Operational Efficiency: How Offering Extended-Stays Reduces Costs and Streamlines Operations
The vacation rental industry has witnessed a significant shift in traveler behavior, with a rise in extended stays that could present a valuable opportunity for hoteliers and property managers. 11% of Airbnb extended-stay bookers in 2021 reported living a “nomadic” lifestyle and the percentage of bookings of 28 days or more doubled from 2019 to 2021. This change is influencing global residential and travel patterns, prompting cities and countries to adjust their visa and tax regulations to attract these mobile workers and slow travelers.
Hoteliers and property managers that capitalize on these changes are poised to reap the benefits of increased profits from the reduced costs and streamlined operations in the following ways.
Reduced Housekeeping and Maintenance Expenses
Labor accounts for nearly half of total hospitality operating costs. With labor-related expenses increasing year-over-year from March 2021 to March 2022, this reality is only becoming more pronounced. However, this increase varies by category as follows:
Full-service hotels — 26.8%
Select-service hotels — 31.1%
Extended-stay hotels — 14.4%
You’ll notice that extended-stay hotels hosted the least dramatic increase. This is due to low staffing requirements. Short-term stays typically require daily housekeeping services. However, for extended stays, housekeeping services are often reduced to once a week or upon request because guests stay longer and may have access to in-room facilities (i.e., kitchenette) that accommodate their daily needs. This reduced demand for frequent housekeeping translates to lower labor and supply costs (i.e., cleaning supplies, and utility costs related to cleaning like water and electricity for laundry).
Let's flesh this out with a simple example. Imagine a mid-scale extended-stay hotel with 100 rooms. Say the cost for housekeeping per room per day is $30—a total of $3,000 in housekeeping costs per day. Suppose we reduce housekeeping to once a week for extended-stay guests. In that case, the cost decreases to $420 per day (assuming an even distribution of housekeeping throughout the week), resulting in significant savings.
Furthermore, the nature of extended-stay accommodations often results in a more stable and familiar guest base, which can contribute to a positive work environment and lower staff turnover rates. This stability allows hoteliers and property managers to invest in more comprehensive staff training, ensuring that employees are well-equipped to handle the unique needs of extended-stay guests. In turn, this leads to improved guest satisfaction and more efficient overall operations.
We can apply this same logic to maintenance costs. The quality of guest rooms and facilities is one of the greatest areas of disappointment for guests and maintenance costs are rising. Since extended stays see less wear and tear on rooms due to lower guest turnover, maintenance expenses are reduced.
Economies of Scale in Utilities and Services
It’s often estimated that heating, ventilation, and air conditioning systems account for about half of hotel energy costs. Hotels typically keep these systems running in unoccupied rooms to ensure a comfortable room temperature for the next arrival. However, as extended-stay guests occupy rooms longer, they tend to adjust the temperature according to their personal comfort and maintain a standard temperature when their room is unoccupied. It stands to reason that less room turnover would result in less energy required for heating or cooling unoccupied rooms.
Yet, there is another, potentially more fruitful boon to hosting extended-stay guests. Rooms are occupied for extended periods by the same guest, making energy costs more predictable and allowing hoteliers and property managers to negotiate better contracts with utility and service providers. Furthermore, the centralized nature of many extended-stay properties allows for streamlined facility management, leading to further cost reductions, which can result in significant savings on electricity, water, and other essential services.
Higher Occupancy Rates
Lower operating costs can be passed on to guests in the form of competitive rates, making the property more attractive for long-term stays. Even in 2021, in the midst of the pandemic, lower-end extended-stay hotels maintained an average occupancy of 66% and while the drop in occupancy for all hotels in the US between 2019 and 2020 was 33%, it was only 10% for extended-stay hotels. This gap in performance shows that extended-stay hotels are a stronger option for independent slow travelers who appreciate the ability to live, work, and travel while maintaining a more permanent living situation. Consequently, hotels are offering benefits to attract slow travelers:
IHG is offering their IHG One Reward (15% discount) for members that stay longer when they book three or more nights in the US.
Latitude Aparthotel in Cape Town, South Africa launched its “rise and thrive” package offering up apartment-style accommodations with furnished kitchens, lounges, co-working spaces, and complimentary breakfast and dinner.
Airbnb encourages its hosts to offer discounted prices for extended stays claiming that, “Longer stays often mean higher occupancy, lower turnover, and less work for you.”
When Guests Win, You Win
Guests can benefit from discounted rates offered by extended-stay properties, as hoteliers and property managers can afford to lower their prices due to reduced operating costs. Attracting a new guest involves marketing and commissions to travel agents or online booking platforms. However, an extended-stay booking provides more revenue for the same customer acquisition cost, improving the return on investment for marketing spending. These savings encourage guests to choose extended-stay accommodations over traditional hotels, leading to increased demand and higher occupancy rates for the property.
Streamlined Communication with Guests
Extended-stay properties often leverage technology to simplify and streamline the reservation and check-in processes. This includes the use of online booking platforms, self-check-in kiosks, and mobile applications that allow guests to manage their reservations and communicate their preferences. These technologies not only save time for guests but also reduce labor costs and minimize errors in bookings and guest data management.
As extended-stay guests usually stay for more extended periods, hoteliers and property managers can establish more consistent and personalized communication with them. This may include regular updates on property events, local attractions, or personalized recommendations based on guest preferences. By maintaining clear and open channels of communication, extended-stay properties can enhance guest satisfaction and cultivate loyalty.
Customizable Amenities and Services
Thanks to the longer duration of stays and the ability to develop deeper relationships with clients, extended-stay properties have the opportunity to focus on delivering more personalized services to their guests. This may include offering customized amenities, tailored local experiences, or personalized attention from staff. By creating memorable and unique experiences, hoteliers and property managers can foster guest loyalty and encourage repeat business.
With in-room facilities such as kitchenettes and laundry appliances, extended-stay properties can offer a range of customizable amenities and services that cater to individual guest needs. This flexibility allows guests to tailor their stay to their preferences, creating a more comfortable and satisfying experience. Additionally, offering customizable services can differentiate extended-stay properties from traditional hotels, providing a competitive edge in the market.
Executive Summary
Currently, more than three dozen countries offer specific visa schemes for slow travelers, showing a global trend toward facilitating extended-stay travel. This shift towards extended stays has been beneficial to Airbnb, which is actively promoting both urban and rural locations to remote workers. Despite a strong recovery of short-term stays in Q1 2022, long-term stays (28 days or more) have emerged as the fastest-growing category since 2019, doubling in size from Q1 2019.
As hoteliers and property managers, this trend could present a significant opportunity for increasing revenue and optimizing operational costs. By offering extended-stay options, you could tap into this growing market, attracting a new demographic of guests, reducing turnover costs, and ensuring a steadier income stream.