Navigating the Extended Stay Market: Proven Strategies for Risk Mitigation

By Justin Randall, HUB International

​Extended stay hotels have emerged as major contenders in the ever-evolving realm of hospitality. Hotel owners are increasingly recognizing the potential for profitability in this segment, while guests appreciate the affordability, comfort and convenience these establishments offer.

The growth in extended stay accommodations isn’t a passing trend but rather a reflection of the changing social and economic landscape. Even renowned hotel brands are pouring substantial investments into this expanding market, with their extended stay portfolios growing by over 50% in the last decade.

Overall hotel occupancy is set to hit 63.8% in 2023, with Wisconsin only 2.2 percentage points behind its pre-pandemic numbers at 54.2%. Several factors have propelled this growth, including the surge in remote work, mobile work crews and the need for temporary housing due to natural disasters such as flooding, tornados and wildfires.

Embracing the extended stay model offers a multitude of advantages and operational efficiencies. It can significantly bolster revenue streams and occupancy rates since guests often book for extended periods, which is valuable during traditionally slow periods in the hospitality industry. Moreover, by catering to guests who stay for weeks or even months, hotels can reduce the frequency of room turnovers (and consequently, staffing requirements) while building brand loyalty, thereby enhancing a hotel’s reputation and overall profitability.

Extended stays not only benefit hotel owners but offer a plethora of perks to customers, with affordability being the primary draw. These establishments typically feature spacious, apartment-like suites at competitive rates, inclusive of essential amenities like Wi-Fi, laundry facilities, fully-equipped kitchens, mail services and 24/7 security. Unlike traditional hotels, they often don’t include bars, restaurants, stores or concierge services, making them cheaper to build.

Revealing the hidden risks

While the advantages of extended stays are undeniable, this model also presents unique risks and challenges that hoteliers should remain aware of. These risks extend beyond just maintaining rooms over extended periods.

Consider the following risks:

• The lack of daily housekeeping is a double-edged sword, as it means there is no everyday monitoring of what is happening within guest rooms
• Fire hazards, as well as crime, drugs and human trafficking are all security risks that can run rampant
• Since they feel more at home than a traditional hotel, guests are more likely to treat it accordingly, often for the worse
• There might be instances of users exceeding room occupancy limits, leading to increased noise, damage and security risks
• Guests might engage in activities such as lighting candles, keeping the door propped open or smoking in the room, elevating fire and security concerns
• Some guests may bring pets or a large family that could potentially damage the space

5 best practices for extended stays

To mitigate the risks associated with extended stays, hotel operators should consider implementing the following best practices:

1. Provide front desk training. Train your front desk staff to effectively communicate security features to guests, such as monitoring access to side doors that are common in extended stay hotels. Prioritize excellent customer service, as satisfied guests are more likely to become loyal patrons and recommend the property to others.
   
   
2. Factor in potential weather exposures. Extended stays may face different exposures compared to traditional hotels. Be prepared for potential weather-related risks based on your building’s type, especially in areas prone to natural disasters. Develop a plan that aligns with revenue goals and discuss concerns extensively with your insurer.
   
   
3. Create an emergency management plan. Extended stays often become the go-to for people caught in catastrophic situations. Familiarize yourself with evacuation orders, stay in compliance with regulatory agency instructions and ensure you have generators and necessary supplies on standby to maintain operations.
   
   
4. Implement enhanced security measures. Invest in robust property management and security systems to streamline operations and monitor guest behaviors and preferences. Extra security measures can be especially appreciated by guests on long-term stays.
   
   
5. Inform your insurance broker. As the risks associated with extended stay hotels differ from those of traditional hotels, inform your agent if you acquire or build one. Be aware of multiple exclusions and potential differences in policy costs and limits compared to non-extended stays.

As the industry continues to evolve, extended stay hotels are poised to remain a prominent and enduring presence in the accommodation landscape. By understanding the dynamics of this market and implementing best practices, hoteliers can seize the opportunity to offer guests an enticing alternative to traditional lodging.

About the Author: 

​Justin Randall leads the Hospitality & Real Estate Practice for global insurance brokerage Hub International’s  Wisconsin Region, focusing on leading client strategy in those verticals.  Justin’s 10 years of experience encompasses leading client engagements, advising clients on all aspects of insurance, risk management and overall enterprise growth.  Justin works with several different franchises including clients with more than nearly $2B in revenues.  Justin is an active member of the Wisconsin Restaurant Association as well as a participant in the American Hotel & Lodging Association.  Mr. Randall holds a Bacheler’s Degree in Business from Edgewood College in Madison, WI.

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