The Extended Stay Hotel Play

Real estate investment opportunities can take many forms. Perhaps an investor is early to an opportunity, seeing upside on the horizon where others don’t. Or possibly an investor is able to move faster or tackle something sub-scale, a deal too small for bigger dealmakers.

And in some cases, an investor merely makes sense of an opportunity that doesn’t fall neatly into well-established categories. That is, in a nutshell, the case for extended-stay hotels (ESH), a real estate niche that looks a little bit like multifamily, a little bit like hospitality, and a little bit like something else entirely.

Despite not drawing broad institutional interest, the US extended stay hotel sector has attracted more than $62 billion in capital since 2021, almost half of all investment volume in the entire hospitality industry—and growing. And it’s producing cash-on-cash yields averaging above 8%, turning heads among yield-hungry real estate investors who have traditionally eschewed the category.

Today’s letter will explore the extended stay hotel world through the lens of two operators on the front lines of the sector. Specifically, we’ll tackle:

• Historical context and the case for extended stay hotels;
• The extended stay macro landscape;
• A deep dives into an extended stay hotel repositioning;

The sector outlook going forward.