U.S. Select-Service & Extended-Stay Hotel Investment Trends

Tailwinds to outweigh economic uncertainty, with record-breaking investment volume to climb higher

January 12, 2023
  • Chris Dewey
  • Stephen M. Leslie
  • Katy Reynolds
  • Zach Demuth
  • Ophelia Makis

On the heels of 2021’s record performance, U.S. select-service and extended-stay investment volume has accelerated even further in 2022 with liquidity approaching $20.5 billion, a 5.5% increase year-over-year. The sector has accounted for 51.1% of total U.S. hotel investment volume, an increase of 210bps to 2021 and the highest portion in U.S. history. Investors continue to flock to the sector in tandem with evolving traveler preferences and underpinned by consistently strong operating performance and yields.

Not only have select-service and extended-stay hotels historically been more insulated during periods of economic disruption as they cater to a wider customer base, but they have achieved higher and more consistent yields relative to other commercial real estate property types. The sector has already seen a quicker RevPAR recovery relative to the overall U.S. lodging industry and is poised to grow even further in 2023. While macroeconomic volatility and capital market dislocation is likely to suppress some short-term hotel investment activity, expect the select-service and extended-stay sector to be less impacted driven by generally smaller cheque sizes and investors’ ability to leverage existing relationships with local lenders.

With nearly $7.0 billion in securitized select-service hotel debt slated to mature over the next 16-months and rising interest rates not expected to subside, expect well-capitalized buyers to have an opportunity to acquire quality select-service and extended-stay assets in 2023. 

Key Takeaways:

  1. Record-breaking investment shows no signs of slowing, driven by a growing demand base and higher profitability

  2. Top liquid markets show strong appeal for select-service & extended-stay hotel investment fed by evolving traveler trends

  3. Select-service hotels represent a defensive and attractive sector with yields surpassing all other property sectors with lower levels of volatility

  4. Strong extended-stay hotel performance attracts increased levels of investment and expansions

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