With their pragmatic, no-frills rooms attracting travelers from across the spectrum, extended stay hotels have enjoyed an advantage over other hospitality types in this recovery.
Last year, extended stay chains ran at an average occupancy of 73%, as other business-oriented hotels recovered much slower. Given reaccelerating business demand and continued strong leisure travel, expectations are that extended stay hotels will continue to outperform, with further occupancy and rate acceleration and continued strong investor demand.
The recent outperformance has already attracted deep-pocketed investors eager to capitalize on a property type that seems almost recession-resistant. Last summer, Blackstone and Starwood Capital teamed up to take the Extended Stay America chain private at a share price of $20.50 for a total transaction price of about $6 billion, or just under $100,000 per key. And earlier this year, the companies teamed up again to buy 111 WoodSpring Suites hotels for $1.5 billion from Brookfield Asset Management. The WoodSpring Suites brand is owned by Choice Hotels. Wyndham Hotels & Resorts, meanwhile, announced during its fourth-quarter earnings call that it will start a new extended economy brand to add to its stable of companies.
This combination of demand drivers insulated the performance of extended stay hotels from the steep losses suffered by other hotels. The average occupancy for extended stay properties in 2020 was around 60%, roughly 16 points above the U.S. average. Even as the health crisis hit the U.S. and hotel occupancy plummeted to a national average of 24% in April 2020, extended stay hotels maintained a 44% occupancy.
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