- The extended-stay segment has grown faster than the overall hotel market, driven by growing demand and underinvestment
- Travelers staying five nights or longer accounted for 37% of the hotel room nights sold in the U.S. in 2004. Yet, only about 5-6% of all hotel rooms in the U.S. are considered extended-stay.
- Extended-stay hotels have lower operational and start-up costs. According to Hilton, an extended-stay hotel can cost anywhere between 30-50% less per key to build than a full-service hotel.
- Extended-stay demand increased by ~8% in 2005, while overall U.S. hotel demand grew ~3%.
- Extended-stay average occupancy in 2005 was ~77% (its highest level since 2000), compared to ~65% for the overall hotel industry.
- Extended-stay hotel average rate grew ~7% in 2005, while overall U.S. hotel average rate grew 5%.
Source: Smith Travel Research, PWC and Bear Stearns
- IHG is underpenetrated in the extended-stay segment vs. its competitors. Current pipeline is being driven by the growth in extended-stay franchised hotels.
- Future Candlewood growth is expected to come exclusively through franchised hotels.
Source: Company reports, Deutsche Bank.