What’s Next for Select-Service? Our Predictions for 2026 and Beyond
Select-service hotels have been one of the most resilient asset classes in commercial real estate for more than a decade. Even through inflation, uneven recovery patterns, shifting corporate travel, and persistent labor challenges, this segment has consistently delivered stronger margins, steadier demand, and higher risk-adjusted returns than many of its full-service counterparts.
As we approach 2026, the fundamentals behind that performance are shifting, not weakening. Select-service is entering a new era defined by smarter operations, stronger rate leadership, and clearer alignment with traveler preferences. Below are our predictions for what comes next, and why this asset class is positioned to outperform again in the next cycle.
1. Rate Discipline Will Drive Margin Expansion
The industry has entered the first true period of sustained rate leadership in more than 15 years. During 2023-2025, RevPAR growth was driven primarily by ADR, not occupancy, a dynamic that select-service brands have managed especially well.
What to expect in 2026
Operators will continue holding rate, even if occupancy normalizes.
Brand families like Marriott, Hilton, and IHG will reinforce pricing discipline through improved forecasting tech and tighter revenue-management guardrails.
Markets with diversified demand drivers (corporate, healthcare, light industrial, logistics) will see the strongest ADR retention.
For investors, this means expanding margins even in flat occupancy environments.
2. Extended-Stay Will Continue Its Outperformance
Extended-stay remains the top-performing category in hospitality, posting some of the industry’s highest occupancy and most durable RevPAR through every cycle.
Why this will accelerate
Corporate travel behavior has permanently changed; fewer trips, longer stays, more project-based travel.
Travel-nursing, sports, training programs, and rotating workforce segments remain stable demand anchors.
On the ownership side, extended-stay requires lower operating costs and fewer labor hours, unlocking stronger flow-through.
Prediction
By 2027, extended-stay will make up more than one-third of select-service investment activity in secondary and tertiary markets.
3. Labor Pressures Will Push Operators Toward Smarter Not Bigger
Labor shortages aren’t going away, especially as Gen Z increasingly prefers flexible (gig-style) work instead of traditional hourly service jobs.
Operational shifts coming
Smaller teams empowered with better tools: automated tasking, dynamic housekeeping, predictive maintenance.
AI-enabled monitoring and analytics: reducing preventable costs, improving response times, and improving guest experience without increasing headcount.
Cross-trained staff models: more generalists, fewer siloed roles.
Select-service is uniquely positioned to capitalize because its operational footprint is already lean.
4. Midscale & Upper-Midscale Will Attract the Most Capital
Interest rates remain the biggest variable heading into 2026. But even in a higher-rate world, the economics of midscale and upper-midscale assets simply make more sense.
Investment themes
Lower CapEx exposure and predictable PIPs
Wider buyer pools
Faster lease-up and absorption compared to multifamily
Lower volatility tied to group/convention travel
Stronger alignment with America’s “new middle market”
Secondary metros with strong industrial growth (Columbus, Indianapolis, Detroit, Milwaukee, Kansas City) will absorb a significant share of new investment.
5. Owners Will Prioritize Efficiency Over Amenity Arms Races
Guest expectations shifted again in 2024-2025. Travelers want consistency, speed, cleanliness, and value. They’re less concerned with features that don’t materially improve their stay.
Expect operators to focus on:
Smarter room design (fewer failure points)
Streamlined breakfast programs
Energy-efficient equipment that reduces OpEx
Automated check-in/check-out experiences
Tech that supports predictability rather than novelty
The result: better NOI without unnecessary amenity spending.
6. Select-Service Will Become the Preferred Hedge Against Volatility
Volatility is now part of normal market conditions. not the exception.
Between geopolitical uncertainty, rate fluctuations, and shifting consumer preferences, investors are choosing assets with stability built in.
Why select-service wins here
Wide and durable demand base
Lower operating leverage
Faster paths to stabilization
Strong brand distribution systems
Less exposure to group/group-cancellation cycles
More predictable labor models
By 2026, select-service is expected to remain the strongest hospitality category for risk-adjusted returns.
7. Operators Will Lean Heavily Into Market Specialization
National strategies are giving way to regional specializations. Operators that know their markets deeply, street-by-street, demand driver by demand driver, are outperforming national averages.
What this looks like in practice
Stronger relationships with local employers and travel teams
More accurate rate forecasting
Better staffing pipelines
Higher review scores tied to consistency and local knowledge
Faster recovery after disruptions
Select-service performance is becoming hyper-local, and the owners who understand this will dominate the next cycle.
8. Clean Balance Sheets Will Become a Competitive Advantage
With rising insurance costs, compressing margins for over-levered operators, and variable financing conditions, balance-sheet health will separate strong operators from the rest.
Our prediction
Buyers with:
stabilized portfolios
disciplined CapEx
and proven revenue-management performance
…will win the majority of deals as distressed assets quietly enter the market in 2026–2027.
This period will create some of the best buying opportunities since 2012, especially in select-service.
Select-Service Isn’t Just Resilient, It’s Redefining the Market
The next cycle isn’t about reinventing hospitality. It’s about getting sharper, more efficient, and more aligned with how today’s travelers and corporate partners actually move.
Select-service sits at the center of that evolution.
The operators who win in 2026 and beyond will be those who:
maintain pricing discipline
implement smarter, leaner operations
focus on extended-stay and midscale demand
invest in markets with real, diversified economic engines
and prioritize long-term portfolio health over short-term wins
This segment has always been steady. Now, it’s becoming strategic.
Sources
STR / CoStar Monthly Hotel Review (2023-2025)
CBRE Hotel Horizons Forecast (2024-2025)
U.S. Travel Association Business Travel Tracker
JLL Select-Service & Extended-Stay Insights Report
McKinsey Travel & Hospitality Consumer Sentiment Study
AHLA State of the Hotel Industry Report (2024-2025)