Summary: The Rise of Select Service and Extended Stay Hotels

Since 2020, the select service and extended stay hotel sector has become one of the strongest and most adaptive segments in the US lodging industry. Once viewed as separate categories, they have evolved into a unified model that blends essential amenities with longer stay comfort, attracting leisure, business, and blended travel guests. Their streamlined operations, strong profitability, and resilience in changing market conditions have made them a favorite among travelers and investors.

Strong Performance and Growing Demand

Select service and extended stay hotels have posted record performance, with RevPAR hitting seventy eight dollars in 2024 and demand nearing full recovery from 2019 levels. These hotels continue to benefit from shifting travel patterns, especially as blended travel becomes more common. Their efficient operating model has also allowed them to maintain strong profit margins, even during difficult periods. Over the past four years, profitability has grown faster than inflation, making the sector especially attractive to investors.

Brand Expansion and Limited New Supply

New hotel development has slowed due to higher interest rates, rising construction costs, and supply chain issues. As a result, brand companies have shifted toward new strategies including mergers, acquisitions, and conversions. The number of brands serving this segment has grown significantly, allowing companies to expand their presence without relying heavily on new construction. This trend has strengthened the position of branded hotels and increased the variety of options available to travelers.

Record Investment Activity

Investment in select service and extended stay hotels has reached record levels since the pandemic, totaling more than sixty two billion dollars over the past four years. Despite a softening in 2024, this segment still accounts for nearly half of all US hotel investment. Investors are drawn to its consistent performance, efficient operations, and reliable yields, which have outpaced other commercial real estate sectors for more than a decade. Owner operators and high net worth individuals remain the most active buyers, while private equity interest is expected to increase as lending conditions improve.

A More Diverse Lending Environment

The lending landscape for this sector continues to expand, with more lenders entering the space and loan originations growing above long term averages. While banks still lead in lending volume, investor driven lenders, insurance companies, and CMBS issuers have all increased their activity. The average deal size remains more accessible than full service hotels, which has supported broader interest from a wide range of capital sources.

Outlook

Select service and extended stay hotels have redefined the hotel landscape through their adaptability, strong profitability, and ability to serve the modern traveler. With continued investor confidence, limited new supply, and a growing mix of brands and ownership groups, the sector is positioned to remain one of the most stable and rewarding areas in hospitality.

This article was originally published in the April edition of Hotel Management magazine

Article by: Ophelia Makis is research manager at JLL’s Hotels and Hospitality Group. (JLL)

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