Choice Hotels Controls 50% of Extended Stay New Builds: What That Means

Glenn: [00:00:00] Hey, everybody. It’s your hospitality friend Glenn here once again in Las Vegas, Nevada. I know I should get an apartment, but I’m not going to do that because I need to be where the news is happening today. It’s happening with Choice Hotels International and my friend Matt McElhare, VP, who runs the extended stay division, not only just a bright spot in our entire industry, but dude, an incredible bright spot for your company as well.

Matt: [00:00:23] And yeah, we’ll definitely get into that. But you know, Glen, you don’t need an apartment here. You need an extended stay.

Glenn: [00:00:27] Yeah.

Matt: [00:00:27] That’s. So there you go.

Glenn: [00:00:28] That’s a really good point. Let me guess. Maybe an ever home.

Matt: [00:00:32] Ever home. We actually will have an ever home here very shortly.

Glenn: [00:00:35] Hey, where’s that gonna be?

Matt: [00:00:36] It’s gonna be north of Vegas, and we’ve got a few sites. We’ve got one in Henderson, one north of Vegas near the base and then one other.

Glenn: [00:00:42] And that makes a whole lot of sense because this this market in particular is really continuing to grow. And having one there and one there and one over there makes sense because this region is much bigger than you’d think by looking at at the strip. But the real story man is like, according to our friends over at Lodging Econometrics extended stay is is already more than a third of the entire new construction pipeline, which is incredible in itself. But take that 33%. Half of that is all extended. Stay from these guys over here. Boom! My mind was blown.

Matt: [00:01:14] Whispering I never heard that.

Glenn: [00:01:15] Yeah. You’re hitting some major milestones with this.

Matt: [00:01:17] This is a year where we’ll we’ll hit a ton of milestones. We’ll open our 600th extended stay. We’ll open up. We just opened our 30th ever home. We’ll open our 300th wood spring. And I think what’s driving that Glen is one we were early right. The acquisition of Wood Spring in 2018. And then using that to kind of grow.

Glenn: [00:01:33] And let’s just give them a little history in 2018 when they they took over value place, right. And then changed the name to Woodspring to make it a little bit more appealing to consumers out there. People were still like, what is this extended thing? And we’re scratching our head and going, why would why would they get that company? Then it became pretty clear pretty quickly. And then I believe it was January of 2020 when you announced a home.

Matt: [00:01:58] Great timing, but no. Yeah, that’s all right.

Glenn: [00:02:00] You also announced the extend collection, right? Just before, I think the the Great Recession. So you guys have great timing.

Matt: [00:02:05] Great timing.

Glenn: [00:02:06] With introducing new.

Matt: [00:02:07] Products. No, we I think that momentum is paying off. And you’re seeing that in the growth. And I think also that in peace and you heard this yesterday in our session is we’ve we’ve got a lot of options, right. You know, some of the new new brands that are new construction only, which we have, we have that with Wood spring and every home. But you know, this market’s getting more complex. And I think conversion has a role to play. As you and Pep discussed, it has a role to play in extended stay as well to meet that supply demand imbalance. Suburban studios we’re growing that predominantly through taking transient boxes, 100 plus keys and converting them into extended stay. And you think about, you know, some of the demand drivers that are propelling this kind of next wave of demand growth in data center construction, more power generation, all of those elements, manufacturing, that demand is there today. Yeah. New construction is 2 to 3 years to get open. If you’ve got a hotel in that market today, you can flip that to an extended stay, perform better, drive more to the bottom line, and take advantage of some of those macro trends that we’re seeing. That’s pretty cool.

Glenn: [00:03:05] I love that. First of all, I love how clever he is that he switched the conversation from new construction to conversions without even knowing it. So what is the, what’s the, the time frame that it typically takes when you convert from a traditional hotel to an extended stay hotel?

Matt: [00:03:18] Yeah. So it’s usually about 3 to 6 months and there’s more variability versus new construction, because so much of it depends on the mechanical, electrical and plumbing work you need to do to support it. But we’ve had hotels open, open within that 1 to 2 quarter.

Glenn: [00:03:32] That’s better than 18 to 24 months.

Matt: [00:03:33] 18.

Glenn: [00:03:33] To 24. It’s a much lower barrier to.

Matt: [00:03:35] Entry, much lower barrier to entry, which means your cost basis can support the rates to attract some of those broader kind of more price sensitive extended stay guests that stay for a really long time. And so we’ve seen great success. Yesterday on stage, I announced we crossed the 20th milestone of the suburban studios transformations. And you heard from one of our partners that was part of the session. We’ve actually got like 30 more in the pipeline. And so that that combination with our new construction momentum is positioning us to be a large player in the space for many years to come. And I couldn’t be more excited about what’s coming, but more, you know, thankful to have the opportunity to lead our team during that period.

Glenn: [00:04:10] You are you are in such a great spot right now. It’s been really fun watching you grow your career and stuff, and this is such a great position for you, and I love seeing your passion for it. And I think that you guys have room still to be able to introduce more brands within that segment because, as you know, suddenly becomes more popular. A one size fits all solution doesn’t work. You need to start, you know, parsing it out like we’ve seen in the traditional transient hospitality business. So that’s my that’s my guess. Yeah.

Matt: [00:04:35] No, I think, I think you’re, you’re going to see obviously everyone’s getting into space, but, you know, at the same time what, what made it attractive in 2016. Call it pre Covid. Those fundamentals are still there. But I think we’re in a we’re in a new new phase of extended stay. And it’s going to be much more about execution from a commercial standpoint. And I think these larger brand chains that are coming into the space, as well as choice as we continue to evolve, we’ve got to find ways to use the scale and power of the larger brand. Org, but focus it on what’s necessary for extended stay. And I think in the past it was either or. Either you’re all, you’re just, you’re just doing extended stay on your own or you’re treating extended stay like a transient hotel. But there’s the middle path. And that’s the vision that I have for us is to take the power of choice, but build extended stay tools and capabilities using the scale and expertise we have within the building. To me, that’s the winning formula that keeps choice, that gets choice to a thousand and keeps us as a leader in the space for years to come. So that’s, that’s what my focus is, and that’s where I think you’re going to see the industry go great.

Glenn: [00:05:37] And as you know, I’ve been a negative nelly about the overall state of the economy and the potential of the economy. I think extended stay, as we saw during Covid, is well positioned to be protected from those market variations time and time again. That segment proves that it could withstand much more than the traditional hospitality products that are out there. Any final words that you’re thinking about?

Matt: [00:05:57] No, just appreciative of the opportunity, excited about what’s to come. I mean, we are seeing rev par start to grow. We’ve got a lot of tailwinds kind of from a demand standpoint this year. I think we’re barely getting started. You know I always I’m a sports metaphor guy. I think we’re in the early innings. I bet we’re in the third or fourth inning of this. We got a long way to go. And there’s still more there’s still more extended stay demand in non extended stay hotels than extended extended stay hotels. So just think about that. That’s that’s 10 to 15 years more growth. Well to bring that into equilibrium. So I’m excited to be part of it.

Glenn: [00:06:28] Yeah I love it. And since he’s a sports guy I’m a music guy. I’ll just say I’ll use a fish quote here. Everything’s right. Just just hold tight. Right. So love it. Thank you for being here today. Thank you for being here. Please like, share, subscribe. Have an amazing day. Love you guys. Bye bye.