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The short-term rental versus hotel battle is gaining renewed strength as business travel ramps up across the U.S. this fall, Bisnow reported on Monday.
A number of large hotel brands, including Hyatt Hotels Corp. and Wyndham Hotels & Resorts, are increasing their long-term stay options. Meanwhile, Airbnb co-founder Brian Chesky has said it’s time for the platform “to get our house in order,” and said that an improvement plan for the company could also include leasing options that extend up to a full year.
“It seems like not a day goes by that one of the well-known hotel chains isn’t moving into alternative accommodations,” NYU Associate Professor Richie Karaburun, with the Jonathan M. Tisch Center of Hospitality, told Bisnow. “What that tells me is that hotels are now in full attack on Airbnb and Vrbo.”
Nearly one-third of the hospitality industry’s construction pipeline is now made up of extended-stay projects, according to Lodging Economics. Over 2,000 projects totaling 214,500 rooms were in progress by the end of the second quarter of 2023. By the end of Q2 2024, extended stay projects are expected to grow to make up 42 percent of all hospitality construction projects.
In August, Hyatt announced Hyatt Studios, an upper-midscale, extended-stay lodging brand for North America with inaugural locations in Mobile, Alabama, and Marysville, California.
The month before, Wyndham announced that it would be growing its Echo Suites Extended Stay brand by 60 additional properties in North America, increasing the brand’s total pipeline to 265 properties. In June, Marriott International also announced its intention to expand into the extended-stay sector with a still-unnamed “affordable midscale extended stay brand.”
The Marriott International’s Homes & Villas by Marriott Bonvoy brand, which was launched just before the pandemic, had already secured a footing in the short-term rental market and now has over 130,000 properties across the globe.
“We are a platform of whole homes that are all professionally managed, so not the pure peer-to-peer like other tech platforms,” Homes & Villas by Marriott Bonvoy Vice President Jennifer Hsieh told Bisnow. “Our whole home rentals cater to a trip purpose that needs the space and amenities of a multi-bedroom home in unique destinations, such as a boat dock by the lake.”
As the prevalence of short-term rental platforms has grown in the last few years, traditional hotel brands have continued to find new ways to respond.
“It’s possible that the extended stay hotels will take some business from Airbnb and Vrbo — some longer-term business,” Highland Group partner Mark Skinner told Bisnow. “Airbnb made a concerted effort to go after that business during the pandemic, and I have seen reports from them about how much it’s grown. I think I’m right in saying that on their app, there’s a section for 30-night stays.”
The pandemic spurred many consumers to want to stay in short-term rentals that mirrored the comfort of a home, often without having to physically interact with anyone.
However, Airbnb’s rising prices, string of fees, unreliable amenities and lack of customer service have hurt the platform, especially as hotels come up with new alternatives.
“We want prices to move and to be more competitive vis-à-vis hotels — that is really important,” Chesky told Bloomberg in early October.
Extended stays were traditionally targeted towards workers who were in a location temporarily on a job, according to Ridgemont Hospitality President Dhruv Patel, with many such properties opening in secondary or tertiary markets with fewer hospitality options. As Airbnb and other similar peer-to-peer rental sites have popped up, group and family travelers gravitated toward those options, which became grouped in more popular destinations.
“Extended-stay and Airbnb have been a bit of a different animal,” Patel told Bisnow.
Many extended-stay customers have continued to be traveling workers, but more non-work-related travelers have gravitated towards those options, too, according to Karaburun, who said that travelers are drawn by standard hotel amenities, like room service and prepared meals.
Because of the growing interest in extended stays, investors have also turned their eyes to the asset class. In 2021, Extended Stay America was acquired by Blackstone and Starwood.
“Extended stay properties are very much in demand,” Berkadia Managing Director Natalie Castillo told Bisnow. “The question I get from most investors is that they’d love to buy, but it’s hard to find anything in the market. There is a significant shortage of extended stay products.”
During the 12-month period ending June 2023, revenue from guests staying seven consecutive nights or longer was $8.97 billion at traditional hotels compared to $7.39 billion at extended-stay hotels, showing that there is enough extended-stay business that goes to the average hotel that could be captured by extended stay-specific properties. Still, extended-stay properties have stayed strong despite the competition.
“But while Airbnb and Vrbo have grown, there still are more people staying in extended stay hotels than ever before,” Skinner told Bisnow. “If they captured some business from extended stay hotels, it’s more than being replaced.”
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