Hotel Feasibility Study in Arkansas

Arkansas hotel deals close, at smaller sizes

Arkansas hotel loans stand out on cancellation and on size, the two distinctive metrics in this cell. Almost every approved deal goes ahead: the cancellation floor for Arkansas hotel approvals dated FY2017 to FY2024 is 2.4%, and the ceiling is the same 2.4%. The loans are also smaller, with a median of $1.7 million, 0.80x the national hotel median. Hotels matter here: the class places 3 of 39 among Arkansas asset classes and the location quotient is 1.59x, although 99 approvals worth $190.3 million from FY2017 to FY2026 rank Arkansas only 33 of 53 among states.

Brands, programs and lenders

Franchised properties account for 76.8% of Arkansas hotel loans, so brand standards are likely to apply to most of these properties. The middle half of approvals runs from $1.1 million to $2.7 million. SBA 7(a) carried 90 loans and SBA 504 just 9, and the leading development company is Rural Missouri, Inc., holding 5 loans worth $8.4 million. No single lender dominates. GBank holds 7 loans worth $12.8 million, and four lenders hold 5 each: Readycap Lending, LLC with $13.9 million, Peoples Bank with $10.2 million, The Huntington National Bank with $9.6 million, and a lender whose name includes a numeral, with $10.2 million. SBA reports each of them as the present holder of these loans. Pulaski County leads with 25 approvals, then Miller with 7 and Benton, Carroll and Saint Francis with 5 each. Activity jumped to 20 loans worth $35.0 million in FY2021, slipped to 3 in FY2025 and recovered to 14 worth $30.8 million in FY2026, a complete fiscal year.

Late losses

Of the 50 Arkansas hotel loans disbursed in FY2017 to FY2021, 4.0% are charged off to date, yet none inside five years of approval, where the rate is 0.00%. The charge-offs that exist therefore came after the first five years, not in the opening period. Read both Arkansas rates as floors.

Testing an Arkansas hotel

A feasibility study for an Arkansas hotel therefore has to look beyond stabilisation. It must size each demand segment in the Arkansas market, from highway transient and business travel to events, against existing and planned supply; test the development budget or the brand's improvement plan against a loan near $1.7 million; and carry debt service coverage through a stabilised year and through a later year with softer occupancy and rate and a renovation due. The Arkansas appraisal will split value among real estate, business and brand, and the study's revenue forecast must reconcile with it.

A limit of the shared code

This data files hotels and motels under one industry code, so an Arkansas limited-service property and a full-service property look alike in every figure above.