There is a lot of hype around extended stay properties in the investment community at the moment. Emerging as a key theme at the International Hospitality Investment Forum, we sat down with Jacqueline Rencurrell, Director of Investment at Turnstone Group, to discuss this growing segment and why it is gaining so much traction among investors.
Specifically, Rencurrell highlights the remarkable efficiency of extended stay hotels, particularly in the economy segment. While traditional transient hotels typically see gross operating profit margins on average of 30-40%, economy extended stay properties like WoodSpring Suites can achieve margins approaching 60% on average. This, Rencurrell says, is a key driver of investor interest in the segment.
The success of extended stay properties, she adds, hinges on experienced management. These specialists understand the unique dynamics of extended stay guests, who are less expensive to attract and retain and require fewer full-time employees to serve. This efficiency translates to labor costs on average of only 13-15% of total revenue in economy extended stay hotels.
Turnstone Group has also found success with a shared site strategy, placing economy and mid-scale extended stay properties side-by-side. This approach, implemented in Newnan, Georgia, has yielded operational efficiencies through shared labor and marketing resources.
As the extended stay segment continues to grow, investors like Turnstone Group are identifying underserved markets by looking beyond surface-level data. With twice as many extended stay guests currently staying in transient hotels compared to purpose-built extended stay properties, the opportunity for growth in this sector appears substantial.
View transcript here.