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As the extended stay remains the darling of the hospitality industry, Choice Hotels International marks a milestone in the growth of the category’s portfolio.
On Wednesday, Choice unveiled the 500th addition to its extended-stay portfolio, the Everhome Suites hotel in Glendale, Arizona. According to the company, the opening puts Choice’s extended-stay portfolio ahead of its size hotel competitors, which are also expanding in the space.
The key takeaway has been more than 20 years in the making: Choice has been an active player in extended stays since the mid-1990s, according to Matt McElhart, vice president and head of extended stay brands at Choice Hotels. But the company’s extended-stay growth picked up sharply in 2018, McElhart noted, when it acquired WoodSpring Suites and added about 240 hotels.
Matt McElhart
Permission granted by Choice Hotels International
The pandemic has accelerated both guest and developer demand for longer-stay accommodations, which remains an area of focus for many hotel companies as that demand continues to outstrip supply, according to McElhart. More supply is coming, however, with extended stays dominating U.S. hotel construction in the first half of this year, according to Lodging Econometrics. Choice alone has a portfolio of 400 hotels across its four economy and mid-range extended stay brands.
As the hotel company plans its next 500 openings, McElhare sat down with Hotel Dive to share what U.S. markets and segments (hint: high-end) have the potential for extended stay growth. It also predicts where the category will be headed in 2025, including what trends in technology and consumer demand could shape its trajectory.
This interview has been edited for length and clarity.
HOTEL DIVE: Which US Markets Have the Most Untapped Extended Stay Demand? And where specifically is Choice headed for continued growth in the category?
MATT MCELHARE: On a macro level, demand for extended stays is about 20% of all demand for lodging in the US, and supply for extended stays is about 10%, so you have this huge imbalance. That means there are plenty of opportunities across the country.
Where we’re looking in particular are markets like Phoenix, where the biggest opportunities are. These are markets that are seeing a lot of population growth, that are investing in manufacturing capacity, that are building a lot of new infrastructure to support the growth of the entire area. The people who support these projects – whether it’s manufacturing, road work, etc. – are the ideal long-stay travelers because they stay for several weeks, are price sensitive and perfectly fit the brands we offer.
We are targeting areas where we are profitable [the Biden administration’s $1.2 trillion infrastructure bill]which have a very favorable business climate and see many new businesses starting by relocating people. All of these things lead to significant demand for extended stays, and that’s where we’re trying to be.
“I think you’re going to see a lot of fun innovation over the next few years as people look for ways to differentiate themselves in the marketplace.”
Matt McElhart
Vice President and Head of Extended Stay Brands at Choice Hotels
We also look at the Sun Belt states. The Carolinas, for example, are seeing a lot of population growth. They already had a fairly strong manufacturing base, but are growing it, especially in terms of electric vehicle facilities and supporting the green transition. The Sun Belt is where we are primarily focused and where we have many properties under development.
Given Choice’s recent push to upscale, is Choice considering launching a high-end extended-stay product?
As a company, we are a high-end competitor, and with the Radisson acquisition, we even have high-end options. So this is a huge growth opportunity for the company that we look forward to in the same way that we lean on the extended stay.
We will always strive to provide a full range of extended stay options for our guests, so we are always looking for growth opportunities in areas that create a unique and differentiated opportunity for guests and for investors. What does this mean for everything over Everhome? Obviously, we’re always looking, but we don’t yet have plans to invest in a new brand in the luxury space.
Will Choice consider acquiring another brand to increase its extended stay portfolio?
We’re always looking for those opportunities, but we just don’t have any right now that we’re pursuing.
I think we’ll start with the question: Where is the guest search and what type of product is that guest looking at? Then we would ask: Is there an option in the market that could be an inorganic capability, or is this something that we have a better opportunity to build ourselves?
What is your outlook for extended stays in 2025?
Where this industry is headed focuses on two areas: how hoteliers can use technology to help more efficient, more effective and more profitable property operations, and how hotel companies can adopt a distribution engine that targets traditional leisure or business travelers and build new strategies to attract guests who stay longer.
“Labor is a big part of what drives the cost of any hotel. If we can find ways – and we’re working on that right now – to take labor out of the model, that will unlock even more profitability and more growth for the segment.”
Matt McElhart
Vice President and Head of Extended Stay Brands at Choice Hotels
Our winning strategy will be built around how we can leverage our proprietary technology and internal teams to innovate in these areas, drive more extended stay business to hotels through low-cost channels, and leverage the evolution of the Choice Advantage property management to help unlock greater profitability.
The most important thing is how do you exchange technology for labor? Because work is always a challenge. Labor is a big part of what drives the cost of any hotel. If we can find ways—and we’re working on that right now—to take labor out of the model, that will unlock even greater profitability and greater growth for the segment.
You will also continue to see more launches from the brand. i think [many hotel companies] there probably will be [extended stay] presence at a lower price point because of how attractive it is from a profitability perspective, and that’s where institutional equity groups are looking to invest. This is the growth zone. I expect that you will continue to see very dynamic and very competitive strategies to try to win dollars and guests as these hotels begin to open.
Most macro trends around travel seem to favor extended stays, so what we continue to see is the impact of infrastructure investment. A lot of those dollars haven’t even started coming out yet, but we’re looking at how to handle that from a business standpoint. [We’re watching the] continued recovery of productive capacity and the types of projects and population migration this creates.
We are also still seeing the influence of the leisure trend. It’s not at the level it was when most people were working remotely, but it’s still rebased to a much higher level than it was before COVID. And when people have the flexibility to work from anywhere, they stay longer and are more likely to want what an extended stay offers, which is more of an apartment-like experience.
These are major trends that are not new, but continue to accelerate. The coolest piece of this will be [uncovering] extended stay markets—even in resort areas—where there is more traditional [leisure] peak season demand and high off-season construction demand.
We have several projects that we’re looking at in some of those markets, especially in the mountain areas of the west, and I think you’re going to see a lot of fun innovation over the next few years as people look at ways to differentiate the market.