As the hotel deals volume is expected to increase in the latter half of the year, the spotlight might be on high-profile properties, but the real action is in the mid-market and extended-stay segments. Extended-stay hotels are proving to be particularly attractive to investors and operators due to their remarkable resilience and steady performance metrics.
Mike Cahill, founder and CEO of Hospitality Real Estate Counselors, highlights the growing interest in mid-market deals, especially in the extended-stay category. "People still want to buy extended-stay hotels," he notes, adding that his brokerage has several extended-stay hotel portfolios on the market, with aggressive buyer interest. The market for hotels valued between $7 million and $15 million has seen a significant uptick, as these properties are often recycled and put back on the market.
Bill Stadler, senior managing director at Aimbridge Hospitality, echoes this sentiment, stating that extended-stay hotels consistently outperform other hotel types in terms of profit margins and performance metrics. "Extended-stay hotels have resilience, not the volatility," Stadler emphasizes. The typical business model of extended-stay hotels involves stays of 26-plus days, providing stability even during economic downturns.
Despite the general growth of the hotel industry, with a less than 1% increase in revenue per available room (RevPAR) year-to-date, extended-stay hotels continue to hold their ground. In contrast, economy and midscale hotel segments have seen a decline in RevPAR by 5%, reports Bryan Wroten of Hotel News Now.
Aperture Hotels CEO Charles Oswald advises caution, however, urging owners to carefully evaluate extended-stay hotel deals based on the specific market. "Make sure you actually have extended-stay business in that submarket," he advises, stressing the importance of understanding the unique characteristics of each market.
During economic downturns, there's often a shift in demand towards lower-cost accommodations, further boosting the appeal of extended-stay hotels. "It showed it in the last few years, which is why everyone’s building extended stay today," Stadler explains.
While there is some debate on how extended-stay hotels might adapt during tough times, with Oswald suggesting a potential shift towards accommodating short-term guests, Stadler disagrees. He believes that maintaining the longer-term stay model is crucial, even if it means occasionally turning away transient guests to keep rooms available for month-long stays.
Overall, the extended-stay hotel segment remains a compelling investment option, offering a stable and resilient model in a market characterized by fluctuating demand. As investors seek to navigate the complexities of the hotel industry, extended-stay properties stand out as a robust choice, capable of weathering economic uncertainties while delivering consistent returns.
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