In less than four years since acquiring the WoodSpring Suites brand in December 2017, Choice Hotels International has quadrupled its portfolio of extended-stay hotels, and company executives said that investment has paid off.
Last week, Choice leaders met in Gurnee, Illinois, to commemorate the opening of the 114-room WoodSpring Suites Gurnee-North Chicago, the brand's 300th property.
The Rockville, Maryland-based hotel franchising company first announced its intent to acquire WoodSpring Suites' brand, franchise operations, marketing and development for $231 million from WoodSpring Hotels LLC in December 2017. The transaction closed in February 2018. At the time of the deal, WoodSpring's portfolio included approximately 240 extended-stay hotels in 35 states.
In an interview ahead of the celebration in Gurnee, Choice executives discussed the company's investment and outlook on the extended-stay hotel space, which includes midscale and economy properties with guests that typically stay seven or more nights.
Ron Burgett, Choice's senior vice president of development, extended stay, said WoodSpring Suites continues to lead the company's extended-stay development strategy.
"We're very, very pleased at where we are after the acquisition, which is now three-and-a-half years ago," Burgett said. "We're definitely on a path for aggressive growth. In our pipeline, we have over 240 properties nationally that we're tracking in the United States for the WoodSpring brand. With our other [extended-stay hotel] brands, we're at about half of that but still very aggressive."
Through the first six months of 2021, Choice's WoodSpring Suites brand leads its extended-stay portfolio with 453 hotels open or in the development pipeline. Its other extended-stay brands include MainStay Suites, which has 217 properties open or in the pipeline, and Suburban Extended Stay Hotels, with 86 hotels open or in development. Choice's newest extended-stay brand Everhome Suites, which executives introduced before the pandemic in January 2020, has 18 hotels in its pipeline and has signed 10 franchise agreements so far in 2021.
As the pandemic restricted travel through much of 2020, many luxury and higher-end hotels closed temporarily, and groups postponed major conferences and events to the detriment of larger hotels. The extended-stay segment has recovered more quickly. According to Choice data, WoodSpring Suites averaged 72% occupancy in 2020 — outpacing the U.S. hotel industry average of 44% — and executives said the brand is continuing to outperform in 2021.
Anna Scozzafava, Choice's vice president of strategy and operations, extended stay, said investors are taking notice of the performance trends in extended-stay hotels.
"We really are seeing that smart money, institutional capital is interested in extended stay, but I think they're really starting to see the return on their investment, even during this challenging environment," Scozzafava said. "We expect some more traditional hoteliers to try and come in and really hedge their bets against their portfolio of more transient or traditional hotels."
Institutional investors include owners who are looking at the hotel industry for the first time and view the extended-stay space as the least risky, Burgett said. That opens up more development conversations for the rest of Choice's extended-stay brand stable.
"They build multi-family; they're looking at office space — for the first time they're calling us because of how we performed in the pandemic. ... You've got people that are outside the business looking in for the first time," he said. "We see that being really good for our Everhome brand, specifically, as we open up all these new markets for something that's been really desired and needed in the market space. Right now, the demand is about 20% higher than the supply, so Choice sees a long runway for growth there."
Burgett said the next development push for Woodspring Suites will be focused on more urban U.S. markets, such as Chicago, Atlanta and Dallas, but the brand could take its first steps outside the U.S. soon.
"We are for the first time seeing strong interest in Canada. ... It's been a year and a half since we've been able to get to Canada," he said. "I would expect to see some strong development over the next six months up there."
The pandemic has reshaped traveler behavior and hotel operations at all price points, but Scozzafava said the core extended-stay demand that WoodSpring Suites attracts will remain even if travel reverts to pre-pandemic trends. For example, the $1 trillion bipartisan infrastructure bill — which passed in the U.S. Senate in August and will go to a vote in the U.S. House of Representatives this week — could provide a huge influx of construction workers looking for longer-duration hotel stays during projects.
"Certainly we have a different kind of guest mix with more essential businesses that have to travel. These are folks that have not stopped traveling throughout the pandemic and continue to travel," she said. "We've been able to serve frontline workers, and essential workers throughout the pandemic and still do today. ... The trend towards those longer-staying guests, we're in a perfect position to serve those guests."
Ahead of the 300th WoodSpring Suites opening celebration, Choice shared testimonials from franchisees in a series of LinkedIn videos. Veronica Garcia, president and chief operating officer of Miami-based Gold Coast Premier Properties, which owns eight WoodSpring properties, said her company has been pleased with the performance of the brand throughout the pandemic.
"Having the hotel industry endure the COVID crisis, it has only shown how resilient the operating model and the segment can be," Garcia said. "During the pandemic, our investments in the extended-stay segment, which are primarily WoodSpring Suites, did perform extremely well. The performance was driven by occupancy and by reasonable rates. WoodSpring Suites still is our No. 1 asset class because of its strengths and continued return on investment."
Carter Rise, founder and managing member of Richmond, Virginia-based Sandpiper Hospitality, an owner of 25 WoodSpring Suites hotels, said increased investor interest and demand outpacing supply are good indicators for the extended-stay segment.
"What we've seen over the last 10 years is the rest of the institutional markets have recognized the cash-flow stability and the value in this market, and as a result, we're seeing increasing acceptance from institutional equity investors, private equity investors and institutional debt providers. That drives valuation and is going to drive investment returns," Rise said. "Supply and demand are critical factors for us and for investing, and what we've seen in extended stay is the demand continues to exceed the supply, especially in midscale and economy, so we've invested heavily there."