Extended-stay segment’s investment opportunities attract affirmative attention

NATIONAL REPORT — The extended-stay segment’s long-term resiliency, especially during difficult and unpredictable economic times, is a key consideration for investing in the product type, according to Hotel Investment Today by Northstar’s 2025 Extended Stay Measurement Report completed in July 2025.

This first-party measurement study, commissioned by Extended Stay America, included questions aimed at gaining an overall sense of where the extended-stay segment stands in the eyes of the hotel investment community.

Hotel Investment Today’s audience of hotel owners, investors, developers, and operators shared their sentiments about how the sector is influencing their real-world, real-time pipeline and portfolio decisions.

TRENDS AND TAKEAWAYS

The future looks bright. One of the key findings in the survey was respondents’ near-consensus on the segment’s positive development outlook. Results revealed that 98.4% of participants perceived the future of extended-stay development in a positive light. More than two-thirds of respondents described the development outlook as bright, citing proven sector resilience across cycles, demand diversity, and operating margins among the primary drivers. Over 33% forecasted a “moderate” pace going forward. Increasing construction costs are the major hurdle to growth, according to respondents.

Extended stay is a strong investment vehicle. The vast majority of respondents expressed confidence in this investment type. The data reported that 87.4% of participants viewed the sector as a solid investment option. Nearly two-thirds of respondents rated extended stay a “4” or “5” on a 5-point scale of investment potential. Over 25% termed it “full of potential.” And 85% of respondents said they are interested in pursuing extended-stay opportunities.

However, a more telling measure of investor confidence in today’s market was the limited skepticism among participants. The middle ground — those who view extended-stay as "attractive yet tough" — represented over one-fifth of respondents (21.7%), indicating that most investors have formed more definitive opinions about the segment's prospects. Only 13% of respondents rated extended-stay investments as "not of interest," while 2.9% gave it a “2” rating, suggesting that even cautious investors see merit in the extended-stay model.

Segment exposure is pivotal to portfolio diversification. In fact, an overwhelming 98.3% of participants attached some level of importance to the role of extended-stay hotels in building a balanced portfolio. Survey data showed that 62.1% of respondents rated extended-stay hotels as “important” or “extremely important” to achieving portfolio diversification (see Fig. 1). This has opened new opportunities to capitalize on this segment based on its strategic value in investment planning. As expected, sentiment on the optimal mix of extended stay and transient hotels covered a wide range. The majority of respondents reported that extended stay comprised 10% to 50% of their existing portfolios.

Fig.1. Nearly two-thirds of respondents rated extended stay as important or very important to a balanced portfolio.

"The near-unanimous optimism we're seeing — with over 98% of respondents viewing extended stay's future positively — reflects what we've observed across the industry: this segment has proven its resilience and continues to deliver strong returns even in challenging economic conditions,” said Mark Williams, Managing Director of Franchise Development, Extended Stay America.

Investors identified strengths, challenges that most influence their development decisions. When asked to check “all that apply” as reasons for investing in extended stay, participants listed “consumer demand trends” (68.3%), “strong operating margins” (66.7%), “cross-cycle resilience” (58.3%), and “length of stay” (50%) at the top of the rankings. (See Fig. 2). “Construction cost efficiency” (35%), “access to financing” (31.7%), and “brand affiliation opportunities” (31.7%) represented other contributing factors to investor interest. However, the respondents voiced areas of concern. Key among them were overdevelopment, rising costs, and regional saturation, suggesting the need for deeper market-by-market diligence to maximize returns.

Fig.2. Resilience, demand, margins topped reasons 85% of respondents are interested in the sector.

Extended-stay properties offer several advantages that increase their appeal to investors relative to traditional hotel models. As reflected in Fig. 3, results pointed to a relatively even split of extended stay’s various advantages over transient hotels. Extended stay’s “efficient operating model” and “profitability” topped the list of strengths at 28.3% and 26.7% of responses, respectively. Participants also highlighted operational and performance benefits stemming from factors unique to the segment. That included a “predictable revenue stream” (18.3%), “fewer daily check-ins/check-outs” (13.3%), and “labor (11.7%).

“What's driving investor interest isn't only one factor — it's the combination of operational efficiency, predictable revenue, and strong margins that you simply don't find in traditional select-service models,” said Williams. “Extended stay hotels can deliver on multiple fronts simultaneously."

New-builds dominate present and future pipelines. Data showed 83.4% of respondents are actively considering extended stay assets for new construction. According to the survey, 23% have ground-up projects underway, and over one-third favored new construction for future expansion. Nearly 63% of those surveyed are considering development of “one to two” new construction projects in the sector. Another 16.7% said they are exploring “three to five” new-build extended-stay assets, and 4.2% have plans for “six to 10” new extended-stay openings.

Nearly three-quarters of new projects will break ground within two years. New construction timelines for active projects showed that 74.9% of participants anticipate breaking ground within two years. Detailed metrics indicated 20.8% are on a fast track with scheduled starts within “six to 12 months.” More than one-third of respondents (33.3%) plan to start their projects within the next “12 to 24 months.”

Interest in conversions is beginning to accelerate. Survey metrics revealed that 20% of participants have conversion projects in their current pipelines.

Fig.3. Advantages layered throughout the extended stay model gave it an edge over traditional hotels.

Results indicated investor sentiment toward conversion versus new construction could see a major shift.

When asked about which types of extended-stay projects they would be more likely to pursue beyond their current pipeline, 36.7% of respondents ranked “ground-up new-builds” as their top choice. Although this confirmed continued interest in new development, the statistics predicted a significant change regarding sentiment on conversion.

The results showed 51.7% of participants would consider conversion as their pipeline driver. Of that total, 21.7% would be open to converting transient hotels to extended stay. Close to 17% would explore reflagging an existing extended-stay hotel, while 13.3% expressed interest in converting a non-hotel asset, such as office or residential, and 11.7% had no strong preference.

Typical conversion timelines target completion in under two years. The survey data confirmed similar time frames for new construction and conversions. Among readers considering conversions, 41.7% had “12-to-24-month” completion timelines. Much like investors who have new construction projects underway, an estimated 17% of respondents planned to finish conversions within “six to 12 months.” A similar percentage have conversions that will debut within six months. One-quarter of participants had no conversions planned.

"With new projects breaking ground within two years and conversion activity accelerating, we're witnessing a transformational period for extended stay hotels,” said Williams. “The investors moving now are positioning themselves to maximize returns as the extended-stay market continues to grow.”

Mary Scoviak is custom and design content director for Hotel Investment Today by Northstar.

The views and opinions expressed in this content do not necessarily reflect the opinions of Hotel Investment Today by Northstar or Northstar Travel Group and its affiliated companies.