According to JLL's Hotels & Hospitality Group’s U.S. Select-Service and Extended-Stay Hotel Outlook 2025 report, demand has increased by 232,000 room nights year-over-year, nearly fully recovered from 2019. JLL’s analysts credit this surge in performance to the sector's transformation into a unified market, offering a blend of amenities to meet evolved traveler preferences. They further expect demand to surpass 2019 levels in 2025.
Revenue per available room, meanwhile, reached a record high of $78 in 2024, 14 percent above 2019 levels.
Brand proliferation has been another key trend identified in the report. The number of brands in this sector has grown from 184 in 2000 to 214 today, now representing 74 percent of the sector’s total room supply. Atwell Suites by IHG, Everhome Suites by Choice, Caption by Hyatt, Tempo by Hilton, ECHO Suites Extended Stay by Wyndham, LivSmart Studios by Hilton and Spark by Hilton have launched over the past five years alone.
However, with limited organic supply growth in today’s market, brand companies are adopting alternative strategies such as mergers, acquisitions and conversions to drive net unit growth.
Since 2021, the sector has generated $62.6 billion in liquidity, representing nearly 50 percent of total U.S. hotel investment volume. This surge in interest is driven by the sector's robust fundamental performance, lean operating model and outsized yields relative to other commercial real estate sectors, the report claims. Moreover, the sector demonstrates a strong durability in its returns exemplified by having the lowest level of yield volatility over the past 16 years relative to other main property sectors.
Lastly, the lending landscape for select-service and extended-stay hotels is diversifying. While banks remain dominant, there's increased participation from investor-driven lenders, insurance companies and commercial mortgage-backed securities. This trend indicates growing confidence in the sector despite broader market challenges.
Segment Appeal
The analysts credit the sector’s lean operating model and superior profit margins, relative to full-service hotels, for its appeal for investors seeking strong, consistent returns even in challenging economic conditions.
The sector’s ability to outpace inflation in profitability growth further enhances its appeal. The sector’s investor attractiveness is further enhanced by its resilience in profitability versus inflationary pressures. According to the report, over the past four years, growth in earnings before interest taxes, depreciation and amortization per available room has outpaced inflation rates with a 23 percent compound annual growth rate compared to 5 percent for the consumer price index.
"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."
"In the post-pandemic era, select-service and extended-stay assets have been a [dominant] force in [the] hotel investment market, primarily on a single-asset transaction basis more recently," added Dan Peek, Americas president for JLL’s Hotels & Hospitality Group. "Given the positive momentum in the financing markets and the rising tide of available equity, it's likely we will see a return of substantial portfolio transactions in 2025 and 2026."