Extended stay is beginning to make its presence felt in the hotel industry as the big players marshal their resources.
While the US brands are making the most noise, it could well be Asia-based owners and operators that deliver the fastest growth – and not just within Asia.
The biggest headline grabber this week was the naming of Starwood’s extended stay brand Element, formerly known as Project ESW (extended stay Westin).
Starwood is promising it will redefine extended-stay hospitality by “incorporating smart design, modern style and a social environment into a category often associated with look-alike brands and generic features”.
Steve Heyer, Starwood’s CEO, said the concept would offer guests a “brand experience” rather than just a hotel. And the growth targets are just as ambitious as the style rhetoric – some 500 hotels worldwide are being sought, with 100 promised by 2012.
The big rivals to Element are Hilton’s Homewood Suites, Marriott’s Residence Inns, Hyatt’s Summerfield Suites and InterContinental’s Staybridge Suites. Expansion outside the US has been limited for all of these brands, with Residence having just 17 international hotels, Staybridge just starting out in the UK and Homewood and Summerfield yet to go beyond North America.
Perhaps this is understandable given the opportunity in the domestic market. Highland Group, a consultancy that specialises in the segment, put the number of rooms under development in the US at 22,909 at the end of the first half of 2006. This is 34% more than were being built a year earlier.
Another reason for the domestic focus, however, could well be the comparative challenge of finding sites internationally.
And this is an area where the Asian players have an edge. Ascott, the biggest extended stay player in the world outside of the US, is at the forefront of clever expansion by recycling capital tied up in its real estate.
The company, listed on the Singapore stock exchange, operates the luxury Ascott, the upscale Somerset and mid scale Citadines brands, covering 44 cities in 18 countries with some 17,000 units (keys).
This August it completed its deal to sell its Ascott Mayfair in London for £65.8m and retain management. Perhaps more interestingly, this month it sold its 40% stake in its Somerset Roppongi in Tokyo for Sing$9.1m to the Ascott Residence Trust, a REIT it set up at the start of the year.
The REIT, which claims to be the world’s first focused on serviced apartments, was launched with 12 pan-Asian properties valued at Sing$856m.
As with other hotel segments, it is China and India that are showing the fastest growth in extended stay product. Ascott, for example, has a JV to develop seven hotels in India, and Oakwood, a US company operating through its Singapore division, is making a push into China alongside Ascott.
There are other new Asian players as well, although often not strictly extended stay. Morgan Stanley Real Estate Funds, through its Panorama Hospitality, is the backer of Hong Kong based Shama which has projects in Shanghai and Bejing.
Mandarin Oriental is also entering the market for branded residences. Most recently, Mandarin last week inked a deal to brand and to manage 80 residences adjacent to its hotel in London. It already has five similar developments on the way in North America, having opened New York in 2004, and is linked to one in Shanghai.
Mandarin says it likes the one-off fees paid to it by the developers for using its name and also the ongoing revenues from the use of the hotel facilities. It is not just the Americans that have spotted this opportunity.