The Highland Group publishes an industry-leading quarterly report on the U.S. extended-stay hotel market, which we follow closely. This year’s second-quarter 2018 version just arrived over the Springwood transom. Highlights from the report are:
- Record high occupancy
- Strongest mid-year demand growth since 2010
- Seventh consecutive quarter with double-digit room revenue increase
- Fourth consecutive quarter of RevPar growth above 4%
- Rooms under construction up 8% over the past year
- Extended-stay hotels continue to absorb record levels of new rooms while maintaining occupancy above their long-term average.
The two-year trend of accelerating supply growth and declining occupancy reversed in 2017, and demand has grown faster than supply for the last four consecutive quarters. After picking up in the second half of 2017, ADR growth moderated over the last six months but is well ahead of inflation.
The exceptionally good extended-stay hotel performance in 2018 is welcome as rooms under construction climb above 50,000. The supply growth rate is accelerating but only incrementally and is short of the most recent peak levels that occurred throughout most of 2009. Recent trends in rising demand and high occupancy indicate extended-stay RevPar growth should continue to exceed general inflation over the next year.
Dave’s notes: What the report does not explicitly say is that Home2 Suites by Hilton is the primary driver of these strong numbers. It’s been a long time since a single brand shifted demand for an entire industry, but this powerful Hilton brand has been a game-changer.
That’s why it’s now “the darling” brand (so we’re told), in heavy demand by institutional investors who are – for the moment – specifically targeting the Home2 Suites brand with premium pricing. These trends come and go like the tides, but it’s an interesting phenomenon that seems to be in place as we approach our first package sale next quarter.