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Think Realty reported that US Mortgage Rates Hit a 7 – Year High
In the United States, there are many lodging segments in the hospitality industry—from extended stay lodging, to bed and breakfasts, to hotels, motels, inns, vacation rentals and resorts.
Extended Stay Lodging
In the extended stay segment, there is a range from totally transient extended stay buildings, to serviced apartments, managed corporate housing and “by owner” corporate housing.
For the past eight years, the extended stay industry has been on a growth trend, including an:
- Increase in ADR (Average Daily Rate)
- Increase in properties available
“Demand is at a record high,” said Mark Skinner, partner at The Highland Group, in 2017. “More people are staying at extended stay hotels in the U.S. today than ever before, but what’s also true of the overall hotel industry is that these extended stay hotels are seeing record revenues. Just to put a number [to it], it’s probably $11 billion in 2016, not including corporate apartments, which would be $3 billion. For 2015, room revenue for extended stay hotels was close to $10 billion.”
The ways in which customers are using extended stay hotels are also expanding.
In the past, extended stay hotels were traditionally thought of as something specifically geared toward business travelers working on long projects or relocating. However, it has now become a lodging option for people staying four days or less.
Transient extended stay hotels are a rising star in an otherwise steady hotel industry, especially in the U.S. These properties—often distinguished by having a kitchenette in each room and taking reservations, instead of requiring a lease—saw room night demand go up 5.4 percent in 2016 compared to 2015, according to a U.S. Extended Stay Lodging Market 2017 report from The Highland Group.
That same report found occupancy for extended stay hotels remains steady at just over 75 percent.
To date, there are about 40,000 extended stay properties in the U.S. alone, and that number will continue to grow. Rooms under construction for this category were up 16 percent in 2016 compared to 2015—a record high.
Extended-stay hotels continue to outperform expectations, enjoying enough demand to remain ahead even as new supply weighs down occupancy numbers in some markets, sources said.
According to Price Waterhouse & Cooper (PWC), the following is expected for the extended stay lodging segment in 2018:
- The underlying macroeconomic and industry fundamentals are expected to remain strong.
- Supply growth is expected to reach the long-term average, while demand growth is anticipated to continue to support record occupancy levels.
- Strength in consumer spending and the potential for an uptick in corporate transient demand are anticipated to drive a slight uptick in ADR growth compared to last year, ultimately resulting in the ninth straight year of RevPAR growth—approaching the record for the longest consecutive quarterly growth cycle in over 30 years.
The Fund’s investment strategy is to acquire, and provide short-term rentals of, corporate housing properties (the “Investments”).