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Extended Stay America (ESA)’s utilitarian focus on long-stay guests may make it unusually well-prepared to weather a U.S. economic turndown if one should materialize.
“While, like the rest of the travel industry, we have experienced some softness in recent weeks, our fiscal year 2025 outlook still calls for steady occupancy — well above the industry average and our competitive set again this year,” said Greg Juceam, ESA’s President and CEO, in an interview Friday.
ESA’s over 700 hotels across 45 states invite guests to settle for weeks or months and buy groceries to stock their kitchenettes.
Juceam said this business model could be resilient during a mild recession. But he didn’t make any predictions about whether one was imminent.
Not Fearing a Mild Recession
On March 10, Delta Air Lines lowered its outlook for the first quarter (but not the year), and CEO Ed Bastian said his team saw a “pretty significant shift” in GDP sentiment in February.
For the hotel sector, a key question is whether some U.S. markets may enter regional recessions if President Donald Trump’s tariff announcements and cuts to the federal government workforce cause local employers to reduce spending and investment.
“As a result of that, we saw companies started to pull back in terms of corporate spending, started to stall, consumer spending started to stall,” Bastian said.
Juceam said that ESA’s potentially most challenged segment is vacation-goers. Travelers with less disposable income might quickly cut back on non-essential trips.
“Although transient leisure demand may soften, because this represents less than 20% of our business, we can double down on larger sources of demand like construction and project work [where travel is less discretionary],” Juceam said.
Plus, Juceam said that Extended Stay America’s economy and midscale segments tend to benefit from a “trade-down effect” as travelers opt for more economical lodging options.
Extended Stay Resilience
The CEO said his company isn’t heavily exposed to markets prone to a typical cyclical recession. ESA has properties in vacation markets like Florida (87 hotels) and California (75 hotels), but that exposure is small.
If tariffs lead to inflationary pressures, that might influence the magnitude of consumer spending.
“Although macroeconomic uncertainty may cause some companies to pause travel spend, uncertainty often leads to consumers making fewer ‘permanent housing’ decisions,” Juceam said. “Those who might otherwise buy a condo or sign a long-term apartment lease may opt for temporary accommodations like extended stay lodging until the dust settles.”
Washington, D.C.’s regional market might be the most heavily affected by Trump administration initiatives in 2025, but it’s still too early to evaluate.
“To date, we have not seen a notable demand impact from government disruption in the DMV [the District of Columbia, Maryland, and Virginia],” he said. “However, certain government-funded travel programs are seeking long-term visibility and are only making short-term commitments at the moment.”
Not All Bad News
“Although evolving macroeconomic factors may introduce new challenges, they create opportunities as well,” Juceam said.
If Trump persists with a tariff war, reshoring manufacturing to the U.S. could benefit the extended-stay segment in the medium term.
“Future deregulation, if enacted, should bring about additional project demand,” Juceam said.
Similarly, ESA’s franchise model and conversion brands could gain momentum if an economic downturn made new hotel development more challenging or if an immigration crackdown constrains the labor supply for construction workers, installers, and renovators.
Currently, ESA has about 125 franchised properties (roughly 20% of its portfolio). Juceam expects franchising to grow to around 50% of its portfolio “in the coming years.”
Recession talk in the market must be caveated, as recession predictions have been wrong. In October 2022, all 42 of the economists Bloomberg Intelligence surveyed predicted a recession, bu that recession never arrived.
The Extended Stay Guest
Unlike the business travelers and tourists filling traditional hotels, ESA attracts a specific clientele that falls into three main buckets:
- The largest segment comprises people in housing transitions — waiting for a home to be built, relocating for work, or caught between leases. This group has only grown in an era of housing uncertainty and high mortgage rates.
- Business travelers on extended assignments make up about 40% of ESA’s mix. These are contractors working on infrastructure projects, traveling nurses, or IT specialists installing systems.
- The third segment is leisure travelers. Even here, ESA isn’t targeting weekend getaways but rather longer stays, like grandparents visiting for several weeks or budget-conscious travelers settling into one location for an extended period.
“On a relative basis versus the broader industry, Extended Stay America remains well hedged to weather macroeconomic volatility,” Juceam said.
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