The pandemic and hybrid work arrangements have generated strong demand for longer hotel stays, increasing the popularity of cost-effective extended-stay hotels and making them one of the fastest growing segments in hospitality. With higher margins and lower development costs than full-service hotels, extended-stay properties have the potential to generate higher returns on investment. As a result, banks are more likely to provide funding for what are perceived to be lower-volatility, higher-return hotels, particularly those associated with well-established brand families. We expect capital to continue flowing into this segment as long as outsized returns exist.
Article - Extended-Stay Hotels Continue to Gain in Popularity - By Jack Levy - The pandemic and hybrid work arrangements have generated strong demand for longer hotel stays, increasing the popularity of cost-effective extended-stay hotels and making them one of the fastest growing segments in hospitality.
The distinction between fixed and variable costs has blurred over time as technology, labor market conditions, and guest preferences have evolved. These trends have been exacerbated by changes in occupancy patterns post COVID. Hotel owners and operators need to understand how these changes affect strategies for maximizing profitability.