NATIONAL REPORT—With the industry-leading success of the extended-stay sector in the U.S. over the past 10 years, the major hotel companies have begun to look to markets outside the U.S. as the next logical place to develop their extended-stay brands. They’re particularly interested in transplanting their upscale, extended-stay brands like Residence Inn by Marriott, Homewood Suites by Hilton, Staybridge Suites, Element and even the recently launched Hyatt House.
Yet transplanting the extended-stay business model from one region to another and from one culture to another can present a variety of challenges, if not handled correctly. To start with, not every culture may have a tradition of purpose-built, extended-stay lodging. In many areas of the world, transient hotels may double for extended-stay bookings by default. And is the extended-stay pricing model—the longer the stay, the lower the rate per night—understood and applied in every market?
“In the U.S., about a third of all business travel room nights are part of an extended stay. Yet only 10% or less of room supply are purpose built for extended stay. That same imbalance exists globally, only more extremely,” explained Diane Mayer, VP & global brand manager for Residence Inn.
For U.S.-based brands interested in expanding internationally, Canada and Mexico are logical first steps, given their proximity. Homewood Suites by Hilton chose Canada. The brand currently has 10 hotels open there with deals signed for four more.
As the brand begins to become known in Canada and consumers become comfortable with the segment, Bill Duncan, global head of brand management, views building distribution as a top priority. “Given the current supply in a country the size of Canada, there’s an opportunity to add additional inventory in the segment,” Duncan noted.
Staybridge Suites, which is part of IHG, has ventured further afield internationally. In addition to six properties in Canada and three in Mexico, Staybridge currently has two hotels open in the U.K., and one each in Sao Paulo, Brazil; Cairo, Egypt; Abu Dhabi, UAE; and St. Petersburg, Russia.
A third U.K. Staybridge is scheduled to open this month in Stratford, England, in a dual-brand development that also includes IHG’s Holiday Inn brand. The timing of the opening was critical for the project’s owners, Trinity Hotels, because Stratford is the site of the Olympic Stadium, a centerpiece of this summer’s London Olympic Games.
For Kirk Kinsell, IHG president of The Americas, Staybridge’s growth internationally is proof of the underlying success of the extended-stay concept. He strikes a theme often heard when discussing the special positioning of these hotels—their residential quality.
They provide a “home-away-from-home experience,” he said, as important in international markets as in the domestic market. While extended-stay hotels typically will take transient stays of a few nights, the business model—to really be successful—requires a base of true extended-stay business, defined variously as five-to-seven nights. Extended-stay guests can actually stay weeks and months, and, on rare occasions, even years at a time.
Marriott International introduced its first Residence Inn outside the U.S. and Canada in Costa Rica in 2009. This was followed last year by openings in Munich, Germany, as part of a dual-brand project with a Courtyard by Marriott; Edinburgh, Scotland; and Manama, Bahrain.
Marriott International’s development strategy internationally has been to go into a market first to establish the Marriott flag with a luxury JW Marriott or full-service Marriott, building name recognition and a comfort level for the Marriott name. The company will then have a Courtyard by Marriott follow, so that the concept of select-service starts to become clear to people.
“Then the introduction of a Residence Inn by Marriott into the market will make sense because it will be clear that the brand is endorsed by Marriott, but is neither full-service nor select-service, but a distinct lodging category all of its own called extended stay,” Mayer explained.
Starwood Hotels & Resorts Worldwide’s eco-friendly Element extended-stay brand doesn’t have any properties outside the U.S. yet, but has three on the drawing board: two in Canada and one in Muscat, Oman.
Meanwhile, the industry’s newest upscale, extended-stay brand from a major company, Hyatt House, launched last September by converting two existing extended-stay brands, Hyatt Summerfield Suites and Hotel Sierra hotels that Hyatt had acquired from LodgeWorks. Like Starwood’s Element, at present, all Hyatt House hotels are in the U.S. But Hyatt, like Starwood, has signed deals to bring its brand overseas in the next few years, in this case to India, China and Saudi Arabia.
In introducing Hyatt House in a market as large and robust as China, Hyatt hopes “to showcase the brand in an effort to expand it to other Chinese markets,” according to Nong Xia, Hyatt’s SVP for real estate & development in the country.
A consultant who specializes in extended-stay lodging, Mark Skinner, a partner in the Atlanta-based Highland Group, discourages people from assuming that the major brands are taking their upscale, extended-stay products to Europe, the Middle East and Asia because the U.S. market is somehow saturated. “To the contrary, with roughly 325,000 extended-stay rooms today, there’s still plenty of room for these brands to expand here. Rather, it’s inevitable that the major hotel companies will want to expand all their brands globally and that includes the extended-stay category,” Skinner said.
Opportunities in Europe
Certainly, there are new opportunities in a market like Europe, he continued. “If you compare Europe—the 27 countries of the European Union—to the U.S., in terms of population, the size and number of hotel rooms are larger than the U.S., but yet there are only a fraction of the number of extended-stay rooms,” he said.
The extended-stay pricing model remains very appealing to people, regardless of region, Mayer concluded. “It adds to the extended-stay category’s value proposition, whether for the end-users themselves of for the corporate buyer. The idea of having a lower price for a longer stay is rational to them. It’s especially appealing to the corporate buyer and, therefore, it’s core to our business model.”