Exporting the Extended-Stay Hotel Model Around the World

Earlier this month we launched our latest free report The Changing Business of Extended-Stay Hotels, brought to you in partnership with Homewood Suites by Hilton.

Below is an extract. Get the full report here to get ahead of this trend.

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The slow and steady supply growth of the segment within the U.S. has meant even slower development outside its borders.

In addition, the unique operating model of extended-stay means that it's not likely to be the first development project in a market.

For instance, Canada is a mature market for many extended-stay franchised brands. But just ten years ago, there were no extended stay hotels in Canada, says Bill Fortier, Hilton Worldwide’s VP of franchise development for the Americas. "It was a good experiment. The owner was surprised at how deep those markets were, how accepting they were of added cost price per room, how quickly customers migrated to extended-stay."

He added that the lower price point product for Hilton, Home2 Suites, is just starting to move into the Canadian market. The brand's first property opened in July in Edmonton. And it's still about finding owners that want to take that "leap of faith" for a product somewhat new to the market.

"They have got to have faith in the businesses in the market and they have to believe they can charge an extra $10 dollars. It will happen and it will surprise owners."

Home2 Suites opened a property Querétaro, Mexico, which shows promise for this price point of extended-stay within Latin America, according to Fortier.

According to Hilton, a prototype specific to Latin America is expected to launch in November, with an emphasis on efficiencies of space that are customary outside of the U.S. while retaining the key elements of the experience in the guestrooms and lobby/ manager's reception area.

Hilton expects to open a total of 30 Homewood Suites in all markets during 2014, and opened the same number in 2013. At the close of the second quarter, the brand had 350 properties open in the Americas.

While there is demand for the product based on business travel and length of stays happening around the world, the extended-stay segment is still in an immature state in most foreign markets.

"The concept doesn't exist outside of the U.S." says Diane Mayer, VP and global brand manager, Residence Inn by Marriott. But that doesn't mean extended-stay development is at a standstill. The biggest pipeline for Residence Inn is in the Middle East and Africa region, due to the demand for extended-stay trips with long-haul flights.

One third of all stays are extended-stay, three quarters of the guests want the segment's definitive features and amenities, and less than 10 percent of the supply is extended-stay, Mayer adds.

The customer is the same outside of the U.S., it's just a matter of how many are there, Fortier says. The cost of construction is exacerbated in smaller markets or less sophisticated markets like Mexico City, he says. "Owners are always going to find the cheapest way in."

Mayer pointed to the dual-branded prototype as a strong international development engine for Residence Inn.

The Courtyard/Residence Inn development in Jazan, Saudi Arabia, saw the Courtyard component open November of last year and the Residence Inn component is scheduled to open in October, 2014. Yet, it is important to note that the first Residence Inn in the Middle East market just opened in 2012 — the 80-room Residence Inn by Marriott Manama Juffair in Bahrain.

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