While 2025 was a challenging year for the hotel industry as a whole, the extended-stay market has generally outperformed other segments, according to the industry experts.
“Extended-stay hotel RevPAR has declined for eight consecutive months but the loss has been less than corresponding classes of all hotels especially at lower price points,” said Mark Skinner, partner at the Highland Group, a consulting firm tracking the extended-stay hotel market.
Extended-stay hotel supply growth accelerated during 2025, according to the Highland Group data. The 5.1 percent increase reported in the fourth quarter 2025 was the first quarterly gain to exceed the long-term annual average increase since 2019, if the pandemic related distortions in 2020 and 2021 are excluded. Consequently, except during 2020, extended-stay hotel average occupancy sunk to its lowest fourth quarter level since 2013.
The moderation and distribution of extended-stay hotel supply growth, as well as the performance of the overall hotel industry will be key factors in the timing of a return to positive change in total extended-stay hotel RevPAR, reports the Highland Group.
Excluding upper upscale and luxury segments, which have negligible extended-stay room supply, extended-stay hotels had a good fourth quarter 2025 compared to the overall hotel industry which has downturned since April, according to data from the Highland Group. Coming off a very strong performance in the fourth quarter 2024, extended-stay hotels reported increases in demand and room revenues in Q4 2025; both declined for the overall hotel industry according to STR/CoStar data. Extended-stay hotels recorded a relative gain in occupancy which was 14 percentage points above the overall hotel industry in Q4 2025. Comparative average daily rate losses were the same over the period but extended-stay hotels endured a slightly lower fall in RevPAR.
“Extended-stay hotel RevPAR is unlikely to show positive change until the second quarter of this year at the earliest, after which much will depend on the direction of the overall hotel industry,” Skinner surmised.
Kevin Davis, Americas CEO at JLL Hotels & Hospitality, remains long‑term bullish on the market but near‑term cautious. However, he sees short‑term structural and fundamental challenges that the sector is working through.
The market performance is being hit by the same K-shaped economy that the rest of the hotel industry is feeling: Luxury is outperforming while further down the chain scale are underperforming with negative RevPAR growth. “A lot of the consumers that frequent those properties are, unfortunately under just economic facing economic challenges, and are not traveling as much,” he said. “That is having an impact on performance of many extended stay assets that play in those various chain scales.”
Extended stay has improved its familiarity and appeal among the traveling public in recent years. More travelers understand the beneficial comforts and flexibility the segment offers – whether that’s for solo travel, with friends or family, or even with their pets, said Justin Alexander, vice president of global brand management, Holiday Inn Express, Staybridge Suites and Candlewood Suites, IHG Hotels & Resorts. "As a result, we expect a stronger shift away from transient hotels and short-term rentals and towards true suites properties for short- and long-term bookings," he continued. "This gravitation is particularly notable in urban and suburban markets, and potentially beneficial as more travelers consider suites brands for stays against the backdrop of tentpole cultural moments such as sporting events, conventions or concerts."
Growth Trajectory
Extended-stay continues to be one of the most resilient and dynamic segments in lodging, said Mike Mueller, president, Extended Stay Brand Operations, Wyndham Hotels & Resorts. “Across the industry, it’s outpaced traditional transient hotels on key metrics like occupancy and RevPAR, and economy extended-stay in particular, has remained a powerhouse for owners. For Wyndham, sustained demand is supported by a healthy mix of long-term project-based stays and everyday needs in both primary and secondary markets.”
BWH Hotels’ Brad LeBlanc, chief development officer of North America, believes the forecast for extended stay also remains exceptionally bright.
“What we’re seeing now is an inflection point,” he said. “Development in key industries, including energy, health, tech and essential services, continue to produce long-term workforce growth. These guests are interested in reliable, efficient, apartment-like accommodations. The demand curve is strong and shows no sign of slowing this year.”
The extended-stay market remains strong for midscale and economy brands who focus on delivering value to long-term guests, believes Mark Williams, managing director of franchise development for Extended Stay America. “While new supply is entering the market, demand from construction workers, traveling nurses, military and government will continue to provide steady occupancy, especially in secondary and tertiary markets where we're less exposed to oversupply,” he said.
Demand fundamentals remain highly favorable for the market, according to Matt McElhare, vice president of Extended Stay Brand Management at Choice Hotels International. Workforce mobility, infrastructure investment, relocation activity and the rise of hybrid and project‑based employment continue to fuel long‑stay needs across U.S. markets. “Developers are responding with extended stay brands now representing more than one‑third of all U.S. hotel projects under construction and pipeline growth outpacing most other chain scales,” he continued. “At the same time, new brand entrants are creating a more competitive and segmented landscape with speed to market becoming increasingly critical.”
Ryan Rivett, president and CEO of My Place Hotels, believes 2026 will continue to resemble a bit of a sorting and maturation phase for the segment. Demand fundamentals remain strong, but the distinction between value-driven and experience-driven extended stay demand is testing old ways of thinking and newly launched platforms with equilateral intensity. “Brands and owners that execute cleanly and within their lane will likely maintain greater stability,” he said. “The surplus of new brands entering the space is pushing the market into a more competitive, bifurcated landscape where not all supply will perform equally.
“Bottom line, this year the extended-stay hotel market is shifting out of a ‘wild west’ like expansion to a more deliberate performance differentiation. Demand remains healthy, but success will depend less on simply being ‘extended-stay’ and more on market selection, cost control, brand clarity and operator execution. The segment is not cooling off because travelers increasingly appreciate the in-room amenities which allow them to better disconnect from their travel load…but it is maturing.
Hilton expects the extended-stay market to remain active and competitive because demand continues to be steady across many use cases. “We are seeing established brands grow and more brands enter the space, which reflects broad confidence in extended stay as a core part of the lodging industry rather than a niche segment,” said Talene Staab, brand leader for Home2 Suites by Hilton.
“That level of interest is healthy, but it also reinforces the importance of being clear about brand purpose,” she continued. “As more products come online across different price points, guests and owners will gravitate toward brands that are intentional about who they serve and how they deliver value.”
Red Roof’s Matthew Hostetler, chief development officer, anticipates hoteliers will focus on the fundamentals more, doubling down on smart construction and rethinking public areas within extended stay. “Economy extended stay, in particular, will continue its focus on delivering the highest-quality, basic essentials to control rates as best as possible,” he said. “However, we anticipate that technology adoption will increase as new tools emerge that enable leaner, more efficient operations.”
Market Challenges
The marketplace is more competitive with new brands entering at a rapid pace, warned Alexander. "This higher volume makes it more important for owners and properties to differentiate themselves and capture their share," he said. "The ones who can best capitalize on digital merchandising, booking clarity, cost discipline and value proposition positioning will be best positioned to stand out from the crowd."
Even with strong demand, profitability requires discipline, LeBlanc stated. Key challenges include labor, technology integration, expense control and building/design considerations.
Extended stay can offer strong margins and operating efficiencies, but only when the model is executed with discipline, Staab agreed. “As the segment grows and competition increases, it becomes more important for owners and operators to stay focused on the core extended stay guest,” she said.
As with the rest of the hotel industry, labor challenges are impacting the extended-stay market as well. Wage pressures compounded by constraints on finding enough qualified employees remains a challenge. “This is exacerbated by staff turnover with added expenses to train, retrain, etc.,” McElhare said. “Temporary labor is a bridge solution to staffing but can be cost prohibitive.”
One of the biggest challenges during a hotel’s early ramp-up is relying on short-term demand that doesn’t align with the extended-stay model, believes Mueller. New properties often lean on OTA bookings to drive occupancy, but these tend to bring shorter stays, lower ADR and higher operational demands. “Frequent housekeeping and increased labor quickly eat into margins in a model designed for efficiency with fewer full cleans,” he said.
Rivett agrees that balancing short and long terms stays to maintain efficiencies while maximizing yield is critically important and fundamentally challenging. “Balancing service and guest experience with CpOR efficiencies is challenging in any category of hotel, but, with extended stay the ‘lighter touch’ model often doesn’t mix well with the guest’s expectations or utilization of the room,” he said. “Further up the funnel is consideration for guest quality in balance with market pricing for longer stays. Most extended stay platforms are ill-equipped to maximize balance whether because of brand standards of operations, chain-level pricing constraints, or operational systems and technology.”
Construction costs have gone up, but there is a ceiling on achievable room rates in many extended-stay segments, warns Davis. Managing basis is an important element for a lot of owners. He notes projects that used to pencil at $90k to $100k per key are now drifting up to $115k to $135k per key, which only works if rates can keep up.
"That's all well and good if you can get the rate, but there is a rate cliff that you will fall off of," Davis continued. "And so again, it's as the cost to build those things goes up, one has to be super careful in investing."
Williams believes higher construction costs have slowed new development, but strong conversion opportunities exist for operators willing to reposition existing transient assets in markets with strong demand for long-term accommodations.
Hostetler sees that economy hotels are facing increased competition from other segments. “Our strategy is to keep costs low for guests as much as possible, but that idea can be challenged as we see more competition from full-service and midscale hotels due to increased development,” he said. “At the economy level, we frequently weigh the pros and cons of increasing access to amenities or services at the cost of raising rates, and typically, we err on the side of reducing costs for our franchisees and guests.”