Demand for extended-stay hotels has been on the rise among guests and developers alike for the better part of a decade, but three notable pieces of federal legislation are creating new opportunities for growth in the segment.
The Infrastructure Investment and Jobs Act—signed into law by President Joe Biden in late 2021—allocated approximately $1.2 trillion to update the country’s infrastructure. The CHIPS and Science Act, signed a few months later, authorized roughly $280 billion to boost domestic research and manufacturing of semiconductors. The Inflation Reduction Act, signed in August 2022, authorized $12 billion in electric-vehicle incentives.
And while these acts are not explicitly connected to hospitality, hoteliers are benefitting from ripple effects as a wide range of projects break ground and begin operations. During the Red Roof 2024 Brand Conference, Douglas Artusio, chairman and CEO of Dellisart Hospitality and founder of the Extended Stay Lodging Association, told attendees that infrastructure projects need extended-stay hotels for construction crews and supervisors. “There's tons and tons of business for this [segment],” he said.
Infrastructure and Opportunity
“There are 1.8 million infrastructure companies out there who are looking for long-term accommodations for those over 15 million infrastructure workers,” Geoff Ballotti, president and CEO of Wyndham Hotels & Resorts said in July ahead of Wyndham’s debut ECHO Suites extended-stay hotel opening in Spartanburg, S.C., close to the expanded BMW Group Plant Spartanburg. After the Acts were signed, Wyndham increased its global sales organization—which has existing partnerships with companies bidding on major infrastructure projects—by 25 percent to help identify opportunities.
Today, the company’s leadership has identified an estimated 4,000 of the 40,000 projects funded through the Acts that they believe would be a good fit for hotel development. Wyndham is targeting markets that are within 10 miles of projects that either have broken ground or are about to, Ballotti said. “We just know that the demand will follow the construction.”
Matt McElhare, vice president and extended stay segment lead at Choice Hotels International, also sees opportunity based on the supply and demand in initiatives like the Infrastructure and CHIPS Acts—“the growth of manufacturing capacity within the U.S. and what that will do for blue-collar demand.”
Isaac Lake, brand leader of LivSmart Studios by Hilton, said that long-term accommodations are needed for development and investments in infrastructure projects “especially in secondary and tertiary settings.” The extended-stay brand’s first property is under construction in Kokomo, Ind.—close to the new Stellantis/Samsung electric-vehicle battery facility, which Secretary of Transportation Pete Buttigieg toured in August.
Target Markets
As of July, South Carolina had received $9 billion in infrastructure grants, with “a billion dollars of economic development projects ongoing” in Spartanburg alone, Ballotti said. In the Austin, Texas, suburb of Taylor, a Samsung semiconductor plant is under construction with $6.4 billion in funding from the CHIPS and Science Act—and Gulf Coast Hotel Management is slated to open an ECHO Suites half an hour away next spring. Ballotti highlighted the Carolinas, Texas, Florida, Virginia, California, Illinois and New Jersey as key hubs for investment and development.
McElhare has seen “a lot” of investment in the southeast, Michigan and Texas. “Those are areas where we have a lot of hotels, so we're really excited about it,” he said, noting that Choice already has 228 hotels across Florida, Georgia, Kentucky, the Carolinas, Tennessee and Texas. “We've got a number of hotels that are executed and under development in those markets right now,” he said. “We'll expect a lot of them to open in the next couple of years.”
Ryan Rivett, co-founder and CEO of My Place Hotels, said the company’s national sales team is following where the biggest infrastructure projects and manufacturing projects are going, and working to capitalize on the demand and the opportunity that comes with the projects. “It's not confined to the major metropolitan areas,” he noted. “Primary, secondary, tertiary markets are all seeing the benefits. It's really about focusing on where the biggest opportunities are.”
“It's important for us, on the development teams, to make sure that we understand what's going on in our country [and] in the states,” said Matt Hostetler, chief development officer with Red Roof, noting that he and his team research not only approved development plans for plants and factories but even for projects only under discussion. “When we find these opportunities [like] factories [and] plants … we get there to determine what the needs are going to be and how our brands and franchisees can help that growth.”
Extended Appeal
Extended-stay hotels are especially appealing for development alongside large-scale projects because they can house first the construction professionals on the site and then visiting workers, with contracts running the gamut of days to months. This makes the sector all the more appealing for developers and operators. “The segment has evolved over many years, and now there's room for so many different brands to run very successfully,” Artusio told Hotel Management. Dellisart Hospitality’s extended-stay portfolio operates at close to 90 percent occupancy, anywhere from 15 to 20 percent higher than neighboring properties.
As Future Market Insights reported in January, the extended-stay market is likely to see an estimated compound annual growth rate of 11.8 percent from 2023 to 2033, bringing the market to a value of $166.58 billion by the end of that timeframe.
McElhare noted that when he started at Choice in 2018, the company had fewer than 100 extended-stay hotels. As of late September, the company was on track to open its 500th property in the vertical. McElhare estimated that Choice would have 1,000 extended-stay hotels open by the end of the decade. “We expect a high floor on performance in the years to come because of the Infrastructure Act,” he said.
Ron Burgett, senior VP of extended-stay development at Choice, noted that the company’s WoodSpring and Everhome Suites extended-stay brands are popular with developers partially because of their ease of building. “They can get into market quick and they can sustain the ongoing activity after the construction,” he said.
When the Infrastructure Bill became law, the company was aware that it would take time for the money to be spent on the projects, Burgett added. “We're just seeing the tip of the iceberg,” he said.
Infrastructure Act and Revenue
Ballotti calculated that current Wyndham owners could see up to $3 billion in revenue over the next eight years from the Infrastructure Act. “We look at the project volume, we look at the contracted room nights, we look at the number of new accounts coming in, we look at the pickup and the lift, and we're estimating that over the next five years, it could add an additional point of occupancy demand to our North American system,” he explained. “So if occupancy historically in the economy segment runs at 1.5 to 2 percent it will add an extra point. And if you take that extra point of demand, that extra point of occupancy, against the existing supply of revenue, or the existing revenue base of our domestic hotel count, [we] estimated $3 billion.”