The News: Hilton Checks In to Extended-Stay

In the last hotel industry downturn, in 2002, the extended-stay segment proved one of the strongest performing lodging sectors, as it is somewhat resistant to economic downturns. Government contractors, military personnel and IT professionals, which are less sensitive to economic cycles, are heavy users of extended-stay product like.That benefit has not gone unnoticed by major hotel companies. In recent years, Starwood Hotels & Resorts Worldwide Inc. has introduced its element by Westin extended-stay offering, and Global Hyatt Corp. has revamped the Summerfield Suites extended-stay brand it acquired from The Blackstone Group L.P. in 2005.Hilton Hotels Corp. is the latest to extend its reach into the segment, with its announcement of its new Home2 Suites by Hilton, a midtier, extended-stay brand. The company already has another brand in the space, Homewood Suites by Hilton. The company said 10 franchise applications have been submitted for its new flag, and it expects to approve another 10 to 15 within 60 days. Construction on the first hotel is slated to start within the year.The four-story properties will be constructed of wood and average 108 guest rooms: 80 percent studios at 323 square feet and 20 percent one-bedroom suites at 509 square feet. Public space will account for 4,200 square feet of each property, and average development cost per key will range from $70,000 to $75,000, excluding land costs.At a panel that examined prospects for extended-stay hotels at the Americas Lodging Investment Summit last week, Gary DeLapp, president & CEO of Extended Stay Hotels, which has 680 properties in the United States and Canada, said the sour economy has dampened activity that typically generates some room demand in the sector. If a national retailer opens in a new location, for example, it usually sends personnel to train new employees for an extended period. But the recession has curtailed retail expansion plans. Job growth also spurs extended-stay demand, as new employees may travel to corporate headquarters for training.The drop-off in new construction—and travel by construction personnel—has also pinched the segment, said Kevin Lewis, president of extended stay brands for Choice Hotels International Inc. But Lewis and the ALIS panel agreed that the long-term prospects for extended-stay remain healthy. Lewis pointed out, “Many markets have little or no representation of extended-stay product.”