The extended-stay hotel recovery continues to gain momentum and set new records, according to The Highland Group’s 2010 U.S. Extended-Stay Lodging Mid-Year Report. Extended-stay hotel demand was up more than 16% for the second successive quarter and extended-stay hotel room nights accommodated were the highest ever reported for the first half of any year. Rates of demand growth not seen in at least a decade coupled with a sharp decline in new room openings produced strong increases in occupancy.

Average rates are still declining but at less than half the pace of the first quarter of 2010. Smith Travel Research (STR) reports that overall hotel average rates have turned positive over the same month in the prior year and they were flat in the second quarter of 2010 compared to the same period in 2009. Upscale extended-stay hotels are expected to follow a similar trend within the next 90 days and monthly average rate growth for economy and mid-price extended-stay hotels should turn positive before the end of 2010.

Growth in extended-stay hotel RevPar is accelerating. All segments posted RevPar growth in the second quarter of 2010 compared to the same period in 2009. With the number of extended-stay rooms under construction below 25% of their peak in 2008 and projections of further declines in the rate of supply growth, the outlook for continued increases in RevPar is very good.

• Extended-stay hotel supply increased 4.4% at the end of June 2010 compared to the same period in 2009.
• Extended-stay hotel demand increased 16.3% in the second quarter of 2010 compared to the same period in 2009. STR reports that overall US hotel demand grew 8.7% in the second quarter 2010.
• At 71.2% extended-stay hotel average occupancy is nearly 15 percentage points higher than the US hotel average.
• In the second quarter of 2010 extended-stay rate discounting decelerated to less than half the pace of the first quarter in 2010.
• Extended-stay hotel RevPar rose 7.5% in the second quarter of 2010 compared to the same period in 2009 and is up 4.3% year-to-date. However, RevPar is still more than 12% below peaks set in 2008.
• There were 6,838 extended-stay rooms under construction at the end of the second quarter 2010. This was a 61.9% decrease compared to one year ago and a more than a 40% decline compared to six months ago.
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