U.S. Select-Service and Extended-Stay Hotel Outlook 2024

The evolution of select-service and extended-stay hotels has driven the sector’s investment appeal to new heights.

January 10, 2024
  • Zach Demuth
  • Ophelia Makis

In the early 2000s, select-service and extended-stay hotels operated as more clearly defined sectors, differentiated by their target market and length of stays. During this period, individual owners dominated the market with only a handful of prominent brands available. However, in recent years, the distinctions between select-service and extended-stay hotels have become increasingly blurred. Select-service hotels now incorporate extended-stay amenities including in-room kitchenettes and flexible workspaces, while extended-stay hotels have added business centers with more of its brands incorporating 24/7 self-service marketplaces as seen in Everhome Suites. Today, the select-service and extended-stay hotel sectors have converged into one, boasting more than 200 brands (existing and in the pipeline) and gaining notable market share by expanding into primary, urban, and resort locations. As a result of this evolution and growth, investor interest has accelerated to its highest level ever. In the period between 2020 and Q3 2023, the number of first-time buyers* of select-service and extended-stay hotels hit a record-high at 855 total.

This is more than three times the number of first-time buyers recorded between 2008 and 2011. With the average yield for the combined select-service and extended-stay sector achieving a 10-year high through the first nine months of 2023 and average deal size at a record low of $16 million, expect even more opportunity for investors over the long-term.

Key Takeaways:

  1. Evolution of a growing consumer demand base underpins an optimistic long-term outlook.
  2. A larger share of consumers is being captured in primary markets, signaled by supply shift.
  3. Select-service and extended-stay hotels comprise an increasing portion of total U.S. hotel liquidity driven by rising yields and robust operating performance.
  4. Select-service and extended-stay hotels have generally been more attractive for lenders underpinned by lower cheque sizes and durable profit margins.

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