclusively focused on extended-stay with more than 750 hotels across three brands: Extended Stay America Premier Suites, Extended Stay America Suites, and Extended Stay America Select Suites. The company has mastered the art of high occupancy from long-term travelers to drive more predictable revenue, while minimizing operating expenses to improve the bottom line. With over 28 years of experience and strong brand awareness, we are the leader in extended-stay because it’s all we do.
About Sandpiper
Based in Richmond, Va., Sandpiper, LLC is a nationally-focused real-estate investment organization recognized as one of the leading companies specializing in extended stay lodging properties. The company continues to develop its portfolio through ground-up development and selective acquisition of performing and non-performing properties. Sandpiper owns a total of 39 hotels under the Candlewood Suites (IHG), Courtyard (Marriott), ECHO Suites (Wyndham), Premier Suites (Extended Stay America), Residence Inn (Marriott), RiseWell Kitchen Suites (Sandpiper), Suburban Studios (Choice), and WoodSpring Suites (Choice) brands.
Sandpiper Hospitality ("SH"), an affiliated hotel management company, manages the entire Sandpiper portfolio and manages 30+ more hotels for unaffiliated third parties. SH has earned its position as the leading operator in the extended stay hotel segment of hospitality by combining the spirit of genuine, welcoming hospitality with superior financial returns, fueling the growth and prosperity of its various stakeholders – from associates to guests to owners and investors. For more information, visit www.sandpiperhospitality.com.
