US infrastructure building boom revs up extended-stay market
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[December 08, 2023] By
Amina Niasse
NEW YORK (Reuters) - The Biden administration's infrastructure spending
blitz has put more construction laborers on the road for work this year,
fueling a race by extended-stay hotel operators to win their business.
Data from Navan, a corporate travel management company, shows
construction industry extended-stay lodging bookings are up 120% in the
two years through the end of November. More broadly, the industry has
outspent all other sectors on work travel overall by 9.2% in the 12
months through August as more workers temporarily relocate to live
around project sites.
“If you look at the infrastructure bill and reshoring of American jobs,
there's a huge amount of new business coming in - 50 million to 100
million room nights over the next decade that really are going to feed
the extended-stay profile,” Scott Oaksmith, chief financial officer of
Choice Hotels, said during a recent third-quarter earnings call.
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The Infrastructure Investment and Jobs Act passed in 2021 had targeted
$1.2 trillion of transportation and infrastructure spending over five
years and has been credited in part for helping construction employment
weather a homebuilding downturn caused by rising interest rates.
Construction employment has risen by 2.2% so far this year, outpacing
the 1.55% increase in overall employment.
From the end of 2019 through the end of June, Choice Hotels experienced
73% growth in revenue per available room in the South Atlantic and a
400% increase in the Mountain West, a spokesperson for the chain said,
areas that have seen a raft of project announcements under the IIJA.
Expansion of Choice Hotels' extended-stay brands, which include Everhome
Suites and MainStay Suites among others, has involved tracking
large-scale infrastructure project announcements in order to cater to
construction workers and related trades, said Anna Scozzafava, chief
strategy officer and senior vice president for technology at Choice
Hotels.
"We can follow the funding, and see where these jobs and investment
dollars are going," said Scozzafava.
This year and 2022 were among the strongest years for demand growth for
Choice's extended-stay brands, she said. "We're getting construction
crews, but also some trades that go along with construction as well. We
had a big win ... with a steel company in Georgia that needed rooms for
six to seven months."
REMOTE AREAS
Choice is not alone in looking to grow the category and in fact faces
competition from Wyndham Hotels & Resorts, for which it has launched an
unsolicited $7.8 billion takeover bid.
Wyndham has expanded investment in hotel-level marketing and its loyalty
program in an effort to boost infrastructure-related bookings and
capture a windfall from the IIJA, Wyndham Chief Executive Officer
Geoffrey Ballotti said in the company's third-quarter earnings call.
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A "sold" sign is seen outside of a recently purchased home in
Washington, U.S., July 7, 2022. REUTERS/Sarah Silbiger/File Photo
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While less than 10% of hotel rooms are extended-stay units, the
category is fast-growing with extended-stay hotels representing 37%
of lodging under development, according to Patrick Scholes, managing
director of lodging and leisure equity research at Truist
Securities.
“Wyndham Hotels is the biggest winner,” Scholes said. “Wyndham was a
hotel company starved of new brands, and then about two years ago
they started to introduce this Echo brand, which has been strong out
of the gate.”
The construction industry has historically seen high rates of
itinerant labor, according to Greg Sizemore, vice president of
health, safety, environment and workforce development at Associated
Builders and Contractors, a trade association based in Washington.
“I worked post-Katrina on the Mississippi Gulf Coast when everyone
was installing trailers down there for people to take up temporary
housing. But there was nowhere for us to stay. We had men and women
sleeping in their cars until the hotels opened back up," said
Sizemore, who traveled as a construction worker for 30 years.
Demand for construction workers remains strong, with the industry's
vacancy rate of 5% as of October being roughly twice the historic
job openings rate over the two decades preceding the pandemic,
according to Bureau of Labor Statistics data.
That often means the employer foots some or most of the cost of
lodging workers in remote areas where local housing options are
limited, said Brandon Mabile, strategic development manager at
Performance Contractors. The Baton Rouge-based industrial
construction company employs about 700 workers on 20 current
projects.
“We’ve got crews in some pretty remote areas at the moment,” said
Mabile. “In Montana, you're going to have to pay a little more than
in Oklahoma or Texas."
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As project funding pours into less densely populated areas, the cost
of housing employees rises and demand for extended-stay properties
and other alternatives like recreational vehicle parks spikes as
employers seek acceptable lodging at affordable rates, according to
Sizemore.
"Options are everything," he said.
(Reporting by Amina Niasse; Editing by Dan Burns and Andrea Ricci)
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