For many real estate investors, extended stay hotels are a bit of a mystery, viewed as a\ distant cousin of limited stay hotels, and catering specifically to business travelers. But those who understand property types like self-storage should find familiar attractive qualities here. Demand is buoyed by major life events (work re-location, temporary dislocation, extended travel needs, etc.) except instead of parking a sofa for six months, the consumer is securing a roof over their head.

Interestingly, unlike other hotel segments, extended stay's business model has not only exhibited resilience but thrived in the face of the Covid pandemic. In 2020, Extended Stay America Inc. maintained average occupancies of 74% compared to 44% for all hotel types. Perhaps more than any other asset class, it has benefited from the shift to remote work, offering a "best of both worlds" option for employees not tethered to a desk and eager to travel for extended periods. What's more, the re-opening of the economy brought greater demand for extended housing amongst workers hired for temporary or contract-based positions.

But even before Covid, the segment had a defensible business model. Extended stay hotels typically run at operating margins of 50-60%, significantly higher than other hotel types due to the combination of longer average stays and lower operating expenses than their more transient-focused counterparts. According to CBRE, globally recognized hotel brands have expanded their extended stay portfolios by 50% over the last decade. The fact that Blackstone and Starwood Capital acquired Extended Stay America Inc. for $6 billion in 2021, and subsequently acquired another $1.5 billion portfolio from Brookfield Asset Management, validates the thesis and illustrates a strong appetite from institutional investors.