Extended-Stay Demand Hits a Four-Year High as Supply Pipeline Thins

Key Points

• Extended-stay demand grew 6.2% year over year in May—the strongest since February 2022 and nearly 9x the 0.7% growth of comparable conventional hotels—lifting room revenue 7.9% and RevPAR 2.8%, with mid-price properties leading gains.
• New supply is decelerating (under 4% growth for three years and below the 5% long-term average projected for 2026) due to high interest rates and construction costs, setting up a demand-supply imbalance that could hand operators meaningful pricing power by 2027.
• The run appears structurally durable: occupancy sits at 76.7% (12+ points above conventional hotels), extended-stay continues drawing demand from the much larger traditional hotel universe, and workforce housing and displaced-resident needs add further support—while the upscale tier remains notably underbuilt.

Summary

U.S. extended-stay hotels posted their strongest demand growth in over four years in May, with demand rising 6.2% year over year—far outpacing the 0.7% gain for comparable conventional hotels. This marked the fourth consecutive month above the sector's 5% long-term demand average, and drove total room revenue up 7.9% and RevPAR up 2.8%, both ahead of the broader industry. Crucially, this acceleration is occurring as new construction slows, with supply growth staying at or below 4% for three straight years and 2026 additions expected under the 5% long-term average, constrained by high interest rates and construction costs. Analysts at The Highland Group characterize the trend as genuine acceleration rather than a statistical artifact, noting demand has risen in 41 of the last 42 months. The widening gap between rising demand and thinning supply signals a potential window of pricing power opening in 2027, with the upscale tier standing out as the most underbuilt segment.