In addition , through November 2022 , RevPAR for the sector was up 9.5 percent to 2019 , 1.9 percentage points better than the U . S . overall , according to STR / CoStar .
As such , investment volume into the sector over the past two years ( 2021-22 ) was greater than in the previous six years ( 2015- 20 ) combined , highlighted by Blackstone and Starwood Capital ’ s $ 6-billion acquisition of Extended Stay America in 2021 .
A SELECT CASE A key reason for the skyrocketing investor interest is that select [ 1 ] service hotels represent a defensive and attractive sector due to high yields and lower levels of volatility . Not only has the sector historically been more insulated during periods of economic disruption , but it has achieved higher and more consistent yields relative to other commercial real estate property types .
Prior to COVID , the sector regularly achieved GOP margin premiums of 10 percentage points relative to the broader U . S . hotel industry and , more importantly , remained profitable during the downturn due to its lean operating model , diverse customer base and increased average length of stay .
Historically , 70 percent of select-service and extended-stay investment volume has been concentrated in urban and suburban markets . In 2022 , these markets accounted for 57.8 percent of total volume , with regional / small-town markets filling in the rest , as investors capitalized on the changes in consumer demand trends , particularly as travelers increasingly choose to explore new , less-dense destinations . In addition , markets , including Los Angeles , Phoenix and Orange County , which historically have little select-service and extended-stay investment activity , saw a boom in liquidity this past year . business and leisure travelers , expect performance to accelerate even further in 2023 . While macroeconomic volatility and capital market dislocation is likely to suppress some short-term hotel investment activity , the select-service and extended-stay sector should be less impacted and driven by smaller check sizes and investors ’ ability to leverage existing relationships with local lenders .
With nearly $ 7 billion in securitized select-service hotel debt slated to mature over the next 16 months and rising interest rates not expected to subside , well-capitalized buyers will have an opportunity to acquire quality select-service and extended-stay assets in the coming year .
As traveler preferences continue to evolve , expect markets that cater to a wide audience to see not only growth in demand , but also increased investment activity as these markets present an opportunity for investors to diversify their portfolios and mitigate risk .
Urban markets , including New York City and Washington , D . C ., for example , may offer an opportunity to acquire quality select [ 1 ] service and extended-stay assets at a relative discount , given their slower RevPAR recovery . Expect these cities to grow over the long [ 1 ] term as group demand and international travel returns .
EXTENSIVE CASE Extended-stay hotels , a subsector of the broader select-service sector , have transformed over the past two years in response to the changing workforce and the rapid decline in apartment rental affordability . The segment is now attracting more budget-conscious leisure travelers .
As demand for extended-stay hotels has risen , so , too , has supply . Extended-stay hotels currently represent 9.6 percent of the total U . S . hotel supply , an increase of 3.1 percentage points relative to 2012 , according to the STR Census . There are currently 38,000 extended-stay rooms under construction ( 24 % of the total U . S . pipeline ) and a deluge of new brands entering the space , including Extended Stay America Select Suites , which launched in 2022 , and Echo Suites by Wyndham and Apartments by Marriott Bonvoy , being introduced to the market this year .
LOOKING AHEAD With a broad demand-base and product that caters to both
Zach Demuth
Mar / Apr 2023 hotelsmag . com 69