First-quarter occupancy, average daily rate and revenue per
available room at U.S. extended-stay hotels each declined year over year,
according to a new report by The Highland Group. Supply increases remain
relatively low, however, which could lead to increased occupancy soon,
according to the company.
First-quarter ADR for the segment was $116.56, down 0.2
percent year over year, the first such decline since the pandemic. However, the
drop was confined to the economy tier, as the upscale and midprice ADR
increased 0.7 percent and 1.8 percent respectively.
U.S. extended-stay occupancy declined year over year for the
fourth consecutive quarter and sixth out of the past seven, down 1.4 percent to
71.5 percent. Occupancy declined in each tier. Outside of the pandemic,
Highland said this was the lowest quarterly occupancy level since 2013.
RevPAR for the segment in the first quarter declined 1.6
percent year over year to $111.88. As with ADR, much of the decline was
centered in the economy tier, where RevPAR declined 3.4 percent, with upscale
and midprice RevPAR holding roughly steady. It’s the first such quarterly
RevPAR decline since the pandemic, according to Highland.
Still, supply growth remains low. Total available
extended-stay room nights increased 3.2 percent year over year, but that
includes the effects of the Feb. 29 Leap Day. Without it, that figure would be
about 2 percent, according to Highland, and almost entirely due to economy-tier
conversions. Sold room nights increased 1.7 percent year over year.
“The last time extended-stay supply growth was at its
current level was from Q4 2010 through Q3 2014, and the federal funds interest
rate was about one-tenth of its current level,” according to Highland. “With
interest rates expected to stay high during the near term and construction
costs rising, extended-stay supply growth should be relatively low nationally
for the foreseeable future.”
Added Highland Group partner Mark Skinner in a statement: “If
most forecasts for overall hotel industry performance are realized,
extended-stay hotels are likely to reverse the trend of declining occupancy in
the near future because demand has increased for 13 consecutive quarters and
supply growth is very low.”
