The extended-stay sector saw great success out of the pandemic, with many companies launching new brands in the space to take advantage of its upward trajectory. Five years removed from those days, the sector is starting to normalize as new supply consistently comes in.
Colin Sherman, director of hospitality market analytics for CoStar Group in Texas and the U.S. South, joined the Hotel News Now podcast to discuss his takeaways from last week's Extended Stay Hotel Forum in Atlanta.
In the first quarter of 2025, U.S. extended-stay room supply was up 4% year over year. Increased supply coupled with a year-over-year decline in occupancy from 74% to 70% led to some revenue per available room pressure in the quarter, Sherman said.
RevPAR averaged $84 in the first quarter, a 1% increase over last year. In March, it was only up 0.2%.
"There's the added pressure of supply, but also, just in general, demand as well, so I can't say it's fully supply," he said. "There's been some normalcy coming back to the extended-stay sector, as with traditional hotels, that we're seeing. That's also a major component of that RevPAR downgrade."
Not unlike the rest of the hotel industry, the new presidential administration's decisions are adding some uncertainty in the extended-stay space. Cuts from the Department of Government Efficiency have led to uncertainty on the follow through of initiatives passed during the previous administration.
A panelist at the forum said the Infrastructure Investment and Jobs Act's website has stopped updating since January. The $1.2 trillion infrastructure investment was created to renovate transportation routes, such as highways and railways, while also adding funding for broadband access, clean water and electric grid renewal. It added jobs around the country, boosting demand in the extended-stay space for workers taking on projects for weeks at a time.
"I think that gives you a pretty good indication of where things stand and where the uncertainty is, at least in that regard," he said.
While it's hard to pin economic uncertainty on the somewhat lackluster first-quarter results in the space right now, it adds another factor to consider, Sherman said.
"It's really hard to say, 'Oh, this uncertainty is causing all of this softness,' because we don't really know. It's that risk," he said. "When you start adding other factors to an already uncertain environment ... it just makes it that much more uncertain."
For more from the interview with CoStar Group's Colin Sherman, listen to the podcast embedded above.