What's Happening?
Hyatt Hotels Corp. is actively expanding its presence in U.S. regional markets by adding select-service and extended-stay hotels. This strategic move comes as the overall growth of hotel supply remains below pre-2020 levels. The company's September 30
release highlighted 15 new U.S. hotels across 10 states, with at least seven of these properties offering kitchens or kitchenettes, catering to extended-stay guests. This expansion is driven by lower development costs associated with these formats, which makes them more viable in the current economic climate where higher construction and financing costs are slowing down other types of projects. States like Florida, Texas, New York, North Carolina, and California are seeing significant development, aligning with findings from HVS's 2026 U.S. Hotel Development Cost Survey. Hyatt's brands, including Hyatt Studios and Hyatt House, are contributing meaningfully to new projects, with a focus on lowering costs and supporting conversions.
Why It's Important?
This expansion by Hyatt is significant for the U.S. hospitality industry as it reflects a broader trend towards more cost-effective and flexible hotel formats. The emphasis on select-service and extended-stay properties addresses evolving traveler needs, particularly for those requiring longer stays or more amenities like in-room kitchens. For developers and investors, the lower median development costs—ranging from $170,000 to $200,000 per room for limited-service, midscale extended-stay, and select-service hotels—present a more attractive investment opportunity compared to full-service hotels, which can cost up to $467,000 per room. This shift could lead to increased competition in regional markets, potentially benefiting consumers with more diverse and affordable lodging options. However, the performance of these new hotels will heavily depend on local market dynamics and the extent of existing competition, as noted by Lodging Econometrics (LE) and HVS. Slower overall supply growth in the industry could support occupancy and pricing for existing owners in areas with limited competition, but investors should be cautious about extending 2026 RevPAR growth projections into later years.
What's Next?
The U.S. hotel industry is expected to see an increase in supply growth later in the decade, with HVS forecasting a rise through 2029, given that hotel development typically takes three to five years. LE projects Phoenix to lead U.S. openings in 2026, followed by Dallas in 2027, indicating specific regional hotspots for new developments. A record 1,567 conversions are also anticipated, which could add competing rooms without the extensive cost and timeline of ground-up construction. Developers will need to meticulously map competing projects, compare new-build costs with conversion opportunities, and assess performance against potentially slower demand growth. While CoStar and Tourism Economics forecast a 4.4% U.S. RevPAR growth for 2026, partly due to events like the FIFA World Cup and America’s 250th anniversary, projects entering development now might open after these demand drivers have passed. Well-capitalized developers may use the current period of constrained development to focus on feasibility, entitlements, and design.
Beyond the Headlines
The strategic shift towards select-service and extended-stay hotels by major players like Hyatt highlights a deeper adaptation within the hospitality sector to economic pressures and changing consumer preferences. This trend could lead to a more decentralized hotel landscape, with increased development in secondary and tertiary markets rather than solely in major metropolitan areas. The focus on cost-efficiency in development also raises questions about the long-term impact on architectural innovation and the guest experience, as developers prioritize functionality and affordability. Furthermore, the rise in hotel conversions suggests a more sustainable approach to growth, repurposing existing structures rather than always building anew, which could have environmental and urban planning implications. The success of these new properties will not only be measured by financial returns but also by their ability to integrate into local communities and cater to a diverse range of travelers, from business professionals on extended assignments to families seeking more home-like amenities.
