In the age of remote work, hotel operators are betting on longer stays

As a road warrior for 35 years, Tana Bierman has traveled all over the country, staying in luxury hotels and roadside motels. Her least favorite are the boxy convention hotels with cavernous lobbies where it’s easy to get lost. But at the top of her list are long-term accommodations.

Ms. Berman, a moderator at Meetings Made Easy, a Las Vegas-based meeting-planning company, said guest rooms are large enough to work and relax, making it easy to combine business calls with tours.

“It feels more like a living space than just a bedroom,” she said.

Ms. Berman has a lot of company these days. Interest in extended-stay hotels has grown, driven in part by a rise in remote work as well as an increase in crews moving from site to site for infrastructure investments in projects such as road construction and green energy.

Because visitors tend to stay longer and require less housekeeping, extended-stay hotels—especially those that focus on more cost-conscious travelers—are less expensive to build and operate than their full-service counterparts. Realizing the higher margins offered by these highway-side lodgings, hotel companies are looking at them with new eyes, expanding their investment portfolios and adding new brands.

Hilton Worldwide, Hyatt Hotels, and Marriott International introduced extended-stay brands this year—some so new that they don’t even have official names yet. Last year, Best Western International Hotels & Resorts and Wyndham Hotels & Resorts announced new brands in the category, following Choice Hotels, which launched a new extended-stay chain in 2020.

“It’s about as hot as it can get,” said Jan Freitag, national director of hospitality market analytics at real estate analytics firm CoStar.

Economic construction is a top priority for hotel operators. “It’s a super efficient way of building design,” said Isaac Lake, brand leader for Hilton’s H3 project, the working name for the company’s new extended-stay hotels due to open in the second half of next year.

For example, he said, Project H3 rooms are designed so that bathrooms require only one fire sprinkler, lighting fixtures can be wired behind the bed to reduce the number of electrical lines and a single type of vinyl floor tile is used instead of multiple floor surfaces.

In the absence of lavish lobbies, full-service restaurants, and other large public spaces, much of the extended-stay footprint has the potential to generate revenue, despite the large rooms. Longer stays also make it much less expensive: weekly housekeeping instead of daily housekeeping is the norm, and having fewer daily check-ins and check-outs reduces the number of front desk staff required.

Labor costs at full-service hotels were nearly 24 percent higher in 2022 than a year earlier, while costs at extended-stay hotels were up just under 12 percent, according to a study by Actabl, a maker of hotel management software.

“It’s mostly home-running — that’s where a lot of your work ends up,” said Jim Chu, Hyatt’s chief growth officer, who announced plans this year for a brand called Hyatt Studios. He said the company expects to open the first of what it says will be more than 100 of these hotels next year.

The shift in how people work is a big factor supporting the trend, said C. Desta, an equity analyst at CFRA Research. Laptop-carrying workers who can do their jobs anywhere are driving an increase in hybrid business and leisure travel.

Hotel managers are moving quickly to take advantage of the shift to remote work. “Taking off desks allows people to work from other places,” said Noah Silverman, Marriott’s global development officer for the US and Canada. “This is a broader dynamic driving the growing long-stay hotel business.”

Marriott announced in June that it is developing a new extended-stay brand, working name Project MidX Studios. Company officials said they expect to start booking guests at the first hotels by late 2024 or early 2025.

Mr. Desta said extended-stay hotels may also attract leisure travelers looking for cheaper accommodation. The inflation rate is falling, but many Americans are still adjusting to higher airfares and restaurant meals. They’re looking for ways to economize, whether that means taking days off on a business trip or eating in their hotel room. (Extended stay hotels usually have kitchens with full-size refrigerators and range tops.)

Paul Hensley said he commutes nearly every week from his home in the Nashville area to his job at an e-commerce manufacturing company. Not only do hotel rooms with kitchens save him money, he said, but they are a boon to his waistline.

Mr Hensley, 57, said: “I’d much rather eat a little bit of healthy food on the road. The fact that it’s a full kitchen – especially in this economy – you can buy food instead of eating out, makes the trip cheaper.”

Home-sharing platforms like Airbnb and Vrbo also offer accommodations with kitchens and space to spread out, but industry experts say they cater to a separate market.

“I think the Airbnb customer is really looking for unique experiences,” said Meet Shah, CEO of Noble Investments Group, a real estate investment management firm that specializes in the travel and hospitality sectors.

But clients who choose to share a home may face unexpected costs such as high cleaning fees or unadvertised property. Mr. Shah said hotel companies are trying to prevent this by imposing brand standards.

“It brings a consistent level of quality hospitality,” he said, which can reassure travelers. “They know what they’re going to get,” he added.

Despite the wave of brand advertising, hotel investors have expressed confidence that the market will not be saturated anytime soon.

“The fact that there are potential new entrants into this space just speaks to the fact that this is a good core business and a compelling sector,” said Nadim Maggi, head of real estate for the Americas at private equity firm Blackstone.

Blackstone has teamed up with Starwood Capital to buy the hotel operator Extended Stay America for about $6 billion in 2021, a bet on the post-pandemic travel boom. Last year, the two investment groups made another investment in the hotel category, buying 111 WoodSpring Suites properties for $1.5 billion.

But growth is expected not only from a return to travel rules. Industry experts point out that the impact of investment in roads, bridges, manufacturing and green energy could drive extended-stay occupancy for years.

“There are some secular tailwinds like US government spending on infrastructure,” said Mr. Desta, the CFRA analyst. “This long-term demand is also expected to help with extended stays.”

In the past two years, Congress has passed the Infrastructure and Jobs Investment Act, the Reducing Inflation Act and the CHIPS and Science Act, legislation intended to boost the economy, and hotel executives predict that these laws will help fill extended-stay rooms across the country with staff for weeks or even months at a time.

“More than half of the recently negotiated business accounts signed by our team over the past 12 months were related to infrastructure,” said Jeff Pallotti, President and CEO of Wyndham. The hotel operator announced its ECHO Suites brand last year and says the first properties will open on schedule by the end of the year.

“This will be years of construction with contractor workers needing rooms, and that’s really what drives demand,” said Mr. Pallotti.