The Rise of Extended-Stay Hotels

As the hospitality industry continues to evolve, one segment is emerging as a clear leader in growth: extended-stay hotels. With major players like Marriott and Hilton leading the charge, this sector is expanding at a pace that far outstrips traditional hotel growth. In fact, extended-stay properties have seen a 3% increase in demand year-to-date, while conventional hotels lag behind with only 0.3% growth. This trend presents an incredible opportunity for savvy real estate investors.

But how can you capitalize on this rapidly growing sector? Let’s dive into the key insights and strategies that will help you take advantage of the booming extended-stay hotel market.

Actionable Insights for Investors

Tap into Growing Demand

Extended-stay hotels are benefitting from multiple growth drivers, such as the booming U.S. energy and manufacturing industries and the rise of contract work, especially in the wake of the CHIPS Act. Additionally, these hotels serve as temporary housing for displaced individuals after natural disasters, driving demand in key regions.

Action Step: Focus your investment strategy on properties in regions where industry growth is accelerating or where recovery work is needed after natural disasters.

Invest in Major Hotel Brands

Marriott’s TownePlace Suites and Residence Inn are two of the biggest players in the extended-stay space, with over 40,000 rooms under development. Hilton’s Home2 Suites isn’t far behind. These well-established brands offer stability and a proven track record in the extended-stay market.

Action Step: Look for opportunities to invest in properties that are either part of these major brands or located near them. The brand strength will provide long-term security and demand for your investment.

Understand the Supply and Demand Balance

While supply growth for extended-stay hotels has been strong, there are signs that the market may be reaching a point of equilibrium, with occupancy flattening out. This slowdown in occupancy growth, coupled with a modest rise in average daily rates (ADR), has impacted revenue per available room (RevPAR) growth for extended-stay properties.

Action Step: While extended-stay hotels are still a great investment, pay attention to market saturation. Focus on markets where the supply of these properties is not outpacing demand, and look for opportunities to improve occupancy rates and ADR.

Long-Term Development Outlook

Despite some challenges in occupancy and ADR growth, the development outlook remains strong. Over 90,000 new extended-stay rooms are expected to be added to the market between 2025 and 2028, highlighting the long-term potential of this sector.

Action Step: If you're looking for future-proof investments, consider entering the market now and preparing for the surge in new properties. Over the next few years, the demand for extended-stay hotels is likely to continue growing, and being an early investor can help you reap the rewards.

The Big Picture

The extended-stay hotel market is poised to continue its rapid growth, driven by increased demand from business travelers, industry growth, and temporary housing needs. For investors, this sector offers a fantastic opportunity to capitalize on a high-demand, high-potential market. By focusing on the right locations, partnering with major brands, and keeping an eye on supply-demand dynamics, you can secure a profitable position in this thriving market.

Action Step: Start evaluating your investment portfolio for opportunities in the extended-stay sector, whether through direct property acquisitions or by tracking industry trends and new developments.

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