Hotel, finance experts see bright future for extended stay

CORAL GABLES, Florida — Hotel Investment Today gathered leading hotel and finance executives for an exclusive April 30, 2025, roundtable here to discuss the current and future state of the extended-stay sector. Their takeaway: Extended stay has “a lot of expanding upside”.

As the panelists noted, the same fundamentals that made this concept "the industry's most lucrative business model" for more than 40 years still offer a compelling value proposition. For 2025, the combination of its efficient operations, lean staffing requirements, and stable revenue streams will bring a total investment of $63 billion to this resilient segment, according to The Highland Group.

But there's more to explore about the upside of extended stay — from new select service and midscale brands tailored to subsets within the segment's targeted long-stay market to quicker ramp-ups, streamlined conversions, and easier access to capital.

Panelists gave owners a best-practice walkthrough on the opportunities ahead. Some leverage emerging market trends, but the vast majority dig deeper into the business model to unlock steady profit streams.

Guiding owners through the changes shaping this robust sector were:
• Conner Donnini, managing director, Access Point Financial
• Eric Jacobs, chief global growth officer, Aimbridge Hospitality
• Rahul Patel, vice chairman ‒ AAHOA
• David Perrin, senior vice president, Hunter Hotel Advisors
• Marco Roca, CEO – partner, Reveille Hospitality
• Mark Williams, managing director franchise development, Extended Stay America
• Bryan Younge, managing partner, Horwath HTL

Jeff Higley, president, The BHN Group by Northstar, moderated the hour-long discussion, which was sponsored by Extended Stay America (ESA).

New money, new growth

Extended stay's lean operating model and strong margin opportunities are attracting fresh investor interest to the space, especially as labor continues to be an issue, according to Perrin. So do quick-turnaround conversions that can be as short as three to four months and new-builds that go from shovel down to opening day in roughly 12 months.

Patel added extended stay's fast stabilization to the list of investor upsides. Owners could hit their projections and performance objectives in year one or year two, he said. "Getting occupancy up and running that fast compared to a traditional hotel brings comfort to owners," Patel pointed out.

But it's also getting attention from seasoned CRE specialists. "Demand for this product is strong and very liquid — more than it is for other asset classes in other segments," said Perrin. "I've been super-interested in just the diversity of capital that's interested in the space. It starts with the institutional level — with investors such as Blackstone, Starwood, and Brookfield," Perrin said. "We get calls every week from traditional hotel investors who come to us for traditional hotel assets. But when they hear they can run a hotel with eight to 10 employees, they're saying, 'That sounds great. Let's do that.'"

Perrin sees an influx of non-hotel investors as well, particularly from the construction, retail, and multi-family sectors. "The extended-stay hotel companies have done a great job of simplifying construction to the point where investors can replicate it over and over. They can just jump in and understand the model," he said. "Then, there's the size of the check. We're selling everything from $2 million or $5 million to $20 million, and that demand runs up and down the capital stack."

Conversions dominate; midscale moves new-build needle

New construction is still an option in the extended-stay sector but not the major growth driver. Conversions still dominate the pipeline. Donnini explained why.

"I think it has been super challenging to get [new construction] done across all segments. I think extended stays are tough, in general, because I feel like the model is a bit tighter. So, if your costs come up too much, the whole investment tracks too close. We've found that challenging," he said.

He continued, "That said, we've aggressively pursued more than a few deals that have gotten done with local banks, especially at that check size, that get really efficient financing. So, we have found projects that are still getting done in this market."

Williams pointed out that "there's a lot of interest" in economy brands, but, "The construction numbers make it tough to get an economy box out of the ground right now. If you have a $12 million or $14 million project, the ADR is not going to be there, and achieving the right flow is going to be a challenge," he said.

Midscale "is the place people are playing and the place where lenders are most comfortable. New brands like ESA's Premier Suites are coming into mid-market extended stay, so there's a lot of focus on that [on the lender side]. And, too, the midscale check size seems to be the right size for lenders," added Jacobs.

The move into midscale opens wider market targets in the medical, military, and university long-stay travel community. These sectors give owners the dual benefits of building higher-rate businesses while extending the length-of-stay window to 30-to-45 days in some cases and six months in others, Williams said.

2025's top trend: increasing length of stay

Investors have no trouble adhering to the cost-effective construction or conversion template. But, if they want to succeed, they need to bring that same buy-in to the business model, said Williams.

"We get transient hotel owners who think, 'This is easy. I can operate this.' Then, they mess it up by trying to operate the property as a transient hotel with in-room kitchens. That's not the business model," said Williams.

Trying to fill an extended-stay hotel with transient bookings, whether to drive rate over a holiday or for a special event or to fill a room for a night or two, undermines the lean labor model as more staff is needed for daily check-in/check-out and housekeeping. It also cuts into the "quality" of revenue.

"In some ways, the industry lost its way, particularly coming out of the pandemic. It became more about driving rate and RevPAR rather than keeping to extended stay's long-standing focus on profitable RevPAR," said Jacobs.

So, while it may be tempting to embrace transient hotel models as opportunities arise, Jacobs' message is: "Resist."

"Some of our extended-stay owners had GMs who were saying, 'Taylor's [Swift] is coming to town. Everybody's jumping on board. We can charge $800 for three nights.' But getting those three nights' worth of transient business instead of being disciplined about only booking core extended stays of seven nights or more will break the business model for the next 60 days," Jacobs said. "You'll displace all this long-term business for a three-night event. And we tell you what one owner told me, 'I'll fire my GM as soon as I see him post up a three-night length of stay at $800 a night.'"

He added that revenue management systems focus on nightly revenue rather than overall asset profitability. He sees the 14- to 20-night stay as the sweet spot for cash flow, as does Patel.

Williams pointed out that sector nuances the length-of-stay discussion. "It's pretty distinct across our three brands," he said. "For ESA's Select Suites, 30-plus nights is about 70% of bookings. For ESA's Suites, it's about 50% to 59%. For ESA's Premier Suites, it's at or below 50%."

The guest profile also plays a role. In Williams' experience, visiting doctors and traveling nurses tend toward 30-45-day stays, while military guests are more likely to spend six months at the hotel.

Discipline and service are keywords for success

Going forward, implementing a service culture could be one of the hottest trends in extended stay. According to the roundtable participants, training team members to interact with guests in a way that makes them feel welcome and important and at home can be key to driving repeat business.

"It's about moving people in, not checking them in," said Younge, explaining how the service goals of extended-stay properties differ from those of their transient peers. "As an example, when my son was going through cancer treatment [he's in remission now], one of the other families we met was staying at an ESA property. They'd be there for five days and then gone for five days. They didn't pay for the room when they weren't there, but the manager still made sure it wasn't sold and their decorations stayed up." He added that in an uncertain economy, extended-stay properties that can master customer service are the ones that will thrive."

Roca expanded on that. "We're not saying you need to hire additional staff to make that happen. I can run sandwich shops with 20 people, and yet 11 can run a 120-room ESA property. However, they have to be the right 11 people and be trained in the extended-stay model. Quality over quantity can be a differentiator," said Roca.

Donnini reiterated the importance of that clear focus for overall sector success. "It's a hot segment. A lot of capital is still flowing in here, and it's important to have the discipline to make sure that models run appropriately," he said.

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.