By: Joerg Happel, senior product manager, IDeaS Revenue Solutions


Is Asia’s extended stay market growing and why should hoteliers pay attention to this market?


For hotel groups looking for new ways to generate additional revenue in 2016 and beyond, the growing extended length accommodation sector continues to provide solid value for both owners and guests. According to The Global Serviced Apartments Industry Report 2015/16 by The Apartment Service Worldwide, the extended stay market is showing strong growth with 82.6 per cent of serviced apartment operators reporting growth in supply, and 77.9 per cent reporting increased demand. Given the growing popularity of serviced apartments, 69.12 per cent of operators are planning to increase the number of apartments in their existing locations – predominately in Asia.

Pricing for extended length hotels and serviced apartments has traditionally been a challenging concept for revenue managers, with rates varying greatly depending on the guest’s length of stay. However, it is vital that extended stay hotel groups enhance their pricing approaches to seize their revenue opportunities. Developing accurate demand forecasts and applying best practice operational strategies not only benefits extended length hotels and serviced apartment by increasing revenue, but it also impacts entire operations by optimising wage costs and increasing guest satisfaction.


How can revenue management support extended stay properties?

Effective revenue management technology and support services aid growth through a focus on three key areas: price, optimal business mix and inventory allocation. Price is one of the key levers in driving revenue and profitability. Price sensitivity and costs associated with both transient-type and longer-stay reservations are also key considerations and important in understanding a property’s demand and booking, extension, and cancellation windows.

Advanced revenue management strategies and solutions can help properties select their most valuable business and spread demand across peak and shoulder nights to maximise occupancy. Automated systems can maximise revenues from booking extension, higher valued long-stay enquiries, and help plan for cancellations and non-arrivals. There are also market tools that fold in competitor impacts on long and short-stay demand separately, and assess the impacts of price changes or demand adjustments. This not only helps set better rates, but it also helps ensure that one sold out night is not blocking a guest willing to make a 30-night booking.


What challenges exist in trying to maximise revenues from the extended stay sector?


One of the biggest challenges is forecasting the different length of stay profiles within the same property: transient (typically shorter stay demand) and longer stay demand. Understanding the dynamics of existing length-of-stay demand profiles for each property, unit, or revenue centre (and how this impacts price sensitivity or willingness to pay) is critical in the acquisition and service costs of the guests in these minor segments. Another important challenge specific to long-stay properties is accommodating extensions to in-house bookings. This differs from primarily transient hotels since extensions can see inventory blocked for significant time periods.


These elements are all crucial to effective forecasting in the serviced apartment, aparthotel and long-stay businesses. This forecast becomes the basis for key business decisions that account for an optimal mix of business, public pricing structures, and levels of expected extensions, cancellations and no-shows.


How can property owners targeting extended stay guests improve their revenue performance?


In order to maximise revenues from extended stay guests, it is important to start with an accurate forecast. This is the core of successful revenue management strategies and allows a property or group to proactively respond to changing market conditions, and support informed day-to-day tactical business controls. A measured and strategic approach is recommended to preserve long-term revenue optimisation. During low demand periods, as many serviced apartment, aparthotel and extended stay owners recognise, it is better to use strategic pricing to protect market positioning.


Accurately forecasting demand also impacts entire operations by optimising wage costs and increasing guest satisfaction. Proactively reviewing long-term demand forecasts can additionally help operators in validating future peak and need time periods. This review process supports effective decisions in sales and marketing teams and encourages the sharing of data, strategy and effective decision making to drive performance improvements and alignment across the business.


What is the best way to integrate revenue management systems and approaches within an extended stay property?


Hotel or serviced apartment owners looking to integrate advanced revenue management systems and strategies should set up regular touch points that engage the revenue performance and strategy stakeholders for their property, business unit or cluster. Revenue metrics like Average Daily Rate (ADR) and occupancy are familiar for many managers and owners, so the focus should tie more into areas that concern owners. This may include: asset profitability and value, competitive set performance, return and costs on employed capital, and guest acquisition and service. This helps owners and other teams better understand how revenue management provides a rational approach to long-term business performance impr