Extended Stay Hotels: Mid-Term Outlook, Opportunities & Risks in a Shifting U.S. Hospitality Market

Windgate Extended Stay Hotel

Extended stay hotels have emerged as a standout segment in the U.S. hospitality real estate market, offering a blend of resilience and robust cash flows that has attracted deep investor interest. Even as overall lodging occupancy remains slightly below pre-pandemic highs, extended stay properties have been outperforming: in late 2024 they averaged over 70% occupancy, versus about 60% for traditional hotels. This high utilization, coupled with lean operations, translated into roughly $20 billion in industry revenues in 2025 – about 10% of all U.S. hotel room revenues. Major capital placements underscore the enthusiasm for this asset class; for instance, Blackstone and Starwood’s $6 billion acquisition of Extended Stay America (ESA) in 2021 (and subsequent $1.5 billion purchase of WoodSpring Suites in 2022) demonstrated institutional confidence in extended stay’s long-term value. As we look ahead to the next 3–5 years, extended stay hotels are poised to remain a financially compelling, “recession-resistant” property type – but not without new competitive dynamics and underwriting considerations for lenders and investors.

Market Overview and Mid-Term Outlook (2025–2030)

Steady Growth: The U.S. extended stay hotel industry is entering the mid-2020s on a stable growth trajectory. According to the MMCG database, industry revenues are projected to expand at a ~2.1% compound annual growth rate (CAGR) through 2030, reaching an estimated $21.7 billion by 2030 (up from about $19.6 billion in 2025). This moderate growth outlook follows a post-pandemic surge – revenue jumped over 11% annually on average from 2020 to 2025 as the sector recovered swiftly – and now normalizes to a sustainable pace. Key demand drivers (discussed below) are expected to keep occupancy and rate on a gentle upswing, even as the initial snap-back from 2020’s trough has passed. Extended stay hotels’ positioning as a bridge between hotels and apartments means they continue to capture shifting traveler behaviors, supporting consistent performance.

New Supply & Brand Expansion: Investor confidence in extended stays is evident from a robust development pipeline, although supply growth bears watching. Nearly 38,000 extended-stay hotel rooms are currently under construction across the U.S., reflecting about one-third of all new hotel projects nationally. Established lodging companies have dramatically expanded their extended stay portfolios – Marriott, Hilton, IHG, Choice, and others have grown their long-stay brands by ~50% over the past decade (far outpacing overall U.S. hotel supply growth). In the next few years, new brands are crowding in: for example, Marriott’s “Apartments by Marriott Bonvoy” concept targets serviced-apartment style stays, Hilton launched a new midscale Home2/LivSmart Studios brand in 2023, and Wyndham’s economy-oriented Echo Suites is rolling out its first properties. Extended Stay America itself – the largest pure-play in this segment – has introduced “Select Suites” conversions to complement its core mid-priced ESA Hotels, and now boasts over 700 properties nationwide. This wave of development and brand proliferation underscores the optimism for extended stay demand, but also raises the risk of localized oversupply. Industry analysts note that extended stay room supply has grown faster than demand in recent years, and that new openings in 2025–2027 could put pressure on occupancy in some markets if demand doesn’t keep up. Overall, however, the mid-term outlook remains positive: the MMCG database characterizes extended stay hotels as entering a growth phase, with high investor interest and new concepts addressing untapped niches (from economy weekly-stay inns to upscale “aparthotel” units).

Resilient Demand Profile: Crucially, extended stay hotels benefit from a diverse customer base that underpins their mid-term prospects. Unlike traditional hotels that rely heavily on short transient visits, extended stays draw from multiple demand streams – business travelers on long assignments, “bleisure” guests mixing work and leisure, relocating families between homes, traveling medical staff, digital nomads, and even local residents in transition. This diversity helped the sector weather recent downturns better than others. During the 2020 pandemic, extended stay hotels’ occupancy and revenue rebounded faster than the broader industry (ESA famously stayed profitable and kept all its properties open in 2020, with revenues only ~15% below 2019 levels despite the pandemic shock). In the words of Jan Freitag of CoStar, extended stay hotels proved “at least recession-resistant” – even when traditional hotel demand evaporated, there was “always demand from first responders, traveling nurses, construction crews, and people relocating” that kept extended stays in business. This fundamental resilience bodes well for the next few years, when economic uncertainty (and currently high interest rates) have made defensive, cash-flow-stable investments more attractive.

Demand Drivers: Bleisure Travel, Digital Nomads & Business Travel Trends

Several travel trends and structural shifts in how people work are directly powering the extended stay segment’s growth:

• Bleisure Travel Boom: The blending of business and leisure travel (“bleisure”) has become mainstream and is lengthening trip durations. A 2023 Expedia Group survey found 76% of business travelers plan to extend work trips for leisure, and an AHLA study indicated 84% are interested in doing so going forward. Professionals are increasingly tacking on extra days (or weeks) to explore destinations after meetings. Extended stay hotels are prime beneficiaries of this trend – their in-room kitchens and workspaces cater perfectly to guests who need to log on for work and enjoy some vacation downtime. Longer trip itineraries driven by bleisure mean higher occupancy for extended stay properties, especially over weekends and shoulder days that traditional business hotels struggled to fill. Hotels in this segment are actively courting bleisure guests by offering “work-from-hotel” amenities and promotional weekend rates, and it’s paying off in the form of sustained demand. Notably, Marriott reported that average business trip length is up ~20% post-pandemic as travelers add leisure days, a shift that directly feeds extended stay occupancy.

• Rise of the Digital Nomad: The remote work revolution has created millions of “digital nomads” – full-time professionals who can work from anywhere and often choose to travel for extended periods. In 2024, an estimated 18+ million Americans described themselves as digital nomads, more than double the number in 2019. These mobile workers seek lodging that combines home-like comfort with reliable services, making extended stay hotels an appealing option (especially for those who prefer a turnkey solution over the hassles of renting short-term apartments or Airbnbs). With many companies embracing hybrid or fully remote teams, this demographic is expected to keep growing. Extended stay operators are responding by adding co-working spaces, high-speed Wi-Fi, and lobby lounges conducive to both productivity and socializing. The MMCG database indicates that over the past five years, remote workers and “workcationers” have become a significant driver of extended stay demand, contributing to the segment’s above-industry occupancy gains. In short, digital nomadism has expanded the customer base beyond the traditional corporate road-warrior, filling rooms even in periods when business travel was soft.

• Business Travel Recovery & Shifts: Traditional corporate travel is gradually recovering, which supports extended stay demand – but with important nuances. By 2024, overall U.S. hotel demand (room-nights) had surpassed 2019 levels as companies resumed more in-person meetings and conferences. Extended stay hotels, in particular, are benefiting from the most essential business trips: project-based travel, training programs, consulting assignments, and crew rotations that require multi-week stays. These are the types of trips companies are least likely to cut, even amid budget scrutiny, because they’re tied to critical operations. Moreover, corporations seeking cost efficiencies are shifting some travel to extended stay accommodations, which often have lower nightly rates (and include amenities like kitchens that reduce meal expenses). However, underwriting must account for potential headwinds: Economic uncertainty has made businesses more cautious with travel budgets in the near term. For example, many large firms in 2024–2025 imposed stricter policies on employee travel (limiting trips unless client-facing or “business critical”) and downsized travel perks. Federal government travel is one area seeing notable cuts – federal spending reductions have caused government-related hotel bookings to fall by as much as 50% recently. Extended stay hotels located in markets that depend heavily on government contractors or per-diem government travel (e.g. around D.C. or military hubs) could feel that pinch. Overall business travel “hasn’t fallen off a cliff” but is “definitely constrained right now,” as PwC’s hospitality lead noted. The net outlook is that business travel will continue improving over the next 3–5 years, albeit not in a straight line. Extended stay demand from private sector clients (especially in consulting, tech, healthcare, energy, and construction) should grow, while government and some corporate segments may lag. Investors should emphasize tenant diversification in this segment – properties drawing from a broad mix of corporate accounts, project-based business, and longer-term individual guests will fare best if certain travel categories tighten.

• Leisure and Inbound Travel Patterns: Beyond work-related trends, general travel preferences are also shifting in favor of longer stays. Many domestic travelers, including families, are taking fewer but longer vacations, opting for “one-week+” trips instead of multiple short getaways – benefiting hotels that offer weekly rates. International inbound tourism to the U.S. is rebounding after years of pandemic restrictions, which is expected to boost upscale extended stay hotels in gateway cities. Overseas visitors tend to stay longer per trip, and some (such as travelers visiting family or those coming for medical or education reasons) appreciate the apartment-like setup of an extended stay hotel. The MMCG database suggests that the return of international travelers will particularly lift demand for higher-end extended stay brands in urban markets (as these guests seek a “home base” for a week or more). For example, New York, Los Angeles, and Miami extended stay properties are seeing improved booking pace as foreign tourism ramps back up. Additionally, relocation and housing market factors are non-trivial demand drivers: with high home prices and interest rates, some individuals and families making an interstate move or awaiting a new house prefer an extended stay hotel for a month or two rather than rushing into buying or signing a long lease. These “in-between homes” stays became more common in the past year, effectively substituting for what might otherwise have been apartment rentals. Collectively, these leisure and personal-travel trends augment the core commercial demand for extended stays, reinforcing a stable demand floor under the segment.

Operating Performance: Profitability, RevPAR Dynamics and Cost Benchmarks

Extended stay hotels are not only enjoying healthy demand – they also operate with notably efficient cost structures and strong profitability metrics, which is a key part of their investment appeal. Compared to traditional hotels, the extended stay model has leaner staffing, lower guest turnover, and limited services, yielding significantly higher margins on average. According to the MMCG database analysis of industry financials, U.S. extended stay hotels in 2025 achieved an average net profit margin around 17%, which is nearly three times the margin of the broader hotel sector (~6%). This outperformance is driven by several structural cost advantages:

• Lower Labor and Servicing Costs: Labor is the single biggest expense in hotel operations, and extended stay properties excel at minimizing it. Housekeeping is typically offered only weekly (or upon checkout) instead of daily, drastically reducing cleaning workloads. One study found that a 100-room extended stay hotel spends as little as $420 per day on housekeeping with weekly service, versus about $3,000 per day with daily cleaning – an 85% cost reduction. Similarly, front desk staffing can be slim since frequent check-ins/outs are fewer; ESA’s CEO noted that in an efficient 120-room aparthotel, only ~8–10 full-time staff are needed, whereas a full-service hotel of that size might require over 100 employees. Extended stay guests also generate less daily wear-and-tear on rooms and use fewer consumables (linens, amenities) per night, cutting maintenance and supplies costs. These efficiencies show up in industry benchmarks: wages and benefits expense averages ~22% of revenue for extended stay hotels, versus ~27% for typical hotels (MMCG database). Overall, extended stay properties can run with a skeleton crew relative to traditional hotels, without compromising guest satisfaction for their target market. This is particularly valuable at a time of rising labor costs and staff shortages industry-wide – extended stays are inherently shielded from some wage inflation pressure by virtue of needing far fewer employees per occupied room.

• Limited Food & Beverage and Amenities: Most extended stay hotels have little to no on-site F&B outlets – perhaps a simple grab-and-go market and a self-serve breakfast area at best. They do not operate full-service restaurants, bars, room service, or banqueting operations that drive up costs in other hotels. Guests instead use their in-room kitchens or dine out locally. This eliminates a traditionally low-margin department (hotel restaurants often barely break even) and simplifies operations. Other amenities are also pared down: extended stays usually have modest fitness rooms, vending and laundry facilities, but not the expansive pools, spas, or concierge services of higher-end hotels. The resulting cost savings are reflected in a lower purchases and utilities expense ratio (the segment spends roughly 15–16% of revenue on purchases like linens, cleaning supplies, and utilities, compared to nearly 29% in the broader hotel sector – MMCG data). Importantly, these lean offerings are by design and generally aligned with guest expectations in this segment. The typical extended stay guest values the kitchenette and space over luxury services, so the lack of frills does not hurt demand – instead, it allows competitive rates while preserving margins.

• Economies of Scale and Predictability: Extended stay hotels benefit from having a base of long-term guests that provide a more predictable revenue stream week to week. A property where, say, 50% of rooms are occupied by guests staying a month or longer has a stable base of income locked in, which helps management plan staffing and control variable costs more tightly. It also means fewer high-cost distribution channels: extended stay guests often book directly or via corporate accounts instead of high-commission online travel agencies. In fact, over 50% of extended stay room-nights are booked through direct channels (including property direct and brand websites), higher than the hotel industry average. Paying less commission (and yielding less inventory to OTA discounting) further bolsters net RevPAR. Moreover, long-stay guests tend to be less rate-sensitive on a nightly basis – they care about total trip cost and convenience – allowing operators to yield-manage more effectively for the remaining short-stay inventory. The bottom line is higher operating leverage: industry data indicates extended stay hotels can achieve 70%+ flow-through of incremental revenue to profit (i.e. each additional dollar of revenue yields 70 cents of NOI), compared to 40–60% flow-through in typical select-service hotels. This high operating margin nature means extended stays convert revenue into NOI exceptionally well, which is highly attractive from a financing perspective (it supports debt service even with moderate revenue growth).

RevPAR Dynamics and Occupancy: By design, extended stay hotels tend to have lower average daily rates (ADR) but higher occupancy than the hotel industry at large. Guests staying a week or more expect a discounted nightly rate, so ADR is lower than a comparable transient hotel – but in exchange, occupancy levels are much more consistent. Recent metrics illustrate this dynamic. In Q4 2024, U.S. extended stay hotels achieved an average occupancy of 72.7%, versus about 60% for all hotels nationally, while the extended stay ADR was $117.66 compared to $158.07 for the industry (due to fewer luxury properties in the mix). The net effect was an extended stay RevPAR of $85.52, a bit below the overall industry’s $94.97, yet delivered far more stable, predictable revenue streams. This stability is a hallmark: even in seasonal low periods, extended stay occupancies don’t dip as severely because of their long-term guests. For example, during the typically slow first quarter, extended stay occupancy remained around 71% in Q1 2025 – the lowest extended stay Q1 since 2010 aside from 2020–21, but still very high historically. In downturns, extended stay RevPAR declines are often gentler than those of traditional hotels. In the 2009 recession, U.S. hotel occupancy fell to a record-low ~54.6%, but the extended stay segment still managed ~64% occupancy. Similarly, Highland Group data for mid-2025 shows that even as new supply caused a slight dip in occupancy, extended stay RevPAR held up better than comparable classes of hotels, especially in the economy tier. This performance pattern – trading off some rate premium in boom times in exchange for steadier volume – is why extended stay cash flows are regarded as safer and more bond-like by investors. Hotels in this segment can sustain high occupancy by flexing rates to attract longer stays (e.g. offering a monthly rate that keeps rooms filled even when transient demand softens). In turn, that consistent occupancy supports strong debt service coverage since revenue volatility is reduced.

It’s worth noting that extended stay ADR growth in the next few years may be somewhat constrained by competition and brand proliferation; with many new economy and midscale extended stay brands launching, there could be competitive pricing pressure in some markets. We are already seeing intensified rate competition at the lower end: e.g., Choice Hotels’ Woodspring Suites and new Everhome Suites aim to offer the lowest weekly rates to capture price-sensitive long-term guests. This could cap ADR increases for legacy players like Extended Stay America in certain markets. However, any ADR headwinds are likely to be offset by high occupancy and the ability to flex length-of-stay mix. Many operators are deploying advanced revenue management to optimize LOS (length-of-stay) strategies, filling gaps with shorter stays at higher nightly rates when possible and building a base of long stays to ensure occupancy floor. This LOS optimization has reportedly improved some extended stay RevPAR by up to ~19% through smarter yield management tailored to weekly/monthly guests. Therefore, investors can expect extended stay RevPAR growth in the mid-term to be modest but positive, driven more by occupancy than rate – and importantly, RevPAR stability should remain superior to traditional hotels.

On the cost side, certain expenses are rising industry-wide (insurance, property taxes, and utilities have been notable inflationary pain points). Extended stay hotels are not immune to these, but their higher margins provide a cushion. For instance, even as insurance costs climbed in 2024, an extended stay property (with limited amenities to insure) could absorb that increase more easily than a full-service resort operating on thinner margins. Profitability benchmarks for 2025 show extended stay hotels’ profit (before interest and taxes) averaging 16–17% of revenue, comfortably above pre-pandemic levels, thanks to efficiencies and solid top-line recovery (MMCG database). By comparison, full-service hotels often saw single-digit or near-zero net margins in 2022–2023 as they struggled with labor shortages and uneven demand. The extended stay segment’s ability to consistently generate profits through cycles is a major reason why lenders view these assets favorably from a credit risk standpoint.

Major Players: Extended Stay Operators by Size, Market Share and Profitability

The extended stay hotel landscape in the U.S. features a mix of specialized pure-play operators and large hotel chains that have significant extended stay franchises. Below is a comparison of several major extended stay operators, illustrating their scale, market share, and typical profitability:

Operator	Key Extended Stay Brands	U.S. Hotels (Est.)	Market Share (Rev)**	Net Profit Margin (Est.)
Extended Stay America (ESA)	Extended Stay America Premier/Suites, Select	~700 hotels	~7–8% of segment	~16–17% (industry-leading)
Marriott International	Residence Inn, TownePlace Suites, Element	~1,500 hotels	~25% of segment (by rooms)	~15% (property-level, est.)
Hilton Worldwide	Homewood Suites, Home2 Suites, (LivSmart)	~1,200 hotels (combined)	~20% of segment (by rooms)	~15% (property-level, est.)
IHG Hotels & Resorts	Candlewood Suites, Staybridge Suites, Atwell	~700 hotels (combined)	~10% of segment (by rooms)	~15% (property-level, est.)
Choice Hotels Intl.	WoodSpring Suites, MainStay, Suburban, Everhome	~500 hotels	~7% of segment (fast-growing)	~15% (property-level, est.)

Extended Stay America (ESA) – the largest dedicated extended stay operator – accounts for roughly 7–8% of U.S. extended stay hotel revenues. ESA has about 700 properties across its upper-economy and mid-priced brands, and it enjoys margins in the mid-to-high teens (reflecting the lean model discussed). ESA’s consistent performance attracted its $6 billion private equity buyout; now privately held, it continues to expand via franchising its new Select Suites concept in converted hotels.

The bulk of the extended stay market, however, is held by the major hotel chains through their extended stay brand portfolios. Marriott International is the biggest player by room count – Residence Inn (the pioneering upscale extended stay brand) alone has over 870 U.S. locations, and together with TownePlace Suites (midscale) and Element (boutique extended stay) Marriott has on the order of 1,400–1,500 U.S. extended stay hotels. This represents roughly a quarter of all extended stay rooms in the country. While Marriott’s corporate revenue doesn’t all come from this segment (since it’s largely franchised), the hotels under its brands typically operate at the high efficiency levels common to extended stays, with property-level net margins around 15%. Hilton is another heavyweight: between Homewood Suites (upper-midscale) and Home2 Suites (midscale), Hilton has approximately 1,200 extended stay properties open or in development in the U.S., roughly ~20% of the segment by room supply. Hilton’s extended stay brands are likewise known for robust operating margins (Home2 Suites in particular has been a growth engine, topping 740 open locations as of 2025). Hilton’s new entry LivSmart Studios will bolster its presence in the midscale, economy tier.

IHG (InterContinental Hotels Group) and Choice Hotels International each command significant slices as well. IHG’s extended stay offering includes Candlewood Suites (economy, ~400+ hotels) and Staybridge Suites (upscale extended stay, ~300 hotels) – combined, around 700 properties in the U.S. These brands give IHG roughly 10% share of the extended stay sector. Choice Hotels, meanwhile, has aggressively grown its economy extended stay lineup: WoodSpring Suites (ranked the #1 economy extended stay brand in recent years) has about 250+ open hotels and hundreds more in the pipeline, complemented by MainStay Suites and Suburban Extended Stay brands (~150 more). Choice’s extended stay system is about 500 properties and expanding fast (Choice’s development pipeline for this segment is one of the largest, with 350+ projects in development). Though smaller in revenue share (~7%), Choice focuses on the budget traveler and workforce housing niche, achieving respectable margins via its highly standardized, cost-engineered designs (e.g. Choice’s “Kitchen in a Box” retrofit kit for conversions).

Other notable players include Hyatt, which operates over 130 Hyatt House extended stay hotels (and is launching a new Hyatt Studios brand), and Wyndham, which historically had a modest presence (Hawthorn Suites) but is now investing in extended stay with its Echo Suites and an acquisition of the Travel + Leisure Co.’s WaterWalk extended stay brand. Additionally, several regional and specialty extended stay chains exist (e.g. InTown Suites, Siegel Suites, stayAPT Suites, AKA Hotel Residences), focusing on economy or urban upscale niches. These smaller operators collectively comprise perhaps 5–10% of the market.

The competitive landscape is thus evolving: large franchisors are doubling down on extended stay growth, and new entrants are intensifying competition, especially in the economy and midscale tiers. From an investor’s standpoint, the scale advantages of big brands (loyalty programs, reservation systems, corporate sales reach) are increasingly important – franchisees are gravitating to the likes of Marriott, Hilton, Choice, etc., to capture demand and financing for new projects. This dynamic suggests that branded extended stay assets may enjoy a valuation premium and easier debt financing terms compared to independent ones, due to perceived lower risk and better distribution. At the same time, more brands in the space means operators must execute sharply to maintain market share. As Choice’s segment leader noted, it’s a “new phase” where franchisees have many choices, and delivering on length-of-stay value and guest experience is key to stay competitive. Overall, the major players all recognize that extended stay is now a core growth segment – and this competitive energy is a positive sign of a maturing, in-demand market, though it will require prudent underwriting of each flag’s performance in different sub-markets.

Extended Stay vs. Short-Term Rentals and Traditional Hotels

Investors and lenders should also weigh the competitive dynamics between extended stay hotels and alternative accommodations – namely short-term rentals (like Airbnb) and conventional hotels – as these influence occupancy, pricing power, and long-term risks.

Competition with Short-Term Rentals: In the era of Airbnb and Vrbo, some travelers who need lodging for a week or longer consider renting private apartments or homes as an alternative to extended stay hotels. This is especially true for leisure travelers or remote workers seeking a more “local” experience. However, extended stay hotels maintain distinct competitive advantages against short-term rentals that have allowed them to thrive alongside the home-sharing boom. Firstly, extended stay hotels offer professional reliability and consistency – a guest knows what they will get in terms of cleanliness, safety, and service standards, whereas rental experiences can be hit-or-miss. Business travelers in particular often cannot or prefer not to use Airbnb for extended assignments due to corporate travel policies, insurance, or simply the lack of amenities like front-desk support and weekly cleaning. Extended stay hotels also typically have more flexible booking terms (no large security deposits or strict check-out schedules) and participate in loyalty programs, an important draw for frequent travelers.

Importantly, extended stay hotels can be more cost-effective for certain stays once you factor in the added fees with rentals. A 30-night Airbnb stay might incur hefty cleaning fees and service charges, eroding the savings, whereas extended stay hotels usually bundle weekly cleaning and utilities in the rate. Additionally, municipalities are increasingly regulating short-term rentals (some banning stays under 30 days without special permits), which can funnel long-stay demand back to hotels. The MMCG analysis suggests that while Airbnb and similar platforms have captured some portion of extended-stay-minded travelers, they have not significantly dented the extended stay hotel segment’s growth – in fact, many digital nomads and relocating families use a mix of both, but prefer extended stay hotels for the start of their trip or when they need turnkey simplicity. The extended stay brands are responding by incorporating more of the home-like features that lure rental users: e.g. Marriott’s new apartment-style product and Hilton’s extended stay designs include separate living areas and full-size kitchens, essentially combining hotel quality with apartment layout. Going forward, short-term rentals are more a complementary option than a direct threat – and in some cases, they even act as a feeder: guests may try a long Airbnb stay and decide next time to opt for the convenience of an extended stay hotel. One risk worth noting is regulatory asymmetry: hotels must comply with extensive safety and accessibility regulations that many short-term rentals do not, which can put hotels at a cost disadvantage. However, there is a push in many cities to level this playing field by imposing stricter rules on home rentals. For underwriting, it’s prudent to assume continued coexistence of these lodging options; extended stay hotels, by focusing on service consistency and targeted marketing (e.g. to corporate accounts and through loyalty programs), are expected to retain a strong niche versus private rentals.

Extended Stay vs. Traditional Hotels: Extended stay hotels also compete in a sense with traditional transient hotels, especially limited-service and select-service properties that might target similar guests for shorter stays. In many markets, a Residence Inn or Home2 Suites may vie with a Holiday Inn Express or Hampton Inn for the same one-night traveler, and vice versa. However, the extended stay product has differentiated itself enough that it often captures a different segment of demand entirely. Length of stay is the defining factor: transient-focused hotels measure success in nightly occupancy and can charge a premium for one-night stays during peak days, whereas extended stays are willing to trade some rate for a longer commitment. This means that in times of high demand (say a citywide convention or event), traditional hotels can spike rates and outperform on RevPAR, but in normal or low periods they may suffer low occupancy. Extended stays, on the other hand, might miss out on some ultra-high-rate one-night bookings, but they win on consistency, filling rooms with guests who stay through the troughs.

For investors, one way to view it is that extended stay hotels compete more with multifamily housing than with other hotels in many cases. Indeed, some metrics and underwriting approaches for extended stays borrow from apartment analysis (e.g. looking at occupancy over months and a form of lease-up, even if technically they’re nightly stays). Traditional hotels are often valued on highest RevPAR potential in peak times, whereas extended stays are valued on sustained NOI generation. That said, extended stay hotels do face competitive pressure from traditional hotels if those hotels start courting long-term guests with discounts. Many standard hotels have responded to the bleisure and “work from anywhere” trend by offering extended stay deals (like week-long packages or kitchenette in some rooms) to avoid losing those guests. For example, some full-service hotels are promoting “workcation” packages that include laundry services and a workspace to attract remote workers for multi-week stays – essentially encroaching on extended stay territory. Overall, though, the competitive dynamics favor extended stay specialists: purpose-built extended stay properties have significantly lower operating costs (as shown earlier) and can thus profitably offer lower rates for long stays that traditional hotels with higher cost bases cannot match without eroding their margins. In fact, if a transient hotel tries to match an extended stay hotel’s weekly rate, it could “cannibalize” its own pricing structure and suffer GOP (gross operating profit) erosion. Hilton’s Home2 Suites leader Talene Staab emphasized this, noting you can’t run an extended stay with transient pricing strategies – it’s a different business model. Traditional hotels generally recognize this and limit how much they chase long-stay business, especially as the extended stay segment has proven its viability.

Summary of Competitive Position: Extended stay hotels occupy a sweet spot between traditional hotels and alternative accommodations. They offer far higher service levels and certainty than most short-term rentals, and far lower costs for long stays than traditional hotels. This makes them the preferred option for a growing number of travel purposes (business projects, temporary housing, etc.). Competitive pressures are not absent – margins could be squeezed if, for instance, an abundance of new extended stay supply in a locality forces rate wars, or if Airbnb were to aggressively target corporate long-stay accounts – but current trends suggest the pie is growing for extended stay demand such that major conflicts are limited. From an underwriting perspective, investors should still analyze the local competitive set: Is the subject extended stay property unique in its submarket or one of many similar offerings? Are traditional hotels offering deep long-stay discounts nearby? Is there a glut of short-term rentals in that area that might cap what long-term guests will pay? Mitigating these risks often comes down to location and product differentiation. For example, an extended stay hotel adjacent to a major medical center or infrastructure project site has a built-in demand stream that neither Airbnb (due to contract needs) nor traditional hotels (due to pricing) can easily tap, insulating it from competition. On the other hand, an extended stay property in a tourist-heavy city center might face more competition from both upscale hotels and luxury Airbnb apartments for month-long upscale travelers. Properly positioning the property (amenities, marketing, partnerships with corporations) can ensure it captures its intended demand segment. In general, the competitive moat for extended stay hotels lies in their efficient design for a specific kind of guest – one who wants the home-like environment with hotel convenience – and that guest base is expanding.

Investment Opportunities and Underwriting Risks

Given the outlook and operating profile discussed, the investment case for extended stay hotels is compelling – but it comes with its own set of risks to underwrite carefully. Below we identify key opportunities and corresponding risks that lenders and investors should weigh:

Key Investment Opportunities

• Stable Cash Flows & Recession Resilience: Extended stay hotels have demonstrated remarkably stable performance through economic cycles. Their diversified demand (business, leisure, relocation, etc.) means occupancy holds up even when one segment falters. As Mark Skinner of Highland Group observed, extended stay demand has never seen a full-year decline historically. This resilience offers lenders comfort that debt service coverage (DSCR) can be maintained in downturn scenarios – a critical advantage over more volatile full-service hotels. Moreover, during recessions or black swan events (pandemics, natural disasters), extended stays often pick up alternative business (e.g. housing displaced persons, relief workers). This downside protection is a strategic opportunity: investors get an asset class with quasi-multifamily stability but often at higher going-in yields than apartments. Indeed, some view extended stay hotels as operating more like high-yield real estate infrastructure, providing an essential lodging service to traveling workers and families regardless of the economy. This quality positions extended stay properties as defensive investments in an uncertain macro climate.

• High Operating Margins = Strong ROI: As detailed, the extended stay model produces above-average operating margins, which can translate to attractive return on investment if properties are acquired or developed at reasonable cost. With net margins ~15–20% and prudent leverage, extended stay hotels can yield healthy cash-on-cash returns. Cap rates for quality extended stay assets have reflected this strength: despite rising interest rates, investors continue to pay premium pricing for top extended stay portfolios. In fact, extended stay hotels often trade at cap rates in the mid-5% range (4.5–6%), on par with multifamily yields, underscoring the perceived lower risk. For opportunistic investors, there’s a chance to achieve high-yield returns through development or conversion plays. The cost to develop midscale extended stay hotels is relatively low (median ~$165k per key in 2024, significantly cheaper than full-service builds). This means ground-up projects can potentially be done at a 20–30% lower cost per room than traditional hotels, but with comparable or better NOI per room. Such development cost advantages, combined with steady NOI, point to strong development spreads and attractive stabilized yields if executed well. It’s no surprise that capital is flowing here: for example, Choice Hotels’ franchisees secured a $500 million credit facility to accelerate Everhome Suites development, and Noble Investment Group aims to amass 100 extended stay assets, signaling institutional conviction in the segment.

• Growing Demand Tailwinds: The secular trends driving extended stay demand – remote work, **“work from anywhere” lifestyles, corporate decentralization, and the rise of project-based economy – are likely to continue for the foreseeable future. This provides a multi-year tailwind of new customers entering the extended stay space. For instance, the percentage of the U.S. workforce that is remote (and thus more mobile) remains elevated and is projected to stay high through 2030. Additionally, infrastructure investments (e.g. federal projects, private capital in manufacturing and energy) are resulting in more traveling crews and consultants on multi-month assignments, exactly the clientele extended stays serve. The hospitality sector as a whole is seeing a blending of lodging categories – hotels incorporating apartment elements, and apartments offering short-term stays – and extended stay brands are at the forefront of this convergence. Investors have the opportunity to capitalize on this structural shift in traveler preferences. Extended stay hotels positioned near business parks, hospitals, universities, or logistics hubs can tap into the long-term demand from those economic drivers. In many secondary and tertiary markets, there remains an undersupply of quality extended stay accommodations – creating opportunities for development or conversion where demand is present but product is outdated or absent. Simply put, the extended stay segment’s growth is underpinned by broad societal changes (work, travel, housing) that are mid-to-long-term in nature, providing investors a megatrend-backed thesis rather than a short fad.

• Value-Add and Conversion Potential: Another opportunity lies in the value-add acquisition of underperforming hotels (or other property types) for conversion into extended stay. Many older limited-service hotels or motels can be relatively easily converted to an extended stay format (adding kitchenettes, reconfiguring lobbies for grab-and-go, etc.). Choice Hotels, for example, has specialized conversion packages (“Lobby in a Box” and “Kitchen in a Box”) that streamline transforming a traditional hotel into an extended stay product. This strategy can unlock significant value: by converting a struggling transient hotel in a market with sustained long-term stay demand, an investor can boost occupancy and margin, thereby increasing the asset’s NOI and value. We’ve seen portfolios where conversions nearly doubled profitability once repositioned as extended stay. Distressed urban hotels (an outcome of the pandemic) and older roadside inns are ripe targets. Furthermore, certain extended stay brands (like ESA’s new Select Suites or Wyndham’s Echo) specifically focus on conversion growth, meaning franchise support and financing might be available for such projects. The economics of these conversions are appealing – often the all-in cost is far below new construction, yet post-conversion the asset trades on the strong extended stay cap rates. This can create immediate equity upside. Lenders might also favor these projects because they are adaptive reuses that improve DSCR by stabilizing a previously volatile asset.

• Favorable Financing and Exit Environment: As the extended stay segment has proven its stability, lenders have started to offer more favorable terms for well-performing extended stay assets compared to other hotel types. Higher loan-to-value ratios and lower debt yields may be attainable for top sponsors in this space, given the predictable cash flows (some lenders underwrite extended stays closer to how they view apartments or self-storage – i.e. more tolerance for higher leverage when historical occupancy is consistently high). On exit, the pool of buyers for extended stay hotels has widened. Not only hotel REITs and private equity are interested, but also multifamily investors and other yield-driven buyers have taken note of extended stay’s hybrid characteristics. This could keep cap rates comparatively compressed for the segment. The recent entry of heavyweights (Blackstone, Starwood, Brookfield) and ongoing franchise expansion indicate a liquid market for portfolios and an appetite for scale. For investors building a portfolio now, the eventual exit via sale or IPO could be lucrative if they establish a strong operating track record. Additionally, some are exploring OpCo/PropCo splits or joint ventures with housing investors, leveraging the quasi-residential nature of extended stays to attract capital that normally wouldn’t invest in hotels. All these point to extended stay hotels being a strategically valuable asset class with multiple avenues to create and realize value.

Key Underwriting Risks

• Supply Growth & Saturation: The flipside of the development boom is the risk of oversupply in certain markets. With one-third of new hotel projects nationally being extended stay-focused, some cities (especially high-growth Sunbelt and suburban markets) could see multiple new extended stay entrants opening around the same time. If demand growth locally doesn’t match this influx, occupancy and ADR could face downward pressure. Already, industry data in mid-2025 showed extended stay occupancy dipping to a five-year low for that month due in part to accelerated supply growth. Underwriting needs to incorporate a competitive supply analysis: Who are the upcoming new competitors within a 5-mile radius and how might they divide the demand pie? For example, a mid-market like Charleston, SC or Boise, ID can absorb only so many new extended stay rooms before rates suffer. Market-level feasibility studies and STR/Highland reports are critical to gauge if a subject property can maintain its performance as new players enter. The risk is most acute in the economy and midscale tiers where brands are proliferating rapidly (Choice, Wyndham, etc., all planting flags). To mitigate this, investors should favor projects with barriers to entry (e.g. tight zoning for new hotels, limited available sites near demand nodes) or unique niches (such as upscale extended stays in markets that mainly have economy ones, or vice versa). Additionally, any underwriting should stress test occupancy and rate assuming a scenario of 2–3 new competitors within the trade area. A once-stable 80% occupancy property might temporarily drop to 65–70% until the market reabsorbs the new supply. Ensuring DSCR remains acceptable under those conditions (and having adequate cash reserves) is prudent. The good news is that high interest rates and construction costs are already pumping the brakes on some development – as one real estate consultant noted, the combination of expensive debt and inflated construction costs has made previously “safe” hotel projects much harder to pencil, putting some new builds on hold. Thus, supply growth may moderate after 2025, but in the near term, localized overbuilding is a top risk to monitor.

• Interest Rates and Financing Costs: Extended stay hotels might have relatively stable NOI, but they are still subject to capital market conditions. The current environment of elevated interest rates directly impacts debt service coverage ratios and investor return hurdles. Cap rates have moved upward across hotel asset classes since 2022 in response to higher borrowing costs. While extended stays have held some of the lowest cap rates in the hotel sector (a testament to their stability), they are not immune – values could soften if rates remain high or rise further. For existing owners with floating-rate debt or loans maturing, there is a risk that refinancing could be at higher rates, squeezing cash flow. Lenders are also more cautious, often requiring higher DSCRs or lower leverage on hotel deals given general economic uncertainty. Underwriting should incorporate interest rate sensitivity: e.g. if current NOI could support, say, a 1.5x DSCR at a 5% interest rate, what happens at 6.5%? Often extended stay deals were underwritten at low cap rates (high values), so any uptick in cap rates could require additional equity at refi or sale. Capex needs can further complicate this (more on that below). The mitigating factor is extended stays’ strong NOI growth out of the pandemic, which has given some cushion. Also, some hotels might be candidates for conversion to multi-family or alternative use if interest rates severely impair hotel valuations – extended stay properties, given their kitchenettes and layout, are relatively easier to convert to apartments if ever needed, providing an extra backstop for value. Nonetheless, investors should use conservative exit cap rate assumptions (perhaps +50 to 100 bps above today’s prevailing rates) in models and ensure deals still pencil. Keeping loan-to-value moderate (e.g. 55–65% LTV instead of 75%) can also safeguard against interest rate risk, improving the chances of refinancing smoothly when the time comes.

• Operational Execution and Cost Creep: While extended stay hotels are operationally simpler than full-service hotels, execution still matters greatly. A poorly run extended stay can quickly see expenses creep up or customer satisfaction plummet. For instance, if a property cuts rates to fill rooms but doesn’t vet guest quality, it could encounter security issues or property damage (some economy extended stays have struggled with essentially becoming last-resort housing, which can deter other guests). Housekeeping on a weekly schedule requires discipline – if a hotel slacks on cleaning or maintenance, rooms can deteriorate given longer occupancy. Additionally, some costs are rising: housekeeping wages, even if fewer hours, may need to increase to attract staff; property insurance premiums have jumped (20–30% in some regions) which directly hits GOP. Extended stay operators must also invest in technology (PMS systems, mobile check-in, etc.) to stay efficient, which is an upfront cost. All these factors can erode the margin advantage if not managed. For underwriting, this means not assuming peak-pandemic expense ratios will hold indefinitely. Build in inflation on operating costs (labor, utilities, insurance) at least in line with CPI if not more. It’s also wise to diligence the operator’s capabilities: Does the management team have specific extended stay experience? As Hilton’s Home2 Suites chief noted, running an extended stay is not exactly like running a transient hotel – revenue management, guest relations (with long-term guests) and maintenance. If a traditional hotel operator is at the helm, there could be a learning curve risk. On the positive side, many brands offer support and training for this model, and new tech solutions are emerging tailored to long-stay operations (e.g. automated monthly billing, keyless entry for after-hours check-ins). Investors should ensure the business plan accounts for adequate staffing and CapEx to maintain quality (a shabby extended stay product can quickly lose out to newer competition). Overall, the risk is manageable with attentiveness, but ignoring operational nuances could undercut the pro forma.

• Rate Sensitivity and Length of Stay Assumptions: Extended stay hotels often attract price-sensitive guests (especially in economy/midscale tiers) who choose them to save money versus other lodging. If room rates climb too high, some of that demand could evaporate or shift to alternatives (e.g. group houses, corporate housing, etc.). There is a ceiling to ADR growth in extended stay that is somewhat lower than for transient hotels; raising rates aggressively can backfire as long-term guests are more budget conscious. Talene Staab’s point that treating an extended stay like a transient hotel on pricing will erode GOP is a caution. Underwriting should remain conservative on ADR growth. It may be safer to assume that much of RevPAR gains will come from occupancy or mix rather than large ADR jumps. Additionally, average length of stay (ALOS) is a critical assumption. A business plan might assume an ALOS of say 10 nights, but if that drops to 5 nights (due to less long-term project business and more short transient bookings), costs would increase (more frequent turns, more OTA commission possibly) and the whole profit model could shift closer to a regular hotel. Monitoring and forecasting the mix of 1–6 night vs. 7–29 night vs. 30+ night stays is key (recall, in this industry about 45% of revenue historically comes from stays over 30 nights). A risk is if corporate travel policies change in a way that reduces trip lengths (for example, some companies might prefer rotating staff every 2 weeks instead of 8-week stints to avoid burnout – hypothetically). If ALOS declines significantly, an extended stay property might need to hire more housekeeping staff and its competitive edge diminishes. Mitigation involves flexibility in operations – being able to scale service levels up or down as the guest mix changes. Some newer extended stay models (e.g. Hyatt’s and Marriott’s apartment concepts) are trying to capture ultra-long stays, whereas others like ESA’s Select cater also to weeklies; understanding where the subject property lies on that spectrum and the stickiness of its core customers is vital in risk assessment.

• CapEx and Renovation Cycles: One often overlooked risk in extended stay underwriting is capital expenditure (CapEx) needs. Extended stay rooms, with kitchens and longer use, can experience heavy wear over time. Appliances break, cabinet fixtures get worn, and the property can start to resemble an apartment complex needing refurbishment. While extended stay hotels avoided mass closures in 2020, some deferred CapEx might be coming due. Major brands typically mandate renovation cycles every 6–8 years (for soft goods) and 12–15 years (for case goods). Investors must budget for these periodic refreshes. A current concern is cost inflation in construction materials and FF&E, which makes upcoming renovations pricier than before. A $5k per key refresh pre-pandemic might now cost $8k or more. Ignoring CapEx can distort DSCR projections – prudent underwriting sets aside a reserve (e.g. 4% of revenue annually) for CapEx. Furthermore, if acquiring an older extended stay asset (say 15+ years old), verify the PIP (property improvement plan) required by the franchisor. These can be significant; for example, bringing an older ESA property up to the new ESA Premier standard could run high. The Spark GHC analysis noted average PIP costs of $18k–$25k per key for branded select-service hotels in 2024 – extended stays might be similar or higher if kitchens need upgrades. If CapEx is underestimated, it could lead to either a large cash outlay down the road or brand quality slippage (hurting occupancy). Also, technological updates (e.g. installing IoT energy management or keyless systems) might be a competitive necessity, which is another form of CapEx. The risk is that true economic returns might be lower once lifecycle costs are accounted for. Mitigants include conducting a thorough engineering inspection and CapEx underwriting on a 10-year DCF (discounted cash flow) basis, not just focusing on Year 1 NOI. This provides a more realistic picture of investor returns after keeping the asset modern. On the positive side, extended stays often have lower ongoing CapEx than full-service hotels (no large kitchen equipment for restaurants, less frequent style updates needed for simpler room designs), but they still require attention.

• Location and Zoning Risks: Extended stay hotels sometimes face local community pushback or regulatory quirks because they blur the line between hotels and residential use. Some jurisdictions have laws that if a guest stays beyond a certain duration (often 30 days), they may gain tenant rights – which can complicate eviction or removal if needed. While not a widespread issue for well-run hotels, it’s a risk to consider if an extended stay effectively becomes long-term housing for some guests. Zoning can also be an issue: certain areas may restrict extended stay hotels or require additional approvals, especially if they are perceived as attracting transient workers in otherwise residential zones. From a lender’s perspective, any ambiguity in legal/allowed use should be cleared. Ensuring the property’s business license and zoning correctly cover extended stay use is part of due diligence. Also, federal policy impacts could emerge – for instance, changes in tax law for long-term stay taxes, or health and safety regulations for what constitutes a hotel vs. apartment. These are not immediate threats, but a cautious underwriter might keep an eye on legislation that affects the segment (e.g. some cities have considered requiring hotels to collect occupancy tax differently for stays beyond 30 days). The overall risk here is low-probability, but it underscores that extended stay hotels, as a hybrid asset, should be scrutinized for any legal gray areas.

In summary, while extended stay hotels present excellent fundamentals, investors should approach them with clear-eyed analysis. The strategic opportunities – high margins, stable demand, favorable trends – make them an enticing addition to real estate portfolios, particularly for those focusing on hospitality or alternative multifamily investments. However, careful underwriting must address the cyclical risks (supply, economy) and operational specifics (length of stay management, CapEx) unique to the segment.

Implications for Financing, Valuations and Underwriting Models

From a financial perspective, extended stay hotels invite a slightly different lens than other hotel types. Lenders and investors are increasingly treating them as a distinct asset class with hybrid characteristics, and this influences how deals are underwritten in terms of DSCR, cap rates, and valuation approaches:

• Debt Service Coverage (DSCR): Thanks to steadier cash flows, extended stay hotels often achieve higher DSCRs under normalized conditions than comparable transient hotels. For example, where a typical select-service hotel might be underwritten at a 1.3× DSCR on stabilized NOI, an extended stay property could potentially support a bit more leverage while still hitting that DSCR, because its NOI is more dependable month to month. Lenders have noticed that extended stays seldom drop to dangerously low occupancy, even in recessions, which reduces default risk. However, given today’s interest rates, DSCR has become tighter industry-wide. To maintain a healthy DSCR, many extended stay deals are now structured with lower LTV or additional interest reserves. Some sponsors mitigate DSCR compression by locking in fixed-rate debt or purchasing rate caps – strategies especially pertinent to hotels with variable cash flows. We see banks and debt funds asking for sensitivity analysis in underwriting: how low can occupancy/ADR go before DSCR falls below 1.0? In extended stay scenarios, that “breakeven” occupancy is impressively low (often 40–50% or less), reflecting the strong margins. This gives comfort, but lenders still will consider worst-case (e.g. if multiple new competitors temporarily push occupancy down, etc.). Interest coverage ratios are similarly bolstered by the high operating leverage. For underwriting models, it’s advisable to present a base, downside, and upside case for extended stay properties’ cash flows (as one would for any hotel), but the downside case for an extended stay might assume, say, a 10–15% RevPAR drop in a recession, versus 20–30% drop for a standard hotel. Investors who stress-test moderate declines (and have contingency plans such as expense cuts or targeting alternative demand) will be more resilient. Overall, extended stay DSCRs can be robust, but conservative underwriting should still target a DSCR cushion (e.g. aiming for ≥1.4× in stabilized year) to account for any unforeseen events or capital costs.

• Cap Rates and Valuation: As noted, cap rates for extended stay assets tend to be among the lowest in the hotel sector, reflecting lower perceived risk. Pre-COVID, economy extended stay hotels often traded around 8–9% cap rates (higher risk, mom-and-pop operations), while upscale extended stays were in the 6–7% range. Post-pandemic, with the segment’s outperformance, we’ve seen cap rates compress: quality extended stay portfolios have traded in the mid-5% range, and even economy extended stays are attracting cap rates in the 7% or lower range in top markets. For valuations, this means extended stay hotels can command higher per-room prices than one might expect just from their ADR profile. Lenders might appraise these properties with methods closer to multi-family (income capitalization with stabilized NOI) in addition to standard hotel comps. One caveat: some appraisers apply a “franchise premium” adjustment or higher capex reserve for hotels, which can widen the bid-ask spread. As an investor, recognizing that many buyers see extended stays as quasi-multifamily yields can inform your exit cap assumption. If interest rates ease in coming years, extended stay cap rates could even compress further relative to other hotels (given the strong buyer interest). For underwriting, a safe approach is to use a cap rate a touch above current market as an exit assumption (to allow for market cycles), but also to articulate the value story: e.g., if your property has an NOI of $1 million and you argue a 6% cap is justified, that’s a ~$16.7M value. Support that with the stability evidence (occupancy history, market demand, etc.) to convince lenders/appraisers. Additionally, using a 10-year discounted cash flow (DCF) model with a reasonable terminal cap can help capture the value of those stable cash flows and future growth. Extended stay valuations also benefit from lower volatility – some investors may accept a lower unlevered IRR because the cash flow profile is safer (this is analogous to core real estate vs. opportunistic). Another nuance: extended stay hotels sometimes have higher replacement cost coverage in valuations since they’re cheaper to build; but as long as demand outpaces supply, existing assets hold an edge.

• Underwriting Models – A Hybrid Approach: When underwriting extended stay hotels, it can be useful to borrow techniques from both hotel analysis and apartment analysis. For example, one might incorporate a seasonality adjustment and daily rate pickup (like a hotel model) but also examine metrics like revenue per available apartment (RevPAA) on a monthly basis and occupancy in terms of leased units (like an apartment). In practice, extended stay underwriting often comes down to carefully projecting occupancy by segment. A robust model might have assumptions for occupancy from long-term corporate contracts, occupancy from transient/overflow demand, etc., each with different ADRs and costs. Length-of-stay discounts need to be modeled: e.g., if you assume 30% of room-nights are monthly stays at a 40% discount to BAR (best available rate), does the math still yield the desired RevPAR and profit? Successful underwriting of extended stays means understanding the guest mix and stay pattern deeply. Lenders will ask: “What if your few key accounts (construction crew or consulting project) end – can you replace them?” So modeling a scenario where certain demand segments fall off and showing how marketing will backfill them is wise. Expense underwriting should reflect the lower variable cost of longer stays – e.g., laundry, housekeeping, and credit card fees all scale differently when someone stays 30 nights vs 30 one-night stays. Ensuring the model doesn’t overestimate variable costs (thus underestimating profit) is as important as not underestimating fixed costs (like the need for a competent on-site manager regardless of high occupancy). Another tip: incorporate a monthly buildup approach – extended stay revenues can be more consistent, so projecting by month (with maybe mild seasonal curves) rather than wild daily swings gives a clearer picture for DSCR calculation.

• Debt Structure and Coverage Ratios: Many investors in extended stay are employing moderate leverage to maintain strong coverage. Some deals involve mezzanine debt or preferred equity tranches, but given the stable cash flows, the cost of such capital might not be justified unless acquiring a large portfolio. Traditional bank financing or CMBS loans have been common for stabilized assets; CMBS in particular likes the consistency of extended stay income (though one must ensure the franchise agreement is CMBS-friendly). One important consideration is debt yield – lenders often look for a minimum debt yield (NOI/Loan) on hotels, say 10% or more. Extended stays can meet this more easily due to higher NOI margins. In underwriting, calculating the implied debt yield at your target loan amount is key; if it’s comfortably above lender thresholds, that strengthens your loan case. Refinancing assumptions should also reflect extended stay strengths: if selling or refinancing after stabilization, a prudent model might assume a slightly lower debt constant or a bit more proceeds relative to a similar transient hotel, owing to lender comfort. However, also factor in any seasonal working capital needs – extended stays can have somewhat lumpy cash flows if big accounts pay monthly, etc., so ensure the model has enough liquidity (maybe via an operating reserve) to cover any timing mismatches for debt payments.

In conclusion, financing and underwriting extended stay hotels requires balancing their robust fundamentals with realistic cushions for the risks outlined. The strategic imperative for investors is to tell the story of an asset that combines the stable income profile of apartments with the nightly pricing upside of hotels – a potent mix when executed well. Lenders are increasingly receptive to this narrative, especially as they’ve seen extended stay portfolios deliver during the pandemic and recovery. As always, the keys are due diligence and conservative projections: know your market’s demand drivers, don’t over-project rate growth, account for new supply, and keep an eye on expenses. If done properly, underwriting models for extended stays can showcase superior risk-adjusted returns, which is exactly why this segment is attracting informed financial audiences in real estate, hospitality, and structured debt investments.

Conclusion

The U.S. extended stay hotel market stands at an intriguing juncture of opportunity and competition. Over the next 3–5 years, it is poised to continue its growth as a high-margin, stable-yield sector, buoyed by trends like bleisure travel, digital nomadism, and the normalization of longer stays. For lenders and investors, extended stay hotels offer a unique proposition: hotel assets that behave more like apartments in stability, yet can outperform in recovery cycles. We’ve seen that in metrics – higher occupancy, resilient RevPAR, and strong profit flow-through – and in market actions, from billion-dollar acquisitions to accelerated brand development. The mid-term outlook is for moderate but steady growth in revenues and ongoing high demand, albeit with the need to navigate increased supply and rising costs. Successful investment in this space will hinge on strategic market selection (targeting the right locations and demand generators), brand/operator alignment (leveraging the efficiencies and reach of experienced extended stay brands), and prudent underwriting that factors in both the upside and the operational realities.

For those with an interest in real estate, hospitality, or structured debt, extended stay hotels have shifted from a niche play to a mainstream institutional asset class. They bring the promise of reliable income (supporting solid debt service coverage and often lower cap rate profiles) and the potential for growth as new travel behaviors emerge. However, they also require a granular understanding of what drives their performance – from guest length-of-stay dynamics to cost control and the competitive landscape with rentals and traditional hotels. Cap rates and values will continue to be shaped by how well properties maintain their occupancies and margins amidst new competition and an evolving economic backdrop. The implication for underwriting models is clear: those that incorporate realistic scenarios, operational expertise, and strategic foresight will be best positioned to capitalize on extended stay opportunities.

In summary, the extended stay segment in the U.S. is entering a mid-term period of sustained demand and investment momentum. It offers compelling opportunities for growth and income, provided that investors remain vigilant about the associated risks – from oversupply to interest rates. With thoughtful analysis and disciplined execution, extended stay hotels can deliver both robust debt coverage and equity returns, solidifying their role as a key component in hospitality and real estate portfolios. In an industry often characterized by cyclical swings, extended stays present a model of “boring is beautiful” – and as many have learned, boring (steady cash flows, that is) can be very good business in the world of hotels.

October 07, 2025, by a collective authors of MMCG Invest, LLC, (retail/hospitality/multi family/sba) feasibility study consultants.

Sources:

• MMCG Hospitality Database (2025 Edition) – U.S. Extended Stay Hotels Market Data and Analysis.

• Highland Group Extended-Stay Market Reports, 2024–2025 (occupancy, RevPAR, supply trends).

• Hotel Management and HOTELS Magazine news on extended stay segment performance and development (2024–2025).

• American Hotel & Lodging Association (AHLA) and Expedia Group surveys on traveler behavior (bleisure, trip lengths).

• STR / CoStar data via AltexSoft (2025) – extended stay vs. hotel industry KPIs in Q4 2024.

• Business Travel News (May 2025) – Highland Group Q1 2025 extended stay report (ADR $118.5, RevPAR growth).

• PRSA Strategies & Tactics (June 2025) – Corporate travel cutbacks and federal travel reductions.

• AInvestor (2024) – Extended stay investment landscape (cap rates 4.5–6%, cost per key).

• Hospitality Upgrade (Mar 2025) – Extended stay investment appeal and performance through cycles.

• AltexSoft Industry Blog (2025) – Extended Stay Hotels Market Overview (global size, margins, booking channels).

• Company disclosures and press releases: Extended Stay America (hotel count), Choice Hotels (portfolio size), Marriott & Hilton (brand expansions).