Real Estate Insights: The Rise of Extended-Stay Hotels in an Evolving Market

Ali Jamal • September 13, 2024

As the hospitality industry continues to face challenges, one segment has been on a steady rise—extended-stay hotels. This model, once considered niche, is quickly becoming a strategic opportunity for investors looking to convert underperforming hotels into consistent revenue-generating assets. In a world where housing affordability is a growing concern, extended-stay accommodations provide a much-needed solution for various tenant segments, including workers, students, and low-income individuals.

Why Extended-Stay Hotels Are Thriving

The extended-stay model has seen a surge in demand over recent years, largely due to the evolving needs of today's renters. With rising costs in both traditional hotels and rental markets, many are turning to long-term stay options as a more affordable and flexible solution. Additionally, extended-stay hotels appeal to a variety of demographics:

  • Traveling workers who need temporary housing during projects.
  • Students who may not have access to on-campus housing or need more affordable alternatives.
  • Low-income tenants who face barriers to entering the traditional rental market, such as security deposits or credit checks.

For these groups, extended-stay hotels provide a balance between affordability, flexibility, and accessibility—making them an attractive housing alternative.

Converting Underperforming Hotels: A Win-Win Strategy

Many hotels have struggled to maintain profitability, especially in markets with inconsistent tourism or seasonal demand. Converting these underperforming properties into extended-stay accommodations allows investors to meet a growing demand while ensuring higher, more consistent occupancy rates. Unlike traditional hotels that rely on transient guests, extended-stay models often boast tenants who stay for weeks or months at a time, providing a more stable revenue stream.

The process of conversion is also often simpler than building new extended-stay properties from scratch. With minimal renovations, such as adding kitchenettes or upgrading laundry facilities, an investor can transform a struggling hotel into a long-term housing solution.

Benefits of the Extended-Stay Model

  1. Higher Occupancy Rates: Unlike traditional hotels that face fluctuating demand based on seasons or events, extended-stay hotels enjoy more consistent occupancy. This is due to longer tenant stays and the growing demand for affordable housing options.
  2. Diversified Tenant Base: Extended-stay properties attract a wide range of tenants, from blue-collar workers on contract to students and low-income residents seeking flexibility. This broad appeal ensures that the property remains occupied, even in economic downturns.
  3. Lower Turnover Costs: With tenants staying for extended periods, the costs associated with turnover—cleaning, marketing, and vacancy periods—are significantly reduced. This means more stable cash flow and less operational overhead.
  4. Affordable and Accessible Housing Solution: At a time when traditional housing and rental prices continue to soar, extended-stay accommodations offer an affordable alternative for people who need temporary or long-term housing without the financial barriers often associated with renting.

Future Outlook for Extended-Stay Hotels

As housing prices continue to rise and economic uncertainty lingers, the demand for extended-stay accommodations is likely to increase. Investors who capitalize on this trend now can position themselves ahead of the curve, providing a crucial service in an underserved market. Moreover, with many hotel properties still struggling post-pandemic, opportunities to acquire and convert underperforming hotels are abundant, making this an opportune time for investors to diversify their real estate portfolios.

The flexibility of the extended-stay model allows it to adapt to shifting market conditions, ensuring that it remains a viable and profitable investment for years to come.

Real Estate Insights: The Evolution of Retail through Mixed-Use Developments

By Ali Jamal • September 13, 2024
The retail real estate market has undergone a significant transformation in recent years. With the rise of e-commerce and shifting consumer habits, traditional retail spaces are facing unprecedented challenges. Many retail properties are experiencing higher vacancy rates and lower foot traffic, leading investors to rethink their strategies. One of the most promising trends to emerge from this shift is the rise of mixed-use developments.

Real Estate Insights: Capitalizing on the Growth of Short-Term Rentals

By Ali Jamal • September 13, 2024
In recent years, short-term rentals have emerged as a lucrative alternative to traditional rental properties, especially in high-demand tourist and business regions. With platforms like Airbnb and VRBO revolutionizing the way people travel and find temporary accommodations, investors are increasingly looking to short-term rental models to boost returns and maximize the potential of their properties.

Real Estate Insights: Maximizing Returns Amid Interest Rate Volatility

By Ali Jamal • September 13, 2024
In real estate, one of the most critical external factors influencing an investor’s success is the interest rate environment. These rates, set by central banks and influenced by broader economic conditions, ripple through the financial markets and can impact property valuations, cap rates, and overall investment returns. For seasoned investors, understanding the ebb and flow of interest rates isn't just a matter of forecasting but of strategic adaptation. Whether you’re focused on residential, commercial, or mixed-use properties, the ability to read the market and adjust your investment approach based on interest rate changes can be the difference between thriving in the market or just getting by. Here’s how savvy investors can position themselves to maximize returns, regardless of interest rate shifts.
More Posts