Homewood Suites' Bill Duncan

MEMPHIS-While the hotel sector appears overall to be sliding into the linens chute, with occupancy rates nearing 50% and nightly prices falling below $100, the extended-stay segment is holding on as a new option for both leisure and corporate travelers. Many of those extended stay brands, whose rooms are technically booked for five days at a time or longer, are being discovered as a lower-cost option for weekend stays or week-long vacations.

Homewood Suites, an upscale extended-stay brand of Hilton Worldwide with nearly 300 locations, has hit a new growth wave in its 20th year with up to 30 new properties unlocking in 2010 and at least 100 more in the development pipeline. Bill Duncan, Homewood’s global head of brand management, is also overseeing development of Home2, Hilton’s new midscale extended-stay brand with over 50 locations in the works.

Duncan, who is based at Hilton’s Memphis operations center, recently spoke with GlobeSt.com about what keeps the extended-stay segment humming lately, and the Homewood brand in particular.

GlobeSt.com: Given all the current troubles in the hotel market, how is the Homewood brand doing lately?

Duncan: We’ve actually grown significant market share over the past 24 months and have seen other metrics grow to record levels within our company. Obviously we’ve seen a little pressure on demand and rate, but overall we’ve held our own.

As a brand we’re pushing 70% occupancy, so it’s still a busy product. We wish it were back to the good old days, but we’re working toward that. We are starting to see some positive indicators. We’re not out of the storm yet, but it looks like it’s starting to clear a little bit.

GlobeSt.com: What are some of the reasons that the extended-stay segment is holding its own?

Duncan: From an upscale perspective, we’re seeing a lot of our guests remaining on the road because of revenue-producing business, such as new product launches and store openings. What was really impacted was transient and group business, which is seen by companies as not producing revenue and therefore expendable.

Another phenomenon in upscale extended stay, which we also noticed after 9/11, is that customers have started looking for value and navigating away from higher-priced brands. People are discovering this segment and this brand, and deciding this is where they are going to stay.

We have seen existing customers move market share to these brands because of the high value they perceive. We also see travel managers focusing on total travel spending, rather than a negotiated rate.

GlobeSt.com: Some hotel analysts have observed that the extended-stay segment has been on a winning streak since the mid-1990s. Is it possible to keep that going?

Duncan: I would say so. It’s very local-market driven, with people staying in locations for extended periods and looking to locals for referrals on where to stay. However, when people discover a brand, new lines of revenue start coming in to the hotels.

We are starting to see a little bit of stabilization, which may be a recipe for growth in the future. It’s a great product that not as many people know about as some of the larger, more urban brands out there.

GlobeSt.com: What appeals the most to hotel guests about extended-stay brands?

Duncan: There is a really strong bundled value proposition that meets the criteria of quality and demand that customers and corporations look for, such as in-room kitchens and complimentary breakfast. We are also able to fulfill the trend of self-service that customers want.

It comes down to helping travelers keep their routine while they are on the road, especially for long periods of time. Anything you can do to allow them to feel in control is going to drive satisfaction and return intent, and ultimately brand loyalty.

GlobeSt.com: Where is the growth headed for Homewood?

Duncan: We’re looking all over. Our pipeline is very solid. We’re opening 20 to 25 hotels this year and opened five in January alone. We’ve got 110 firm deals, either under construction or in design, and we’re looking at new deals all the time. The future is very bright for Homewood and for upscale.

We see a big rainbow of opportunity for Home2, our most successful launch ever with 53 applications signed last year. These tough economic times have really pushed owners and developers to look at brands that they can be confident in and will do well in hard times, and we can make the case that Homewood has done that and Home2 will, too.