Choice Hotels on Extended Stay Versus Short-Term Rentals: Interview

22.11.2023 - 17:33 / skift.com / Srividya Kalyanaraman

This was the year the short-term rentals  industry saw it all — the good, the bad and the ugly.  

It has been a year of tough regulations, softening demand and fierce competition. Notably, 2023 saw every major hotel company announce an extended stay brand — Marriott, Hyatt, Hilton, Wyndham, Best Western to name a few. 

But Choice Hotels believes it has a clear competitive advantage over its peers. It has four extended stay brands, a plan to transform traditional hotel rooms into an extended stay unit by shipping and installing a kitchen, and a franchise model that allows the company to branch out of the Choice platform.

Through franchising and acquisitions, the company has established itself as a prominent player. Last year, Choice produced record revenue of $1.4 billion and a record net income of $332.2 million.

Skift spoke to Matt McElhare, senior director of extended stay and Ron Burgett, senior vice president of franchise development in its extended stay business. 

Here are the top takeaways below. Edited for clarity:

Matt McElhare: In a lot of ways that’s validation for the opportunity that exists in longer stay accommodations. And that’s what’s been driving our investment as a company over the last six years — to build a leadership presence in the extended stay kind of branded solution for long staying travelers.

Right now in the hospitality space, demand for longer stays is roughly 20% of overall lodging demand, but supply is roughly about 10%. Majority of these travelers are looking for consistency, convenience and predictability. 

Those three factors create a competitive advantage for a branded solution relative to a short term rental where it is much more difficult to create that consistency across the board.

Ron Burgett: Most of our brands are playing in the midscale and economy segment. Private equity firms like TPG — that’s a little more for the affluent traveler. Can you imagine the marketing costs to do that, right? But they don’t have the power of Choice Hotels. 

And it’s an expensive model. It will work, because demand is twice the supply. We’ll let them have that little piece of the demand at the top for now. But rest assured we’re not assuming that they’re not a competitor. We’re watching and we want to see what they’re doing. But I think we can learn faster with our background.

Matt McElhare:The reason all these companies are introducing extended stays is because of how different they are from traditional hotels. Over the last six years, we’ve been investing in capabilities like support from a sales perspective marketing, operations, training and development. Those key areas allow our developers to find the best sites within the best markets for extended stay, and then operate them