Extended Stay Hotels Are Outperforming, Here’s Why
Once considered a niche segment of the lodging market, extended stay hotels are now outperforming their full-service and transient counterparts across occupancy, RevPAR, and resilience during economic cycles. In an environment where volatility is the norm and investors are seeking durable yield, this asset class is proving it can deliver.
Here’s what’s behind the surge and why many investors are doubling down on extended stay.
1. Occupancy and RevPAR Leadership Across Market Cycles
Extended stay hotels have consistently led the hospitality sector in both occupancy and revenue metrics, particularly during times of uncertainty. In 2024, extended stay hotels in many top submarkets like Novi, MI and Warne, NJ maintained occupancies above 75% even as transient hotel demand fluctuated.
For example:
Novi, MI (Residence Inn by Marriott): 80.4% occupancy, RevPAR of $116.19, with a RevPAR index 47% higher than its comp set.
Wayne, NJ (Home2 Suites by Hilton): 71.7% occupancy, ADR of $187.99, and RevPAR of $134.91. As a newer build with no deferred CapEx and located just 20 miles from Manhattan, the property benefits from strong demand drivers and high brand affinity.
These figures reflect the operational stability that extended stay offers, driven by longer guest stays, reduced turnover, and leaner operating models.
2. Longer Length of Stay = Lower Volatility, Higher Margins
Unlike traditional hotels, extended stay properties cater to project-based workers, corporate relocation guests, medical travelers, and other long-term guests. That translates into:
Fewer turnovers and housekeeping costs
Higher base occupancy
More predictable revenue streams
Hilton’s Home2 Suites and Marriott’s Residence Inn brands each report average stays of 4-7 nights, compared to 1.5-2 nights at typical transient hotels. These longer stays generate margin resilience even during downturns.
3. Brand Power and Operational Efficiency
Extended stay giants like Hilton and Marriott have invested heavily in purpose-built models that combine guest comfort with operational efficiency:
Home2 Suites by Hilton: Lean labor model, no F&B, and high guest satisfaction; 1,200+ locations open or in development globally.
Residence Inn by Marriott: Largest share of Marriott’s extended stay portfolio, strong loyalty via Bonvoy, and the highest RevPAR in the segment.
This brand infrastructure brings credibility for lenders and exit buyers; critical advantages for investors.
4. Supply Constraints and Replacement Cost Barriers
New supply in the extended stay segment remains extremely limited due to high construction costs and land scarcity. This gives existing properties pricing power.
Case in point:
In Wayne, NJ, new extended stay supply remains extremely limited, with high land and construction costs serving as natural barriers to entry. Rising FF&E prices and inflationary pressures have pushed replacement costs well above $325K/key, while current all-in acquisition basis remains closer to $260K/key. That delta makes stabilized, branded assets like this one increasingly valuable in a constrained market.
As such, the value of in-place, well-located extended stay hotels continues to appreciate relative to new development.
5. Demand Diversity Anchors Performance
Extended stay assets outperform because they tap into a broader demand base. Where full-service hotels rely heavily on business travel or events, extended stay properties serve:
Corporate relocation & training
Healthcare and insurance stays
Infrastructure and logistics workers
Government and military contracts
Leisure guests seeking kitchen access or multi-generational travel
Markets like Novi, MI and Wayne, NJ benefit from this mix:
Novi is surrounded by automotive R&D, healthcare, and showplace event traffic.
Brandon benefits from Tampa’s logistics corridor, regional healthcare hubs, and military demand from MacDill AFB.
6. Investor Appetite and Exit Liquidity
Institutional and private investors alike are seeking income-producing assets with recession resistance. Extended stay hotels, with their low CapEx profiles and lean cost structures, meet that criteria.
For instance:
Spark GHC’s projected total return on the Home2 Suites in Wayne, NJ is 23.4% over a 3-year hold, with a projected 3.12x equity multiple, driven by management transition, margin optimization, and long-term demand fundamentals in the NYC metro corridor
Extended stay hotels are now top targets for REIT roll-ups and private portfolio consolidations, creating strong exit optionality.
Extended stay hotels are no longer niche, they’re outperformers. With consistent demand, efficient operations, and strong brand infrastructure, they offer the rare combination of cash flow resilience and institutional scalability.
In a market where macro headwinds persist and development costs continue to climb, extended stay properties stand out as one of the most attractive risk-adjusted plays in hospitality.