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.
Select-service hotels' growth is really a mix of drivers, according to Ophelia Makis, research manager for JLL’s Hotels & Hospitality Group. “It’s select-service hotels’ streamlined operations, its adaptability to changing consumer trends and more recently, it’s lack of supply growth that’s really contributed to success in both performance and investment activity,” she said.
Zach Demuth, JLL’s global head of hotels research, added that the select-service hotel sector broadly caters to a new type of traveler who is prevalent, post-pandemic. “Select-service properties really cater to those experiential travelers with their larger rooms and a slightly lower price-point than a full-service hotel,” he continued. “People are traveling for a why now instead of a what and the select-service model really appeals to them.”
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.
“Consumers are always looking for something new—whether it's in retail or hotels—they always want something fresh. And the brand proliferation is really nourishing that with this appetite of combined innovation and the differentiation,” Markis said. “As select-service hotels are adaptable to consumer trends, they are very successful in doing this [being fresh], whether it’s the design aspect, incorporating different amenities, limited fitness centers, things like that. The impact is not just adding another brand to the portfolio, but it’s really advancing its market share of the consumer wallet.”
Brands are effectively just distribution systems, whether they want to admit to or not, Demuth said. “So the more brands or the more sub brands they have that they have, the better distribution systems they are,” he continued. “As there has been both more demand for this sector and greater market share demand, the brands look at the way to capture more of that is to proliferate and create a differentiated style.”
Demuth thinks this trend starts back with Marriott's adoption of the Moxy brand.
“Before that the belief was select-service hotels were really very simplified hotels that were really transactional, so to speak,” he said. “I think Moxie sort of opened the door that you could have experiential select-service. Clearly we now have other instances such as citizenM or Hyatt's recent advancements into the space and obviously, IHG with its Even brand.”
Markis mentioned that many of these new select-service brands are conversion friendly, such as Hilton’s Spark brand. “It’s just easier to convert as opposed to building a hotel and then flagging it,” she said. “So there are opportunities within these new brands.”
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.
This article was originally published in the April edition of Hotel Management magazine. Subscribe here.