Highland Group: Smaller Markets Leading Extended-Stay Recovery

U.S. extended-stay lodging continued its strong
performance in 2021, according to a report released Thursday by The Highland
Group. Compiled with the assistance of STR, the report analyzed 100 metropolitan
statistical areas in the U.S. With few exceptions, however, the strongest recoveries
were in smaller markets, not often associated with traditional business travel.

The report showed only 10 percent of the MSAs achieving
above average RevPAR recovery in 2021 had 50,000 or more hotel rooms. Markets
with the highest 2021 RevPAR recovery over 2019 levels included Myrtle Beach,
S.C., Baton Rouge, La. and Ogden, Utah, with 144.5 percent, 126.7 percent and
122.1 percent, respectively. Myrtle Beach had the most inventory at 31,682
rooms; Baton Rouge had 13,143 rooms and Ogden 4,503.

Areas with the lowest RevPAR recovery in 2021 compared to
2019 included San Jose, San Francisco and Washington DC, with 45.3 percent,
61.7 percent and 67.6 percent, respectively. The report noted that larger
markets can have more upscale extended-stay properties, which have been slower
to recover.

Large cities like Las Vegas, Phoenix and San Antonio, which
have higher concentrations of economy extended-stay properties, were among 43
metropolitan areas that in 2021 achieved RevPAR equal to or higher than the nominal value in
2019. 

RevPAR recovery at extended-stay properties was powered by
occupancy over average daily rate in most markets. Nearly half of the 100 areas Highland included in its report had a 2021 occupancy recovery index of at least 100 percent. Highest occupancy
recovery was recorded in Lancaster, Pa., Ogden and Baton Rouge. MSAs with the
lowest 2021 occupancy recovery were Minneapolis-St. Paul, San Jose and Washington
DC.

Essential Business Travel Putting Heads in Beds

In recent Q4 and full-year 2021 earnings calls,  Choice,
Wyndham,
IHG
and Hilton
reported lift from extended-stay properties housing reshoring, relocating and essential
workers. Hotel executives are seeing a market that needs more options. 

Marriott
International SVP global sales Tammy Routh told BTN, that leisure remains the
stronger component of extended-stay business, but business travel continued
there as well with, “traveling nurses and doctors, project teams, business
continuity, entertainment and insurance.”

Choice Hotels president and CEO Patrick Pacious, in the
company’s recent earnings call, cited global supply chain shortcomings and
re-shoring of offshore operations as a big extended stay opportunity. “A recent
survey indicated that over 80 percent of North American manufacturers are
likely to reshore their production operations. This trend has already
contributed to the accelerated recovery of our business travels,” he said. 

Wyndham president and CEO Geoffrey Ballotti exuded the same
confidence in the essential and long-term project workforce to bolster more
extended-stay business. “We know that there are over 10 million construction
workers out there that travel every week. And we also know that relocation and
long-term assignments are going to continue to pick up.”