Many variables at the market level play into the decision to develop a full-service or select-service hotel.

The first step is understanding market demographics and opportunities through data, native knowledge and guidance from brand partners, Brad Rahinsky, president and CEO of development and management company Hotel Equities, said during the "Future of Select and Full Service" panel at the Hunter Hotel Investment Conference.

"We can't miss there. That's such a mission-critical component of identifying an opportunity," he said. "Grab as much [data] as you can before you start to put together the concept of whether you go full service or select service. Ultimately, the data will help drive that decision."

Beau Benton, president of management and development company LBA Hospitality, said local market knowledge is the key to understanding what the demand drivers are.

In a market surrounded by restaurants, a hotel developer needs to know how to encourage better service than what the local restaurants already offer, he said.

Additionally, how much weddings or group business the market draws should be considered, he said. Ultimately, a developer must decide whether there's value in investing in the additional development costs of a full-service hotel.

In addition to lower development costs, an upside to select service is flexibility, he added.

"Just because it's limited service doesn't mean it has to be limited imagination in what you can do," he said.

LBA manages a Courtyard By Marriott hotel in Hilton Head Island, South Carolina, which has all of the standard things a guest would recognize in a Courtyard — except it's fully customized and includes a rooftop bar, pool and cabana area, Benton said.

Those offerings are not typical for a select-service hotel, he said.

"Because of the type of average daily rate that you can demand in a Hilton Head Island market, that was the right choice there," he said.

LBA's Fairfield Inn and Suites in Pasadena, Texas, follows a prototypical look without any extras because that's what the market needed, he said.

"You can really go with a straight prototypical property [that] matches what the ADR and demand is for that market," he said.

In Clearwater, Florida, where most of the market is dominated by full-service hotels, LBA Hospitality found success with a 255-room dual branded Residence Inn and Springhill Suites.

Despite there being a full-service hotel across the street, LBA has beat it "day in and day out with a Marriott limited-service product," Benton said.

Rahinsky said Hotel Equities is selective about where it develops hotels, considering both the market and available land. The firm's portfolio is largely dispersed across top 25 metropolitan statistical areas, where hotels typically command $100-plus revenue per available room.

Hotel brands mostly work with experienced developers with industry knowledge but also should be willing to help guide new developers, Tom Papelian, senior vice president of development at Marriott International, said.

"It's really taking the time, putting them in touch with the right people within our organization to educate them. We embrace them, we get them up to our corporate office and put them in front of the right brand folks," he said.

The education process includes helping to navigate the steps for development, including the feasibility study and determining a capital structure.

Marriott helps developers examine which of its 30 brands are available and have an opportunity for growth in a market. The company's wide distribution offers some flexibility, Papelian said.

"If they come to us with a site and they want to do a Courtyard and there's three Courtyards within a reasonable distance, chances are we're going to try to steer them somewhere else," he said.

Jenna Hackett, global brand head of Curio and Tapestry Collections by Hilton, said her team will help developers decide whether a property should be branded or a soft brand, which offers more of the benefits of an independent hotel.

"The collection space over the past decade has exploded and I think there's many collection brands out there. It's really because you get to take that independent property identity and match it to an engine and get all the same benefits whether you're a focused service, a full service or even a luxury brand," she said.

Hackett said developers working with a historic building should consider a soft brand.

"It's very easy to tell that story, whereas if you're doing a new build, you're going to have to develop that story, bring in that design and sell that out to the local community. If you're unsure about that, go hard brand," she said.

Hilton works with developers to ensure they are partnered with the right people, helping them create a story and identity to avoid the property falling flat once it opens, she said.

For the past 15 years, Benton said LBA Hospitality has only worked on hotel development projects that offered an exit strategy.

"You should never go into any investment unless you have a plan on how to get out of it," he said.

Rahinsky said the market should help determine that exit, having thresholds in place for return on investments.

"We're very conservative in our underwriting. We stress-test everything against the [Great Financial Crisis]. We used to think that was the appropriate stress test, then COVID comes, and all of a sudden the GFC was sunny days. We're reevaluating the way we stress-test," he said.

Papelian said when Marriott signs a deal, it's in it for the long haul.