The U.S. select-service and extended-stay hotel sectors are projected to remain strong investment options in 2025 and beyond, according to a report by JLL’s Hotels & Hospitality Group. The sector’s robust performance, lean operating model, and outsized yields relative to other commercial real estate sectors are attributed to its attractiveness to investors.
In recent years, the select-service and extended-stay hotel sectors have shown impressive growth, with RevPAR reaching a record high of $78 in 2024, a 14% increase from 2019. Concurrently, demand has surged by 232,000 room nights annually, nearly fully recovering from 2019. This performance boost is credited to the sector’s transition into a unified market that offers a mix of amenities to cater to travelers’ evolved preferences.
Compared to full-service hotels, the sector’s lean operating model and superior profit margins make it a preferred choice for investors looking for robust, consistent returns even in challenging economic circumstances. The sector’s capacity to exceed inflation in profitability growth further amplifies its allure.
Jll’s Select-Service and Extended-Stay Hotel Outlook 2025 report highlights brand proliferation as a significant trend. The number of brands in this sector has increased from 184 in 2000 to 214 today, accounting for 74% of the sector’s total room supply. As organic supply growth is limited, brand companies explore alternative strategies such as mergers, acquisitions, and conversions to spur net unit growth.
Since 2021, the sector has generated $62.6 billion in liquidity, accounting for nearly half the total U.S. hotel investment volume. This surge in interest is propelled by the sector’s fundamental performance, lean operating model, and outsized yields compared to other commercial real estate sectors. Furthermore, the sector showcases strong durability in its returns, having the least yield volatility over the past 16 years compared to other main property sectors.
The lending landscape for these hotels is also diversifying. While banks remain dominant, investor-driven lenders, insurance companies, and CMBS are becoming more involved, indicating growing confidence in the sector despite broader market challenges.
“The select-service and extended-stay hotel sector remains a focal point for investors seeking durable returns in a volatile market,” said Ophelia Makis, Research Manager for JLL’s Hotels & Hospitality Group. “The sector’s adaptability, operational efficiency, and consistent yields position it well for continued success in 2025 and beyond.”
The post-pandemic era has seen select-service and extended-stay assets dominate the hotel investment market, mostly on a single-asset transaction basis. “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,” added Dan Peek, Americas President for JLL’s Hotels & Hospitality Group.
