Contact Us
News

Extended-Stay Hotels Are Surviving The Pandemic, But Increased Costs And Limitations Still Threaten

Clockwise from top left: Korman Communities co-CEO Larry Korman, Bisnow's Brian Kinslow and Hersha Hospitality Management CEO Naveen Kakarla.

Guests at Korman Communities' AKA Serviced Residences will be provided a complimentary silk face mask to protect them against the coronavirus when they check in. They also will be greeted by a strip of paper on the door of their rooms signed by the property's general manager and head of housekeeping, saying the cleaning passed their inspections adhering to Centers for Disease Control and Prevention guidelines. 

Staff spends four days cleaning one fully furnished unit, according to Larry Korman, co-CEO of Korman Communities and the president of AKA. The facilities are similar to apartments, and guests typically stay between two weeks and three months, according to Korman.

"Overall, people are starting to come back," Korman said on a July 23 Bisnow webinar about the Philadelphia hospitality sector. "They expect to see a certain level of cleanliness."

Korman Communities, which also manages and develops luxury apartment buildings, is also trying to appeal to customers in the region looking for a romantic getaway to escape from the monotony of life under quarantine, Korman said.

Hersha Hospitality Management also found that extended-stay properties performed well during the pandemic. They were able to pivot their businesses to adapt to more pressing needs such as the housing of essential workers including doctors, and the housing of sports teams, Hersha CEO Naveen Kakarla said.

Philadelphia-based Hersha operates 48 hotels in key East Coast markets such as Philadelphia, New York and Washington, D.C., and select cities on the West Coast. It too is ramping up spending on cleaning properties while reducing expenditures in other areas such as staff. 

"We kept most of our hotels open," Karkarla said during the webinar. "The folks who stayed with us in April, May and June were very understanding." 

The coronavirus pandemic has created a challenging environment for hotel operators as business and leisure travel ground to a halt as the worst health crisis in more than a century has left over 150,000 people in the U.S. dead.  

Data from hotel research company STRY cited by the travel news website AFAR shows that 2,069 of the nation's 57,528 hotels are shut because of the crisis. More than 3,000 hotels that had been closed have since reopened their doors at a limited capacity.

Adding to the sector's challenges are the confusing and often-contradictory signals that state officials are sending regarding indoor dining. States like Pennsylvania have set schedules to allow restaurants to open their doors to patrons on a limited basis only to delay them again after coronavirus cases unexpectedly spiked again. Food and beverage is a key moneymaker for hotels, and restaurants are a draw for hotel guests.

"Restaurants are the soul of the city," Korman said, adding that their profit margins are pretty thin even under the best circumstances. "It's so hard for them to operate."

Lenders have ratcheted up credit standards, making it difficult for many companies to secure the financing they need to stay afloat, according to Karkala.

Getting deals done is also going to be a challenge since experts aren't expecting the sector to rebound for another year or two as lenders tighten requirements for borrowers. 

"They have been more focused and have been insisting on pay downs and capital infusions to support the hotels," Karkala said. "In some cases, the owners can put that capital in, and in other cases, they cannot. I do think you will have lenders who will force the hands of some owners." 

Contact Jonathan Berr at jonathan.berr@bisnow.com