Dive Brief:
- In 2025 and beyond, select-service and extended stay hotels are poised to lead as a desirable investment opportunity given the sector’s “durable returns in a volatile market,” according to new research from JLL, shared with Hotel Dive.
- The sector’s RevPAR reached a record high of $78 in 2024, 14% above 2019 levels, according to JLL’s U.S. Select-Service and Extended-Stay Hotel Outlook 2025 report. Additionally, demand for the sector “surged” by 232,000 room nights year over year in 2024, the report detailed.
- Guest demand for the sector will continue to increase in 2025, which, along with other trends, will drive continued growth and increased investment interest in the coming years, per JLL.
Dive Insight:
Performance and demand growth of the select-service and extended stay hotel sector can be attributed to the sector’s “transformation into a unified market, offering a blend of amenities to meet evolved traveler preferences,” according to JLL.
In 2025, JLL expects guest demand for select-service and extended stay hotels to surpass 2019 levels, as the sector caters to evolving traveler preferences for longer stays, remote work and work-life balance with amenities like in-room kitchenettes and recreational areas.
This demand surge, coupled with the sector’s lean operating model and “superior profit margins, relative to full-service hotels,” will drive investment activity in 2025 and beyond, JLL detailed in a statement obtained by Hotel Dive.
“The select-service and extended-stay hotel sector remains a focal point for investors seeking durable returns in a volatile market,” Ophelia Makis, research manager for JLL’s Hotels & Hospitality Group, said in a statement. “The sector’s adaptability, operational efficiency and consistent yields position it well for continued success in 2025 and beyond.”
Since 2021, the sector has attracted $62.6 billion in investment volume driven by increased activity from owner-operators, high-net-worth individuals and private equity firms, according to the report. Investment activity will likely maintain its momentum, especially given it costs roughly 37% less to acquire a property in the sector’s top U.S. markets than to develop a new one, the report detailed.
Another factor that will drive growth is the diversifying lending landscape for select-service and extended stay hotels, with increased participation from investor-driven lenders, insurance companies and commercial mortgage-backed security, according to JLL.
The U.S. select-service and extended stay hotel sector “maintains its allure for lenders, even in the face of higher debt costs,” according to the report. In 2024, loan origination volume for the sector increased 6.4% year over year, reaching $18.2 billion.
For hotel companies expanding in the space, mergers, acquisitions and conversions will be an attractive way to drive net unit growth, according to JLL.
Since 2000, the U.S. select-service and extended stay hotel sector has grown from 184 brands to 214 today, with branded hotels accounting for 74% of the total supply, per the report.
Brands new to the sector in the last five years include IHG Hotels & Resorts’ Atwell Suites, Choice Hotels International’s Everhome Suites, Wyndham Hotels & Resorts’ Echo Suites and Hilton’s LivSmart Studios and Spark flags.
Across segments, hotel investment is expected to ramp up in 2025 amid a cooling interest rate environment, improving lender sentiment and healthy travel levels, hospitality pros told Hotel Dive earlier this year.
