Given the relative newness of this type of hotel, little historical data is available to effectively measure the national appeal for these properties. Future occupancies will certainly be the best indicator of the depth of demand for this type of property. Look At Middle, Not Just The Top Line Besides market support, a major reason for the historical success of extended-stay hotels is their ability to achieve high profit margins. This compares to an overall industry average of 30.0 percent and 37.7 percent for all-suite hotels. The primary reason for reason for the efficiency of extended-stay properties relative to other hotels is the limited amount of services offered, combined with a low labor requirement.
Early indications show a struggle.
Certainly 43.0 percent is an excellent profit margin. As with all hotel developments, each individual deal needs to be examined for its own market and financial feasibility. The analysis presented in this article is not intended to condemn the new breed of extended-stay hotels, nor dissuade someone from building one. Robert Mandelbaum is Director of Research for PKF Consulting, an international management consulting firm specializing in the hospitality industry. Please contact Hotel.