Buyers: Ext. Stay Hotels Extend To The Transient Traveler

Travel buyers last month said they added extended stay properties to their hotel programs for 2002 for two reasons: Primarily, the decision was economic, but also one of market forces. As with midprice business hotels generally, extended stay brands are a cost-effective alternative for buyers at a time when travel budgets are under particularly intense scrutiny. But buyers also said that extended stay properties increasingly were looking for transient business, which inadvertently gave them additional options in markets where they needed more coverage.

"Basically, we're using more extended stay properties in 2002 because so much of our travel is project driven, meaning travelers will be at a certain location for a while overseeing a project," said Carol Ann Bakeman, corporate travel manager for AECOM Technology Corp. in Los Angeles, a consortium consisting of architecture and engineering firms. "Location is important, of course, but much depends on the rate we're able to negotiate. There'll be times when a regular business hotel will give us an advantageous rate for extended stay, but more times the best rates are at extended stay properties."

Other classic users of extended stay hotels are employees being relocated and those on long-term training assignments. Typically, an extended stay is defined as five nights or longer, though many travelers can be in residence for months at a stretch. In the classic extended stay pricing model, the longer the length of stay, the lower the nightly rate.

Five years ago, travelers may have been unfamiliar with the extended stay concept, but that has changed as a result of exposure. "Our extended stay use continued to grow in 2002 because of the lower rate structure, but also because our travelers developed a comfort factor with this type of product," said Kevin Maguire, travel manager for Tokyo Electron America in Austin. "Once travelers knew the level of service they could expect, it became an easy sell for the travel department. At the midprice level, the value proposition at many of these properties is quite high." This use extends to transient stays, according to Maguire. "If we need to place a traveler in an extended stay property for a night or two and the hotel will take the reservation, we'll do it," he said. "Particularly if the price is right, why not?"

As extended stay brands have come to realize there is an opportunity for them in the transient segment, buyers reported the brands have become more assertive in going after it. "In a lot of markets we're in, extended stay hotels have come to us and offered a transient rate for 2002," said Richard Del Colle, global hotel program and meetings manager at Hewlett-Packard in Burlington, Mass. "A few years ago, that would rarely happen."

Del Colle noted that Hewlett-Packard this year is using more extended stay properties overall, though he specified that these properties are midprice. In his mind, the new aggressiveness on the part of extended stay brands reflects an increase in the number of midprice extended stay options available in the marketplace today, all scrambling to build market share. "Their outreach is a result of this growth."

In certain instances, however, extended stay brands' traditional pricing has been a handicap in working with buyers on their transient business. "It's been especially true at some upscale extended stay brands," said Tracey Wilt, travel manager at Xerox Corp. "Because of their rate structure, they often can't give us as competitive a rate on our one-to-four-night transient stays as we can get at the regular business hotel around the corner."

For their part, such extended stay brands as Homestead Studio Suites and Extended StayAmerica acknowledge having benefited from the increase in transient usage. "Every transient stay is an opportunity to educate the traveler about what we have to offer," said Gary DeLapp, president and CEO of Homestead Studio Suites, which is based in Atlanta. "There's no question trial usage helps us in the long term."

New hotels tend to attract a higher amount of transient bookings than more mature ones. "Depending on the location, we'll see transient usage of 15 percent to 20 percent," said Mike Wilson, vice president of sales for Extended StayAmerica. "For the first nine months to a year after a property opens, however, the transient business will be higher. At around that point, the extended stay demand kicks in."

At both of these brands, the value proposition precludes elaborate amenities. "Our strategy is to stress the amenities travelers need without the frills they don't need," DeLapp said.

At Extended StayAmerica, Wilson described the approach as contrarian. "We're the opposite of other segments of the lodging industry, which add amenities as a way of raising rates," he said.