Select-Service vs. Full-Service: Where’s the Smarter Bet in 2025?
When it comes to hospitality investment in 2025, one question keeps coming up:
Should you bet on select-service or full-service hotels?
It’s not just a matter of preference, it’s a matter of performance, risk tolerance, capital availability, and strategic alignment. At Spark GHC, we work across both segments, but we’ve seen the tides shift. Select-service and extended-stay properties have surged in investor interest, delivering efficiency, scale, and resilience during uncertain cycles.
So what’s really driving the divide? And where does the data point for smart capital deployment in the year ahead?
Let’s break it down.
1. Revenue Performance and Margin Profiles Tell Two Different Stories
Select-Service and Extended-Stay (SS/ES) hotels hit record highs in 2024. According to STR, extended-stay RevPAR rose to $78, 14% above 2019 levels, with demand up 232,000 room nights year-over-year.¹
Gross Operating Profit (GOP) margins in select-service properties averaged around 26%, compared to 15% for full-service hotels, thanks to leaner labor and F&B costs.²
Meanwhile, EBITDA per available room (EBITDA/PAR) in select-service has outpaced inflation, growing 23% CAGR since 2020, while CPI hovered around 5%.³
Full-service hotels, especially luxury and upper-upscale, have seen gains in ADR and group RevPAR, but margins remain under pressure. CBRE projects that NOI margins will decline by ~60 basis points in 2025 as operating costs rise faster than revenue.⁴
Investor takeaway: Select-service delivers margin durability. Full-service has upside, but it comes with volatility and higher fixed costs.
2. Operational Complexity and Cost Control Favor Select-Service
Select-service properties are operationally streamlined by design. Fewer F&B outlets, smaller footprints, and lower staffing ratios allow for more efficient operations, particularly during labor shortages or inflationary periods.
In contrast, full-service hotels carry higher exposure to:
Labor and benefits
Food & beverage costs
Maintenance and utilities
Property taxes and insurance
According to PwC, these cost categories are likely to outpace revenue growth in the full-service segment through 2025.⁵
Smart capital flows toward simplicity, especially when inflation compresses margins across the board.
3. Brand Consolidation and Development Trends Show Clear Momentum
Brand expansion in the select-service and extended-stay category is accelerating. In fact:
JLL reports that 214 SS/ES brands now make up 74% of total supply, compared to just 184 brands in 2000.⁶
Marriott, Hilton, and IHG continue to push into this space with conversions, M&A, and franchise-driven growth strategies.⁷
New supply in SS/ES has slowed to below 2.6%, the historical average, creating room for ADR growth and occupancy stability.⁸
Full-service hotel development, on the other hand, remains sluggish due to:
Higher construction and FF&E costs
Stricter lending terms
Greater entitlement and permitting friction
4. Capital Access and Investment Activity Tell a Story of Scale
Select-service assets are transacting more frequently and more accessibly. In 2024:
$62.6B in liquidity was generated from SS/ES deals; almost half of all U.S. hotel investment activity.⁹
Average deal size: ~$17M, well-suited to private equity, syndicates, and family offices.
Loan originations for these assets hit $21.3B in 2024, as a wider range of lenders (banks, insurance firms, debt funds, CMBS) showed interest.¹⁰
Full-service assets tend to command larger capex and higher risk-adjusted returns, but often require institutional capital, deeper reserves, and longer timelines.
5. Demand Trends Continue to Favor the Select-Service Format
The rise of “bleisure” travel, hybrid work, and longer average stays have made extended-stay formats especially attractive:
Business/leisure hybrids prefer amenities like kitchenettes, free breakfast, and lower ADRs.
Travelers and corporations continue shifting toward efficiency-first lodging with reliable brand standards and minimal frills.
Full-service hotels still dominate in event-driven markets and major metros, especially in the luxury category. But the economy and midscale full-service tiers are underperforming, lagging in ADR and occupancy as consumers cut discretionary travel.¹¹
So, Where’s the Smarter Bet in 2025?
Efficiency Is the Edge
In a high-cost, high-rate environment, efficiency becomes a superpower. Select-service and extended-stay hotels are winning not just because they’re affordable to build or operate, but because they’re aligned with modern traveler behavior, capital market preferences, and margin stability.
We continue to see value in both segments, but for most investors in 2025, select-service remains the more agile, resilient, and scalable bet.
Sources:
STR 2025 Outlook Report
CBRE Hotels Research 2024
PwC Hospitality Directions, Spring 2025
CBRE U.S. Hotel Forecast, May 2025
JLL Hotel Investment Highlights, Q2 2025
Lodging Econometrics Pipeline Trends 2024
Hotel News Now / CoStar 2025 Brand Rankings
CBRE Construction Cost Trends 2024
Real Capital Analytics (MSCI)
Trepp Hotel Lending Report 2024
Kalibri Labs, April 2025