This year, Extended Stay America celebrates 30 years in business. Originally a pioneer in the midscale, Extended Stay America today remains the only major lodging company exclusively focused on the extended stay category.
Compared to 1995, it is now operating in a more crowded marketplace. Post-pandemic, there has been a surge in interest in extended stay from investors, developers and hotel groups.
Pension funds, insurance companies, and real estate private equity groups (Starwood Capital, Blackstone, Brookfield Asset Management) are among those investing. One recent example is Noble Investment Group’s acquisition of 16 WoodSpring Suites. Investors in adjacent real estate categories like storage units, student accommodation and multi-family housing are also active.
The attraction of midscale extended stay is the low-cost operating model, fewer staffing requirements compared to traditional hotels, and the resilience demonstrated during the Covid pandemic.
While most standard hotels shut and laid off employees, extended stay hotels remained open, acting as the short-term homes for government, healthcare, military, and construction workers.
Resilient business model
Mark Williams, managing director of franchise development at Extended Stay America, said: “We didn't close a property. We didn't lay off an individual. We paid bonuses to every employee at the end of 2020. Nobody did that, and the extended stay segment basically came rising out of the ashes. It's always been there, but people now are starting to take notice.”
While many expected the demand for extended stay accommodation to fall after the pandemic, this did not happen. At Extended Stay America properties, the volume of 30-plus nightly stays increased between 2020 and 2023, according to Williams.
Almost every major hotel group has jumped on the bandwagon and launched a new midscale extended stay brand: StudioRes by Marriott; Hyatt Studios; ECHO Suites by Wyndham; Hilton’s Project H3.
Keeping the marines happy
The pipeline of extended stay products is not necessarily in major cities but in places served by key drivers of demand like military bases, distribution centers, universities, construction sites, and hospitals.
“The properties that position themselves in those markets are the most successful,” said Williams. For marines who prefer to live off base, Williams said that there is an Extended Stay America property near military facilities in Pensacola, Florida. The company installed extra gas lines for barbecue grills behind the property.
“These are guys with young families. They're there for weeks or months, and we want to take care of them. It’s good business,” he said.
Pipeline constraints
With more than 700 properties already across the US, Extended Stay America still has “a lot of white space to hit.” Its newest hotels are in Colorado Springs, Austin, San Antonio, and Jacksonville, with a property in Yuma, Arizona, opening soon.
But the increase in competition, along with heightened costs of borrowing and construction, are mitigating factors.
Williams said: “The cost of borrowing is now more expensive, and construction is 25 per cent more than it was three years ago. And I’ve got competition just nipping at my heels. I’ve got every brand out there coming in with an extended stay product. It’s a struggle.”
Local government
Another dampener on expansion is a negative attitude to extended stay from some local governments. “It goes back to years of independent extended stay properties that are just not what they should be, and the city fathers are like, we don't want that in our community,” commented Williams.
There are suburban areas of Texas that will not permit extended stay properties. “It's up to us to go and communicate with the mayor and the city council and say it's not what you had 30 years ago. It's a different product. But it is tough.”
Ahmed Kabani, CEO and founder, Kabani Hotel Group, added that in the Kissimmee area of Florida a lot of investors took regular hotels and converted them into extended stay properties with the addition of kitchens during Covid.
Now, these unbranded properties are getting poor customer service reviews and preventing the local government from issuing new licences. There is a strong need for brands to take over these properties, he said.
Hybrid products
There is the option to offer transient hotel rooms and extended stay units within the same building. Duane Schroder, chief growth officer, Waterford Hotel Group, said that having recognised demand at a 160-key hotel, 25 rooms were converted to extended stay units.
“Inadvertently, we sell those rooms at a higher price. They've increased the ADR in the market. We've also been able to tap into new corporate segments,” he said.
Other options include combining extended stay with medium-term rentals. The WaterWalk Extended Stay by Wyndham in Huntsville, Alabama, for instance, offers extended stay units or unfurnished apartments for stays of 90-plus nights.
Displacement analysis
While there are plenty of transient guests who prefer to stay one or two nights in a suite with a kitchen rather than a standard hotel room, operators must stick to the extended stay business model to maximise their revenue.
That means devoting at least 80 percent of inventory to stays of 30-plus nights. Displacement analysis is essential, said Schroder: “Sometimes that's tough to justify to a general manager. You can't take that transient business because you are displacing the long -term business. But that's where it has to be. Everybody must be aligned and hold very tight onto the business model.”
All quotes taken from the panel session ‘Long-term potential – unlocking value in the extended stay market’ at IHIF NYU 2025. The session was moderated by Kevin Carey, chief operating officer and senior executive vice president, American Hotel & Lodging Association (AHLA)