With each passing month, extended-stay hotels continue to outpace other hotel types in their recovery from the pandemic, and at the lead is the economy segment.

Data from The Highland Group shows that extended-stay hotels in the economy segment are outperforming both extended-stay hotels higher up in the hotel chain scale as well as the rest of the U.S. hotel industry. Not only that, as of April, economy extended-stay hotels are recovering at twice the pace they did during the previous two downturns.

The Highland Group's May report shows occupancy for extended-stay hotels across the economy, mid-priced and upscale segments averaged to 76.5%, its highest for the year and almost 97% of its level two years ago. Average daily rate averaged to $94.42, 87.8% of its 2019 value, and revenue per available reached $72.21, 85.1% compared to May 2019.

Looking at all other hotel segments, economy extended-stay hotels lost the least amount of RevPAR during the worst days of the pandemic, said Mark Skinner, partner at The Highland Group. They are also closer than any other segment to recovering back to 2019 levels.

When compared to previous downturns, the industry focused on maintaining occupancy by providing deeper discounts on average daily rate, Skinner said, adding that extended-stay hotels did this as well.

“The problem with that is rate is hard to get back, and the deeper the discount is, the longer it’s going to take you to get it back,” he said.

This time around, extended-stay hotels did not discount rate as deeply as the rest of the hotel industry, making it easier to build back rate, Skinner said. Economy extended-stay hotels have been seeing monthly rate increases since December 2020.

Upscale extended-stay hotels have not performed as well as economy and midscale extended-stay properties, Skinner said. One of the reasons is the upscale extended-stay hotels are more often located in urban centers, which are lagging in the recovery overall. In contrast, there are few mid-priced extended-stay hotels in urban markets, and the economy segment has virtually no product in urban locations.

The second factor is business mix, he said. Upscale extended-stay hotels have more white-collar business traveler demand than the economy or midscale hotels, and that demand group has been slower to come back from the pandemic. Paired with the location issue, convention- and event-related demand are also lagging. Inbound international travel is only trickling back.

“If you add all those things together, the upscale extended-stay segment is disadvantaged against the lower price point extended stay hotel on all those variables,” he said.

However, compared to the rest of the hotel industry, upscale extended-stay hotels are recovering more quickly. Upscale extended-stay hotels should benefit from increased leisure travel this summer, just as it did last year, Skinner said. This product has been more conducive to leisure travel. Upscale extended-stay properties have similar appeals as the economy and midscale hotels, but they also have pools and offer free breakfasts.

“Those are things that families on vacation find important,” he said. “As you go up the price level for extended stay, those amenities come back.”

Red Roof has more than 60 extended-stay HomeTowne Studio hotels in its portfolio, about 53 of which have been in the system for more than two years, said Alex Cisneros, senior vice president of revenue generation and analytics at Red Roof. The company has seen the positive occupancy and rate trends in this hotel segment through the pandemic.

In tracking performance, Red Roof has been benchmarking against 2019 numbers, he said. Revenue in 2021 for its extended-stay hotels is about 15% higher than it was in 2019, above what the company is seeing with its other hotel brands.

“Extended-stay is far exceeding our expectations,” Cisneros said.

Occupancy levels have been trending to just above 80% for the extended-stay properties, he said. ADR is about $50 and has been growing faster than inflation year to date.

The customer mix has been stable, with about 80% of bookings coming from people who are looking for stays of 16 days or longer, Cisneros said. The remaining 20% are staying for a few days at time. The traditional extended-stay guest was the foundation of what Red Roof was doing with this brand before the pandemic started.

“We've been relying on those customers to stay with the brand for a longer period of time,” he said.

Cisneros said he expects occupancy to remain at or above 80% while ADR should increase as demand grows. While business travel for the U.S. hotel industry is down overall, the business traveler types Red Roof has catered to with its extended-stay brand have been construction crews and other blue-collar workers.

“That is going to be a segment that is going to allow us to increase occupancy and rate even faster,” he said, adding a federal infrastructure bill would benefit the segment greatly.

Prism Hotels & Resorts’ portfolio includes Hyatt Houses, Residence Inns and Homewood Suites, all within the upscale space. The company was able to achieve 90% occupancy or higher at many of these properties because the hotels attracted the right mix of business.

Shannon Kane, regional director of sales at Prism, said her company's extended-stay hotels benefited from people working throughout the pandemic. Film crews were still making TV shows and movies. Employees of various government departments, including the National Guard, were traveling to help with vaccination efforts. Prism's extended-stay hotels saw a lot of traveling nurses over the last year as well.

During the power outages in Texas over the winter, Prism's extended-stay hotels saw demand from displaced residents and then from the insurance adjusters who came to assess the aftermath of the storm, she said. Extended-stay hotels near ports housed crews of fishing boats who needed to quarantine before they got on their boats and then again before they would pack the fish.

Many of Prism’s extended-stay guests were homeowners who decided to remodel their homes because they were able to work remotely, she said.

The families choosing extended-stay hotels over the summer want the larger rooms and amenities they offer, Kane said. Pools, especially outdoor pools, are important for families on vacation. Breakfasts are also coming back, replacing the grab-and-go options many hotels offered over the last year. Extended-stay properties that don’t meet guests’ desire for a return to normalcy will be at a disadvantage.

“No matter how much communication we can send to them before, when they get here to grab-and-go breakfasts, that is going to not only be hard on your staff, it’s going to kill your scores,” she said. “People are going to be unhappy.”

Many companies are watching what some of the bigger players, such as Amazon or Microsoft, are doing for returning to travel, Kane said. When one of these businesses starts to allow travel again, others will feel more comfortable with it and start letting their employees travel as well.