Q1 U.S. Ext.-Stay Rates Recover as Occupancy Ticks Up

U.S. extended-stay hotels’ revenue per available room in the first quarter recovered to pre-pandemic levels, while midscale extended-stay properties reached record-high occupancy levels, and the sector’s overall occupancy remains above the hotel industry as a whole, according to a new report from The Highland Group. 

In Q1, U.S. extended-stay RevPAR across the economy, midscale and upscale sectors was $84.69, up 12.3 percent year over year and up from $75.21 in 2019. Upscale RevPAR increased 17.5 percent year over year to $112.17, while midscale increased 8.6 percent to $76.06 and economy rose 1.4 percent to $42.34.

Revenue trends across each sector were “consistent” with the overall hotel industry, as quarterly RevPAR growth “is slowing compared to the first half of 2022,” while slightly ahead of the pace of RevPAR increase during the second half of 2022, according to The Highland Group.

This uptick partially can be attributed to the midscale sector’s record-high occupancy at 71.8 percent in Q1—the highest peak for the sector in 20 years—up 0.4 percent year over year, according to the report. Upscale occupancy in Q1 was 72.9 percent, up 4.4 percent year over year, but shy 2.7 percentage points from 2019 levels. Total extended-stay demand increased at nearly “twice the rate of supply over the last 12 months,” according to the report.

“The pandemic had a far greater impact on mid-price and upscale segment occupancy with the latter growing the fastest over the last two years,” the authors added. With that said, upscale is the only extended-stay segment not yet recovered to 2019 occupancy levels, according to the report.

Economy extended-stay hotels’ Q1 occupancy declined 3.4 percent to 73.6 percent, down 1.5 percent points from 2019 levels. While economy Q1 occupancy surpassed 2019 levels in 2022, “the decline over the last 12 months means first-quarter 2023 occupancy was the segment’s lowest since 2010,” according to the report.

Average Q1 U.S. extended-stay occupancy was 13 points higher than the average of all hotels, according to the report.

The overall Q1 extended-stay segment average daily rate increased 10.9 percent year over year to $116.74, up from $101.82 in 2019. Upscale ADR increased 12.6 percent year over year to $153.88, while midscale ADR increased 8.2 percent to $106 and economy ADR was, up 4.9 percent to $57.55. 

Overall Q1 U.S. extended stay revenue is up 13.9 percent year over year, and the upscale sector alone reported a 17.6 percent increase. Midscale revenue increased 11.9 percent, while economy was up 2.6 percent.

RELATED: Q4 U.S. extended-stay performance