Smedes Rose : I just wanted to ask you quickly on that extended-stay launch. We’ve seen a lot of products from different brands being launched to the extended-stay segment. And I was just curious, what do you think is driving so much interest from customers? And are they abandoning another segment of mid-scale? We don’t get data or at least in our case, we don’t get extended-stay data specifically. We just see the chain scale data. I’m just wondering what sort of shifts you’re seeing within that, that it’s leading so many people to launch into that sector.
Christopher Nassetta : We were already seeing it pre-COVID, where there was just a demand for workforce housing and people — more mobility in their lives and they wanted to be places and work from different places. And they didn’t — they were going to be there long enough to commit. They’re like, get an apartment and pay a one year’s deposit and all that fun stuff. And so we are already seeing demand that was outstripping supply. And then COVID hit. And while a lot of things have normalized, and I’ve talked about this on prior calls a bunch of times, the one thing that happened is it accelerated the idea of mobility. While the office environment is normalizing, a lot of people are going back. It’s not exactly what it was. More people are going to be remote as a percentage of the workforce permanently.
More are going to have flexibility and sort of different times of year, times of the week, Mondays and Fridays. And all of that is continuing to just — as those patterns shift, it’s building more and more demand against a limited amount of supply. And so the fundamentals we think are just great. The way I think about the product that we’re developing, and I’m getting ahead of myself, but it’s coming really soon. I mean, down we have — we’ve built it. We’ve done 99% of the work. It’s almost a hybrid. It’s like an apartment efficiency meets hotel. And I’d say it’s almost like 60-40. It’s more apartment efficiency. There’s so many workforce housing needs that are just unmet with this kind of product for somebody who needs to be somewhere 30, 60, 90, 120 days.
So you’re talking about average length of stay of probably 20 to 30 days on average versus most of the core extended-stay brands are like 5 to 10 maybe, somewhere in that range, if you look at the industry. So it’s a different demand base, different types of locations, which is why we love it because we’re not serving it, meaning it’s not competitive with what we’re doing with Home2 and certainly not competitive with Homewood because it’s serving a totally different need, mostly in totally different markets. And as I said, we — I didn’t intend to go this far, sorry. But this is hundreds and hundreds and hundreds of hotels over time. This is not like we’re going to do 50 or 100 of these. I mean, you’ll wake up over time in 10 years, and will — it will be like Home2.
We’ll have 4, 5, 6. We’ll have a lot of these because we think the need is there now and growing. And we — while a lot of people are doing things in this arena, I think we’ve proven by launching brands that we do uniquely have done it pretty well to launch brands and get to scale and build network effect, not just broadly for the company but within brands. And we’ve done that, I think, as well or better than anybody. And I think we have an opportunity to do it here. And our system delivers. The system delivers the highest market share in the business. So if you’re an owner thinking about I’m going to build a similar product somewhere else, I mean, you’re going to look at the system strength. And ultimately, I think, historically, people vote with their feet.
They vote with a product that they think will work better from a customer point of view, ultimately, higher margins and drive higher share. And so we got to do it again, but we’ve got a pretty good track record of doing this stuff. We’ve spent a lot of time on this. And hopefully, by the next time we talk, it will be out of the shoot and we’ll be talking about how many deals we got lined up.
Smedes Rose : And can I just ask you a quick other question? The difference between the gross room additions in the first quarter and then that room just seemed kind of wider than what we’ve seen. Is that — was that just — is that sort of a seasonal thing or was there something in particular on the deletion side that you can call out or…
Kevin Jacobs : Are you talking about the difference between — if you do Q1 in the guidance, Smedes?
Smedes Rose : Well, just the first quarter gross room additions and then the net room additions that seem just pickup…
Kevin Jacobs : No, there’s — no. Removals is right in line with normal. We’ll end up about 1%, 1% and change for the year. Just the gross rooms from a timing perspective — I mean, I think I don’t want to repeat what Chris said earlier on the call. But I think from a timing perspective, for the full year, gross room additions were lower in the first quarter and deletions were about the same. So that’s the difference.
Operator: And the next question is from Stephen Grambling from Morgan Stanley.
Stephen Grambling : Maybe following up on some of your comments about the new brand launches, Spark and then it sounds like another one in the extended-stay. When you think about going into some of these lower-end chain scales, I think many of the peers often see higher attrition rates or deletion rates. What can you do to ensure that the attrition rates from your brands are more resilient long term? And have you seen any evidence of that from your current lower of chain scale brands such as Tru?
Christopher Nassetta : No. You mean, attrition meaning losing hotels out of the system? No, I mean, here’s the — listen, and not to be too simplistic about it. But what we do is really made much easier by delivering commercial performance. So having great brands that resonate with customers, loyalty that connects the dots, that customers are engaged with, product and service in those particular brands that really resonates with customers. And ultimately, our commercial engines and commercial strategies that deliver the highest level of market share. And so if you look at our — if you look at like Tru or Hampton almost — I would say, almost 100%, I don’t know, 90% to 100% of the deals that exit the system within those brands.
And I don’t think any Trus have exited the system that I’m aware of. It’s a relatively new brand. I’m probably — probably none. But Hampton is by our choice, meaning that their time is up. They’re in a location or they’re in a physical state that we just don’t think works anymore. And so that’s by our choice. We have very little attrition. And back to where I started, the reason we have very little attrition is our mega category brands are category killers. They drive incredibly high share. So as we think about Spark, as we think about our new extended-stay brand, we have to get it right, which we will. We have to drive really high share, which we will. The product has to really work for customers, which is what drives that. And people don’t want to leave, right?
So our history is super, super good in the mega categories. If you go through the whole list of all our extended, Home2, Homewood, Hampton, Tru, the attrition there is almost all. The vast, vast majority of it is by our choice.
Stephen Grambling : That’s helpful context, and that’s my one question.
Operator: The next question is from David Katz from Jefferies.
David Katz : I wanted to just go back to Spark because obviously, a lot of enthusiasm and success and it’s unlike things that you’ve done before. If we look at the makeup of the deals that you’ve put together, I’d love some color on what’s in there. Are those independents that are looking for a brand? Are those switching from other brands for one reason or another? Are any of the hotels switching within your system into it that may have otherwise departed for one reason or another?
