Report: U.S. Ext.-Stay 2023 Rates Rise Amid Record-Low Supply Growth

U.S. extended-stay hotel available room supply in 2023 increased 1.8 percent year over year, the lowest increase on record, according to a new report by The Highland Group. Average daily rates in 2023 increased year over year, allowing for revenue per available room growth even as occupancy declined.

The small increase in U.S. extended-stay room supply in 2023 follows a similarly modest increase the year prior. The last time such annual supply growth was less than 2 percent was in 2011 and 2012, according to Highland Group partner Mark Skinner, when in the subsequent two years, growth remained below long-term averages. 

"We expect a similar pattern will emerge over the next two years given that interest rates and construction costs are much higher than they were a decade ago," Skinner said in the report.

Most of the 2023 increase in supply fell in the economy extended-stay tier, where the room count increased 6.6 percent year over year, while midprice supply increased 1.5 percent and upscale supply held steady.

The U.S. extended-stay pipeline, however, is starting to show some sign of a rebound. Rooms under construction in 2023 increased 53 percent, bringing it to a level seen in 2020 after sharp declines in 2021 and 2022.

Several hotel companies in the past 18 months have announced the development of new extended-stay brands, including Hilton Worldwide, Marriott International, Hyatt Hotels Corp. and Best Western parent BWH Hotel Group.  

Still, "the near-term risk of extended-stay hotel over supply is very low nationally … and plenty of excess extended-stay demand remains," Skinner said in a statement. That should allow extended-stay hoteliers to maintain a level of pricing power after another year of rate increases in 2023.

Overall U.S. extended-stay hotel ADR increased 4.7 percent year over year to $118.80, with upscale ADR up 5.4 percent to $156.43. Overall occupancy declined 0.4 percent to 74.9 percent, although in the upscale tier it increased 1.2 percent to 75.7 percent.

The rate gains fueled a 2023 RevPAR increased 4.7 percent year over year to $88.98. Skinner noted that RevPAR increase outpaced that of the broader hotel industry, and given projections of year-over-year growth in hotel RevPAR of 3 percent to 5 percent in 2024, "we expect that to continue for the foreseeable future."