Investment powerhouses betting big on extended stay

The collaboration of two of the biggest global investment firms – Blackstone and Starwood Capital – has given the already healthy extended stay sector a further shot in the arm.

Over the last year, the partners have committed to jointly spend $7.5 billion, first on the acquisition of Extended Stay America, and now on 111 Woodspring Suites-branded properties across the US. Separately, Blackstone has also acquired the 15-strong Condor Hospitality Trust portfolio.

The extended stay segment has significantly outperformed the broader US hotel market during the pandemic, setting records, and attracting new guest demographics.

The latest deal lends weight to a market shift I highlighted in my sector trends for 2022 – that extended stay, in contrast to other segments where the asset light model still rules the roost, is seeing a resurgence of brands which have opco and propco under the same ownership.

It also poses questions about the future direction for Choice Hotels’ highly successful WoodSpring Suites brand. There is no getting away from the fact that one of its major owners – Blackstone and Starwood’s 111 hotels represent more than a third of the circa 300 WoodSpring properties – also have its own operating platform in the form of Extended Stay America.

Does the new deal represent an opportunity to grow the ESA estate by around 15 per cent with one flourish of the cheque book, or will the partners be content to enjoy the returns provided by operating under the current flag?

Whatever the answer, we can expect to see further big plays in the space this year, by existing actors and new entrants.