Home Hospitality KARA Hospitality Benefits From Resilience of Extended-Stay

KARA Hospitality Benefits From Resilience of Extended-Stay

LODGING brings you the first installment of our three-part Ownership Series, providing owner perspectives on various hot topics and industry trends. For this installment, Vinay Patel of Fairbrook Hotels and Mitesh Amin of KARA Hospitality discuss some of the key benefits of operating within the extended-stay segment and share their model for success. The second and third articles in this series, which will appear in the coming months, will further detail some of the nuances of the segment from the owner’s perspective. 

It’s well-documented that the pandemic underscored the true value of extended-stay hotels, particularly in comparison to other hotel segments. There is perhaps no better example of the segment’s resiliency and potential upside than the Extended Stay America’s Premier Suites property in Colonial Heights, Virginia.

Despite having opened during the height of the pandemic in April of 2020, from day one the hotel performed exceptionally well for franchisee KARA Hospitality and managing partner Mitesh Amin as well as co-investor Vinay Patel, who is also President/CEO of Fairbrook Hotels. In fact, their collective experience with the property has been so positive that it spurred further investment in the Charlotte-based Extended Stay America [ESA] family of brands. Founded in 1995, the company now includes more than 700 properties within its Extended Stay America Premier Suites, Extended Stay America Premier Suites and Extended-Stay America Select Suites brands.

Patel detailed his journey with the Extended Stay America Premier Suites Colonial Heights – Fort Lee and some of the challenges the industry was up against.

“In my other hotels we were struggling to even pay bills, so you’re talking about the complete opposite in terms of the experience we had at the ESA. To open up a hotel in April of 2020 and then by years-end still come around and make money; that was huge for us,” he said.

Patel went on to point out that the hotel also gained the attention of other investors as well as he received “multiple offers to sell it in 2021.” Nevertheless, he’s “glad” that he and Amin decided to retain the asset “because every year the valuation as a result of the NOI just continues to get better and better.”  

Amin further explained that while the property performed well during the pandemic it did require some pivoting on the part of management and he credited the brand with robust support.

“We had developed a local sales plan and with us opening during the pandemic, significant parts of our plan had to be scrapped. Fortunately, the ESA branding and centralized sales efforts helped us tremendously and bridged the gap. We were pleasantly surprised to find that ESA.com was driving 54% of our business,” he said.

Patel further pointed out “the brand has done exceptionally well for us” and is particularly effective in “smaller, tertiary markets.” To that point, the partnership opened the Extended Stay America Premier Suites in Fredericksburg, VA, last April, which Patel said has been “ramping up well for us.” KARA Hospitality has also broken ground on two additional ESA hotels in Harrisonburg, VA—which is slated to open this summer—as well as Charlottesville, VA—which is scheduled to open in Q1 2025.  

Explaining the development pipeline and subsequent expansion of its extended-stay lineup, Amin touted the overall segment.

“Given the shortage of short-stay housing nationwide, we remain bullish with the extended-stay segment in general,” said Amin.  

Being relatively new to the segment, Patel acknowledged one of the lessons learned has been how critical it is operationally to stay focused on the basics and true to the brand’s operating model to fully leverage all of the benefits.  

“We initially struggled maintaining the lean operating model, and slowly drifted towards a transient hotel staffing model. After operating for 6 months and realizing our operating expenses were significantly higher than our projections, we pivoted back to ESA’s model and have been able to maintain it effectively. We track the numbers monthly to make sure this is not slipping,” he said.

Patel later added, “you really have to focus on the extended-stay market and not get so overzealous with everything else. Sometimes you may have to give up a few rooms on a Tuesday or Wednesday to get that extended-stay business and it’s more about being disciplined in your head.”

Amin reinforced the point touting the brand’s ability to maximize profitability for franchisees.

“Given that the majority of properties are corporate-owned they [ESA] have limited unnecessary expenses in both development and operations,” he said.

Further elaborating on ground-up development, Patel emphasized the importance of not getting “too fancy” and sticking with the efficient prototype offered by the brand.

“I would advise anybody that’s developing these ESA properties ‘you can’t try to make it personal.’ I’ve done it myself, saying ‘hey, it’s in my backyard and I want to put gold-plated doors and I want to do all this and that. At the end of the day we stuck with what was there so that made it a lot easier when it comes to construction costs and even managing the process,” he said.

Patel went on to explain that there is certainly no shortage of extended-stay brands in the market these days, but he differentiated the ESA brand specifically for its singular focus.

“At the end of the day they’re totally focused on extended stay. They’ve got operators just focused on this particular segment. I feel it’s just a safer investment because the engine and horsepower is purely focused on this particular segment and not being spread out over different segments out there,” he concluded.

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