Expect other big hotel companies to add more economy extended-stay brands. They'll wager that a business model that reduces labor costs will have staying power for the long-term.
Wyndham Hotels & Resorts, the U.S.-based hotel franchising giant, is creating an extended-stay brand focused on the budget market. It said on Tuesday that it had signed deals with developers to debut 50 hotels by 2027.
Each hotel will have 124 rooms. Rooms will average 300 square feet and will come with in-suite kitchenettes.
Wyndham already had a smattering of extended-stay offerings, such as Hawthorn Suites by Wyndham. But the new brand will be the company’s first in “economy extended stay.”
“Our target is $50 to $55 for RevPAR [revenue per available room],” said Krishna Paliwal, head of architecture, design, and construction.
Extended stay caters to travelers staying a week to a few months, such as traveling nurses and construction workers.
Developers like the economy extended-stay segment because it typically performs well during economic booms and busts alike. The pandemic underscored this point. During the past two years in the U.S., extended stay beat all segments.
Aiming to Contain Labor Costs
Lower labor costs are part of extended stay’s appeal.
Wyndham is designing the new brand to limit labor needs. For example, it will design the lobbies, gyms, and laundry rooms to be efficient to maintain, and it will give guests access codes, allowing the properties to avoid having to staff the front desk at all hours.
“It’s a significantly reduced labor model,” Paliwal said. “We’ll have as few as six to eight FTE [full-time employees].”
Wyndham would like to keep construction costs low, too, to appeal to developers. The brand is targeting building costs to be as low as about $8.7 million in many markets, said Chip Ohlsson, chief development officer.
Wyndham would like to build at least 300 hotels with this model in the next decade. The initial focus will be in metropolitan areas in Texas, Virginia, the Washington, D.C. area, Florida, Phoenix, and Reno.
Extended Stay’s Extended Run
The extended-stay segment is getting more crowded in the U.S., as underscored last year by Blackstone’s and Starwood’s $6 billion takeover of Extended Stay America, plus last week’s news that Choice would expand its Suburban brand with a series of conversions.
Wyndham’s new brand, its 23rd, will be all new construction — as a way to stand apart.
Wyndham said it would have a marketing edge because its customer database is already filled with people it believes are likely guests.
About one out of four of its customers have an interest in extended stay, said Lisa Checchio, chief marketing officer.
“The supply/demand expectation for this space continues to be better than just about any other space in the hotel industry,” said Carter Rise, chairman and CEO of Sandpiper Lodging Trust. “There’s still plenty of room to run.”
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Photo credit: A rendering of the exterior of Wyndham's concept for an economy extended stay brand, as of March 2022. The name "echo" is an acronym for Economy Hotel Opportunity. Source: Wyndham.