SHERIDAN, WYOMING – Feb. 21, 2025 – JLL’s Hotels & Hospitality Group has released its U.S. Select-Service and Extended-Stay Hotel Outlook 2025 report, offering insights into recent market trends and the sector’s potential as a strong investment opportunity.
Record-Breaking Performance and Demand Surge
The report reveals significant growth in the select-service and extended-stay hotel sector. RevPAR reached a record high of $78 in 2024, exceeding 2019 levels by 14 percent. Demand also saw a substantial increase, with a surge of 232,000 room nights year-over-year, nearly recovering to pre-pandemic levels. This strong performance is attributed to the sector’s evolution into a unified market, effectively catering to the changing preferences of modern travelers with a diverse range of amenities.
Attractive Investment Proposition
The operational model and profit margins of select-service and extended-stay hotels, compared to full-service hotels, make them an appealing choice for investors seeking consistent returns, even amidst economic uncertainties. The sector's ability to outperform inflation in profitability growth further strengthens its investment attractiveness.
Brand Proliferation and Strategic Growth
The report also identifies brand proliferation as a significant trend. The number of brands in this sector has expanded from 184 in 2000 to 214 currently, representing 74 percent of the sector’s total room supply. Faced with limited organic supply growth in the current market, brand companies are pursuing alternative strategies like mergers, acquisitions, and conversions to drive net unit growth.
Significant Investment and Durable Returns
Since 2021, the select-service and extended-stay hotel sector has attracted $62.6 billion in liquidity, accounting for nearly 50 percent of the total U.S. hotel investment volume. This strong investor interest is fueled by the sector’s robust fundamental performance, efficient operating model, and higher yields compared to other commercial real estate sectors. The sector also demonstrates the durability of its returns, exhibiting the lowest level of yield volatility over the past 16 years compared to other major property sectors.
Diversifying Lending Landscape
The lending environment for select-service and extended-stay hotels is becoming more diverse. While banks remain the primary lenders, increased participation is observed from investor-driven lenders, insurance companies, and CMBS. This diversification reflects growing confidence in the sector despite broader market challenges.
Expert Insights and Outlook
“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, JLL’s Hotels & Hospitality Group. “The sector’s adaptability, operational efficiency, and consistent yields position it well for continued success in 2025 and beyond.”
Looking ahead, the sector is poised for further growth. “In the post-pandemic era, select-service and extended-stay assets have been a dominate force in hotel investment market, primarily on a single-asset transaction basis more recently,” added Dan Peek, Americas president, 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.”
Conclusion
JLL's 2025 outlook report paints a positive picture for the select-service and extended-stay hotel segment. Its strong performance, attractive investment profile, and adaptability to changing market dynamics suggest continued growth and success in the coming years. The sector's resilience and consistent returns make it a compelling option for investors navigating the current economic landscape.
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