Agenda - Planning Commission - 01/05/1999

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According to J.C. Bradford and Company, the average occupancy in 1996 was 80 percent for extended-stay facilities and 66 percent for hotels. It has been found that maintenance costs for extended-stay operations tend to be ,0 lower because guests staying longer take better care of their rooms. A typical extended-stay facility is a two- ~ or three-story structure with interior access ~ to the rooms. In the more '~ temperate southern states, buildings with exterior access have been built to help reduce construction costs. However, the recent trend has been to provide interior hallways for the security and convenience of guests. Generous landscaping often buffers against noise and provides a more residential "home away from home" appearance. Wifh Downsizing Comes Opportunlfy The effect of corporate downsizing and merging of companies can be credited with much of the increased demand for extended-stay lodging. Downsizing has effectively reduced the number of branch offices, driving up corporate travel to yet fewer locations. Where managers once made day trips to several close locations, they are now traveling farther distances for longer periods of time. Business travelers have found the convenience and price of extended-stay facilities more suitable than full-service hotels, apartments, or staying with friends or relatives. Such changes in the business environment have caused the mid- and economy- level extended-stay market to The following table devised by the Highland Group helps distinguish among the differing segments of the extended-stay market: Average Rate Rate Tier Per Day Upscale S99 · Mid-Price S50 Economy $31 I~udget S20 expand beyond the traditional three to five percent growth rate of the hotel industry. Downsizing, mergers, and corporate relocations have forced corporations to reduce travel accounts and focus on the bottom line. Technology has placed new demands on workers and team-based job strategies are on the rise. Such changes require corporations to provide training that will optimize productivity. Training can last more than five consecutive days, reports the Highland Group, with banking and telecommunication industries often requiring more than 10 consecutive days of annual training. Furthermore, communications technology is changing quickly, fueling the need for corporate training programs. Coupled with downsizing, companies are finding more economy in centralizing training programs and bringing in out-of-town employees. Providing a more comfortable location with the conveniences of home may increase productivity and reduce the stress of being away. Joseph.[. Cimer is a planner and Richard W. Redniss is the president of Redniss & Mead Planners, Engineers, Surveyors, Environmental Consultants, in Stamford, Connecticut. Typical building design of the Stamford, Connecticut, Homestead ¼'llage site. Left, a deluxe guest room layout. Extended-stay lodging has also become a viable alternative for non-business guests. Census data show that an increasing number of American households are relocating, prompting a need for transitional accommodations. With upscale extended- stay hotels an expensive option, mid- and econo.my-level segments of the niche market have allowed movers a reasonably priced alternative. J.C. Bradford has found that as many as 25 percent of the guests of some extended-stay facilities would otherwise have found temporary accommodations with family or friends. Price-conscious military personnel and government workers also find extended-stay hotels financially attractive, as do contractors placed in new markets by government outsourcing and families requiring location-specific and specialized health care. As the mid-price and economy market segments grow, and as the targeted markets mature, a better understanding of all users will become known. Cheap Land The extended-stay industry tends to locate on land cheaper than that occupied by traditi6nal hotels. The sites may be comparatively small, accommodating as few as 60 units of extended-stay housing. The Highland Group has found that the typical project is 100 to 150 units in size. Land available to this growir;g lodging use has traditionally been in the suburbs. As the market segment matures and is more easily identified by the industry, extended-stay property owners may find more suitable urban locations. Extended-stay sites can range from one to three acres in size, making location near a major thoroughfare essential for visibility and convenience. Because the facilities typically do not contain retail amenities, a variety of restaurants or shopping should be within a five-minute drive. The lower-end extended- stay lodging facilities generate most business through drive-by recognition and word-of-mouth, says KPMG, advisers to the real estate hospitality and construction industry. For this segment, visibility becomes a major factor for success. Companies entering the low-end market early also have an upper hand in future locations within the same market area. Only 18 percent of the guests in that stay in low-end facilities are corporate clients, while up to 48 percent of the clientele are construction employees and movers. With fewer barriers to entering this market, oversupply is predicted.