Owners and developers are already well aware of the benefits of transforming a transient asset into an extended stay hotel. In this exclusive interview, Extended Stay America shares next-level tips for managing the conversion more effectively.
CHARLOTTE, North Carolina ‒ Transient and extended stay hotels aren’t much alike, either in form or function. So, there’s a significant learning curve for new hoteliers who are converting assets from the traditional hotel model to a longer-stay asset. It’s one of the primary reasons segment heavyweights like Extended Stay America offer a deep team of experts to help guide franchisees through the conversion process.
“The difference is more than a matter of perspective. It's not just, ‘Hey, I want to jump in. Let's just do it.’ Some people might approach it that way, but I think they really need to put some thought into everything that it takes,” explained Paul Fraser, vice president of real estate and development for Extended Stay America.
Paul Fraser, Extended Stay America
He added, “It's not just changing the physical plant from transient to extended stay. You have to change your operating structure. It's also going to affect your guests and your market. Guests have to understand the shift the hotel will be going through. For the franchisee, conversion involves trying to grow through that as well.”
Here are some key things to expect before and during your extended stay conversion project:
• Budget for the brand requirements. The first step to every successful conversion is knowing what the specific brand requirements are for converting to an extended stay hotel and budgeting accordingly.
Using Extended Stay America as an example, this includes adding a full-size refrigerator with a freezer, a cooktop, a vent hood, a microwave and a kitchen sink to each guest room, as well as washer and dryer units for a guest laundry room.
“When we're talking about conversions and trying to find ways to integrate the appliances and, perhaps, reconfigure the space, the decisions you make trigger different outcomes ‒ from those that impact the placement and type of water lines to sightlines. You just can't start the project without doing the research,” said Fraser.
He continued, “There are a lot of underlying conditions to consider. But once you piece all those things together, that will help you piece the costing element together.”
• Perform due diligence research on code requirements. Franchisees should prepare for the time and expense allocated to researching the codes for all of the authorities having jurisdiction in order to execute an extended stay conversion.
First and foremost, it’s crucial to understand the code requirements and how they apply to an extended stay hotel operating in that municipality according to Fraser. This includes confirming that an extended stay hotel is even allowed in that jurisdiction, because some areas are now working to restrain or constrain, if not ban, this property type. Zoning and building occupancy types may also be affected by the switch.
“Most stick-built four-story hotels are built as an R1 occupancy type, and that is geared toward transient. If you go to extended stay, that may trigger an R2 building type,” cautioned Fraser.
“There are other hurdles as well, he said. “Installing a kitchen could flag issues with local or state code enforcement officials if they're going in to pull permits. Having a clear understanding of the local codes at the beginning of a project will allow you to better plan the steps necessary in ensuring compliance. This could save your project time and expenses.”
• Hire or consult with an architect. The conversion may not be as simple as you’d think, especially taking into account complex factors such as ADA requirements for the space. So, unless you have in-house design and construction knowledge and expertise, enlist the help of an experienced architect or consultant to guide you through the process.
“Clearances may have to be accommodated to facilitate the kitchen install; you're taking a 250-450-sq.-ft. room and you're trying to add those appliances and countertops into that space. How does that affect the accessibility of the room? You're going to want to talk with an architect and run through those specifications,” said Fraser.
The difference is more than a matter of perspective. It's not just, ‘Hey, I want to jump in. Let's just do it.’ Some people might approach it that way, but I think they really need to put some thought into everything that it takes.
Paul Fraser
He added, “There's a lot to consider in terms of how it gets applied, and not every hotel is the same. Even in the individual hotel, not all the rooms are exactly the same. So, how do you manage that? That’s why you need to talk to an architect to understand the layout issues in the conversion and what needs to happen to accommodate them.”
• Make electricians and plumbers your allies. Working with a knowledgeable electrician is another crucial component of the extended stay hotel conversion process, as the new product will significantly alter the power requirements of each guest room. Specifically, the refrigerator, cooktop and microwave add to the room’s power load.
“You have to go in and do some calculations to address the increased amperage and power requirements to that room,” said Fraser. “All of those appliances are going to affect the existing electrical condition of that hotel. Nearly every one of our rooms has an electrical panel in the room. Not all transient hotels have that.”
Planning for the changes in your hotel’s plumbing is also integral to conversions. “Talk with a plumber about how the conversion will impact the hotel’s water needs and usage,” Fraser said. “Also, make sure you understand any additional brand requirements that may affect plumbing and electrical needs. For example, does the brand require guest laundry accommodations, fitness center, or other offerings such as coffee and breakfast, what about dishes, storage and sanitizing equipment?”.
• Enlist your accountant’s help, too. Another professional who shouldn’t be left out of the conversion team is your accountant. Amid the transient-to-extended-stay conversion process, this is the person/team best suited to advise on the tax implications of the change, including the shifts in the hotel’s taxable value and reassessment.
“Your accountant will help you try to understand how to manage this shift,” noted Fraser. “By adding these improvements, you're increasing the capital that's going into the hotel, so that’s going to be an improvement that you’ll need to report. And what is the new value of the asset versus as a transient hotel? There's a lot to consider there.”
Partnering with a franchisor that will help ensure success is vital to a positive conversion, Fraser added. “Our ESA franchise support team is direct and hands on with our franchisees. We are here to assist and provide insight and guidance as owner operators to help produce successful conversions,” he said.
Brendan Manley is a writer, editor and digital marketer specializing in hospitality content creation based in Warrensburg, New York.
The views and opinions expressed in this content do not necessarily reflect the opinions of Hotel Investment Today by Northstar or Northstar Travel Group and its affiliated companies.