More strong numbers from US extended stay sector

George Sell By George Sell
16 August 2017 | Updated 16 August 2017

US: The latest report from The Highland Group shows strong performance across the US extended stay sector.

Highland Group's 2017 Extended Stay Mid-Year Report found that quarterly extended-stay hotel room revenues exceeded $3 billion for the first time as the segment absorbed over 26,000 new rooms during the past year. Some of the strongest demand growth in more than a decade maintained occupancy, stabilised decelerating ADR growth and kept RevPar increases well ahead of inflation for the sixth consecutive quarter.
 
"The exceptionally good extended-stay hotel performance in 2017 is most welcome as rooms under construction climb to almost 50,000," said Mark Skinner, Partner at The Highland Group."The supply growth rate is accelerating but only incrementally and is well short of the most recent peak levels throughout most of 2009. Recent trends in rising demand and high occupancy indicate extended-stay RevPar growth should continue to exceed general inflation over the next year."

The supply of extended-stay hotel rooms approached 434,000 at mid-year 2017. Supply rose 7.5 per cent compared to the same period in 2016. However, this included Starwood's element brand which was not in the data prior to 2017. Excluding element, room supply rose 6.4 per cent, which is a slight acceleration on the 2016/17 annual increase.

Extended-stay average occupancy was 79.4 per cent in Q2 2017 compared to the 69.5 per cent STR reported for the overall hotel industry. Overall extended-stay hotel occupancy was unchanged in Q2 2017 compared to the same period in 2016. Occupancy is up slightly year-to-date although only the mid-price segment posted a gain. Strong supply growth is being absorbed except in the economy segment which is aggressively growing ADR.

A 3.8 per cent increase in extended-stay ADR in Q2 2017 was about the same as in Q1 and well ahead of the 2.2 per cent gain STR showed for the overall hotel industry. The economy segment's 7.6 per cent increase was its fastest quarterly growth in the last six, and the fourth consecutive quarter of accelerating gains in ADR. Very high supply growth has limited ADR increases in the upscale segment but the 2.5 per cent Q2 gain was a big improvement on the 1.1 per cent growth in Q1 2017.

Despite declining occupancy, very high ADR growth resulted in the economy extended-stay segment posting the largest RevPar gains for the second successive quarter. The mid-price segment continues to report RevPar growth above the overall extended-stay average and well ahead of the three per cent year-to- date 2017 gain for overall US hotels, according to STR.

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