The CHIPS and Science Act could be on the chopping block after recent criticism by President Donald Trump. Its defunding would likely hurt U.S. extended stay hotel players.
In his March 4 address to Congress, Trump called on legislators to kill the $52.7 billion CHIPS and Science Act, which funds the domestic production of semiconductors. The law aims to reduce U.S. dependence on foreign suppliers and boost American competitiveness in the global semiconductor industry, which is estimated to reach roughly $1 trillion by 2030, according to McKinsey & Co.
Trump attacked the bipartisan act for wasteful spending, though politicians across the political spectrum have disagreed. And funding from the act is expected to create upward of 145,000 manufacturing and construction jobs, per the Semiconductor Industry Association.
Those jobs, in turn, have created a significant demand and revenue opportunity for extended stay hotels nationwide, per leaders in the space. The act’s potential defunding concerns hotel players expanding in the highly competitive longer-stay accommodations sector, though other tailwinds show promise, one leader shared.
As the CHIPS Act’s future hangs in the balance, Hotel Dive analyzed how extended stay hotel demand, development and overall sector growth could shift if Trump’s request is carried out.
Infrastructure jobs boost extended stay growth
While Trump called the CHIPS and Science Act a “horrible, horrible thing” in his address, extended stay hotel players have praised the infrastructure projects resulting from the act, as well as the bipartisan Infrastructure Investment and Jobs Act, both of which passed under the Biden administration.
“The Infrastructure and CHIPS Acts are expected to dramatically increase the demand for economy extended stay hotels nationally over the coming years,” Mike Nielson, CEO of extended stay hotel brand LivAway Suites, said in a February 2024 statement.
Since 2022, the CHIPS Act has funded $30.6 billion in grant awards to 19 companies, including Taiwan Semiconductor Manufacturing Co., which vowed earlier this month to invest a total $165 billion in advanced semiconductor manufacturing domestically.
Wyndham Hotels & Resorts, meanwhile, previously stated that growth of its Echo Suites extended stay hotel brand, as well as a “multi-year boom” in extended stay demand, has been driven in part by “historic infrastructure and microchip spend” resulting from the laws.
Infrastructure projects — and the hotel guest demand they drive — pose a $3.3 billion room revenue opportunity for Wyndham franchisees nationwide, according to the hotel company. And infrastructure business will continue to play a “crucial” role in the extended stay segment, Wyndham Chief Development Officer Amit Sripathi told Hotel Dive earlier this year.
Matt McElhare, Choice Hotels International’s lead for extended stay brands, told Hotel Dive in October that Choice targets extended stay growth in markets that benefit from federally funded infrastructure projects because the areas have a “business-friendly” environment that spurs population growth.
In a conversation with Hotel Dive earlier this month, McElhare said such infrastructure projects can be “transformational” for their respective markets.
Paul Duncan, chief development officer at West77, the development engine behind LivAway Suites, told Hotel Dive last spring that the brand similarly targets growth in markets that are benefiting from increased infrastructure spending, including Phoenix, where TSMC is investing heavily.
How a CHIPS Act repeal would impact extended stay
So, what would happen to extended stay demand and strategies if projects funded by the CHIPS Act were jeopardized by its repeal?
According to McElhare, there “would no doubt be certain markets where [the repeal] would fundamentally alter the attractiveness from an extended stay perspective.”
However, he said, successful extended stay hotels are located in markets that have multiple extended stay drivers, so if these types of infrastructure projects were to suddenly disappear, extended stay hotels would find resilience from other demand outlets.
"You’re still looking at a segment that has really favorable supply and demand characteristics across the country. People are bullish on this space."
Matt McElhare
Choice Hotels International’s lead for extended stay brands
The CHIPS Act, and the infrastructure projects derived from its funding, are driving more project workforce demand, McElhare said. Project workforce demand, in turn, drives long lengths of stay, which boosts occupancy, drives higher margins and builds more resiliency into a hotel’s performance.
But an extended stay developer should never build in a market that only has one demand driver, McElhare said, and most aren’t targeting markets solely because of surrounding infrastructure development — or they shouldn’t be, per McElhare.
LivAway Suites’ Nielson echoed a similar sentiment, telling Hotel Dive that “there are 20-30 verticals or demand generators for our space such that a pullback in any one of them is not sufficient to impact operations significantly.”
“The sector was strong before the CHIPS Act and we would expect it to remain strong even if the CHIPS Act was repealed,” though it would be naive to say a repeal would not have any impact, he noted.
“Those that are chasing sites based on headlines would likely be more aggressively impacted in the event of a repeal,” Nielson said. “The old saying is ‘location, location, location’ and not ‘legislation, legislation, legislation.’”
“To run a successful extended stay [hotel], you need to have confidence that the rest of that market has enough of those extended stay demand drivers to drive that length of stay,” McElhare said. Then, he added, hoteliers can run their properties “with a true extended stay model [and] deliver the 55%-plus [gross operating profit margins] that we see with brands like WoodSpring Suites.”
Universities, medical facilities and research and development campuses also drive strong extended stay demand, he noted.
When LivAway Suites was considering its hotel in Syracuse, New York, Nielson explained, the brand analyzed a diverse array of demand generators in the market, including educational, medical and manufacturing facilities, as well as ongoing construction. The decision “was not materially reliant on the anticipated Micron semiconductor facility,” he said.
Beyond the CHIPS Act, former President Joe Biden’s Inflation Reduction Act and IIJA account for a significant amount of support for initiatives and projects domestically that will continue to drive extended stay demand, McElhare said.
On his first day in office, though, Trump suspended Inflation Reduction Act and IIJA funding disbursements in an executive action dubbed “Terminating the Green New Deal.”
But strong market forces are a bigger tailwind for reshoring advanced manufacturing than the fiscal support from the federal government, McElhare added, pointing to TSMC’s pledge from earlier this month to invest another $100 billion in the U.S.
Markets with low taxes, population growth and a lot of new business formation — all of which are extended stay demand drivers — are where manufacturers like TSMC want to be, McElhare noted. Markets with those existing fundamentals include the Carolinas, Texas, Salt Lake City, Phoenix and Las Vegas, he said.
Holistically, McElhare said, extended stay remains attractive regardless of the CHIPS Act, though the law does accelerate some demand trends.
“You’re still looking at a segment that has really favorable supply and demand characteristics across the country. People are bullish on this space,” McElhare said.
What’s next for the CHIPS Act?
While Trump was adamant in his address that Congress should kill the CHIPS Act, his call fell somewhat flat across the political spectrum, as the bill supports infrastructure growth in both Republican- and Democrat-led states.
“I have to admit, I was surprised,” Sen. Todd Young of Indiana, the act’s Republican co-author, told Business Insider reporters the morning following Trump’s address. “It's been one of the greatest successes of our time.”
At this point, it would require an act of Congress to fully defund the CHIPS Act, Manufacturing Dive reported. Jack Gold, founder and principal analyst at J. Gold Associates, told the publication the move would be very unpopular, costing states billions of dollars in the process.
Trump, though, implied in his address that killing the act would save that amount of money. He told House Speaker Mike Johnson to “get rid of the CHIP Act, and whatever [money] is left over, use it to reduce debt or any other reason you want to.”
Senate Democratic Leader Chuck Schumer, meanwhile, said in a March 5 statement that people are “already feeling the positive impacts and new economic energy in their towns in every corner of America, from Ohio to Arizona” as a result of the CHIPS Act.
“I do not think the president will find much support in Congress for undermining these CHIPS investments and the massive amount of jobs they are creating,” Schumer said.
