After a period of virtually every major hotel brand company launching new extended-stay brands but overall travel demand softening, it's natural to assume the extended-stay segment could have some out-of-control supply-demand dynamics.
But that's not the case, said The Highland Group's principal Mark Skinner, who keeps tabs on that segment of the hotel industry.
Speaking on the latest podcast episode, Skinner noted both supply and demand have seen somewhat muted growth recently, with overall performance mirroring that seen across broader U.S. hotel metrics.
"Extended-stay supply and demand are both increasing, but they are increasing well below their long-term average, which is about 5% over the last 25 years," he said. "So over the last trailing 12 months, you've got supply increasing about 2.9%. You've got demand increasing at about 2.5%. Over the last five months, supply has actually increased faster than demand every month. So occupancy has fallen, but during the prior eight months, the reverse was true. In seven of them, occupancy increased."
He noted that "the correlation coefficient between the total hotel industry and extended stay is extremely high" at the moment. This marks a shift from the period of the COVID-19 pandemic when extended-stay hotels performed significantly better than the larger industry, especially at the lower-rated segments.
And the hospitality industry hasn't seen skyrocketing supply, despite that continued interest from brands and investors, Skinner said.
"It's very difficult with the interest rates [where] they are today and the construction costs to build any hotel, quite frankly, and that's also impacted extended stay," he said.
For the full interview with The Highland Group's Mark Skinner, listen to the podcast above.