There are more than 200 select service hotel brands operating in the U.S., with 10 new brands launched since the pandemic, according to JLL research.
The demand for select service hotels in the U.S. is expected to reach a milestone of one billion room nights this year, which surpasses the 22-year average by 18 percent, said Katen Patel, managing director, JLL. Select service room supply has increased by 190 percent since 1988, compared to a 130 percent increase for full-service room supply.
Currently, with high construction costs and lending restraints, there has been a slowdown in new-build development and more appetite from brands to consider conversions and other partnerships, said Patel. Cost efficiency and speed-to-market are behind the emergence of select service brands that focus solely on conversions: Sonesta’s Signature Inn; Spark by Hilton; Marriott’s Project Mid-T; Choice’s Park Inn by Radisson relaunch; and IHG’s Garner. This trend is driven by the need to drive net unit growth, a key measure of shareholder value.
“From an investment sales standpoint, select service is also the most liquid segment, especially in this challenging environment. At JLL today, a lot of our transactions are select service, and buyer demand for this product type continues to be strong and grow,” Patel added.
With such a wide choice of select service brands, how do owners and investors choose one brand over another?
“Brand standards are rooted in guest need, but there’s got to be margin for the owner and the brands that are successful marry those two things up," said Brian Quinn, chief development officer, Sonesta Hotels. "All of us have quality assurance and property improvement plans and different ways to encourage and please the owner.”
Davonne Reaves, founder of The Vonne Group and crowdfunding platform Vesterr, is the owner of three hotels: two Hiltons and an IHG property. “As an owner, I consider how I will be treated as a franchisee in both the acquisition and development phases," she said. "This is a relationship-driven business, and I take that into account. Fees are always a consideration. In a competitive market with many brands vying for the same space, I need to know what will make my project successful, so I look at factors like reservation systems and SEO.”
Read the full article on our sister site, Hospitality Investor.