5 ways to reduce your risk in the extended-stay market
Once considered a niche market, extended stay hotels are now emerging as prominent players in the hospitality world.
The surge in extended-stay hotels isn’t just a fleeting fad – it’s a reflection of shifting societal and economic dynamics. Even top-tier hotel brands are jumping on the bandwagon, investing heavily in this burgeoning market and expanding their extended stay portfolios by more than 50% during the past decade.
In Orlando alone, nearly 60% of real estate transactions in 2022 involved extended-stay properties, illustrating the robust demand for long-term lodging solutions. This growth has been spurred by various factors including an increase in remote work, more long-term travel, and natural disaster home displacement after hurricanes and wildfires.
Embracing the extended-stay model comes with a host of advantages and operational benefits for hoteliers. It can significantly enhance and stabilize revenue streams since guests often book for longer durations, leading to more consistent occupancy rates. Additionally, by catering to guests who stay for weeks or even months, hotels can reduce the frequency of room turnovers – and therefore staffing needs – and increase brand loyalty, boosting a hotel’s reputation and overall profitability.
Extended-stay hotels are not just a boon for hotel owners; they also offer a range of benefits to customers, with the primary allure being affordability since the cost of a conventional hotel can quickly become prohibitive. They typically offer spacious, home-like suites with competitive rates, often inclusive of essential amenities like Wi-Fi, laundry, and fitness facilities, fully-equipped kitchens, mail collection, 24/7 security, and key card access.
UNVEILING THE HIDDEN RISKS
While the benefits of extended stays are significant, there also are potential risks and exposures unique to this model, of which hotel owners should be aware. These extend beyond the challenging task of ensuring that rooms are well-maintained over long periods of time.
Long-term guests may exhibit different behavior patterns than those who stay for short time periods. Because it feels more like home than a traditional hotel, they are more likely to treat it as such, for better or worse.
Consider some of the following risks caused by guests:
- Cooking, lighting candles, or smoking in the room, thus raising fire concerns
- Bringing pets that can destroy the space
- Having more people in the room than occupancy allows, increasing noise, damage, and security risks
Best Practices For Extended Stays
To reduce risk when it comes to extended stays, hotel operators should consider adopting the following best practices:
1. Extra security measures. Invest in effective property management and security systems to streamline operations and track guest behaviors and preferences, such as wanting to stay on the first floor. Guests will appreciate extra security when staying for longer periods.
2. Train front desk staff to communicate about security features. This may include monitoring access to the back/side doors that are common to extended-stay hotels and often left propped open, creating a security concern.
3. Consider weather exposures. Extended stays will have different exposures compared to regular hotels. Wind, flooding, and more can affect any hotel, but think about what else may be needed in areas prone to CAT disasters. Devise a plan that supports revenue goals and be sure to fully discuss concerns and risks with an agent.
4. Have an emergency management plan. Extended stays often become Plan A for people caught in a natural disaster or other CAT claim situation. Know the evacuation orders and have generators and other necessary supplies on standby to keep operations running. Be aligned with any regulatory or government agency instructions and understand a four-story concrete building will be a different situation than a high-rise in the wind.
5. Let your broker know about your extended stay. Because the exposures are different in an extended-stay hotel, let your insurer know if you acquire or build one. There are multiple exclusions of which to be aware, and the policy costs and limits may differ compared to traditional hotel exposures.
The rise of extended-stay hotels is a testament to the evolving preferences and demands of modern travelers. By understanding the dynamics of the market and implementing best practices, hoteliers can capitalize on this movement and provide guests with a compelling alternative to traditional lodging.