Hotel Feasibility Study in Connecticut

Large tickets in a thin market

Connecticut hotel lending is unusual in size more than in volume. SBA approved 78 loans for hotels and motels between FY2017 and FY2026, worth $229.2 million, and the median loan of $3.1 million works out to 1.44x the class's national median. That figure sets Connecticut hotels apart from the state's overall lending as well as from hotels across the country. The state ranks 36 of 53 for the class, among Connecticut's asset classes hotels rank 11 of 39, and a location quotient of 0.53x says lodging takes roughly half the share of state lending that it takes nationally. Few deals, but big ones.

How the money is structured

Half of all loans run from $1.5 million to $4.5 million. SBA 7(a) accounts for 41 loans and SBA 504 for 37, an almost even split that reflects how often a hotel purchase is built on a real estate loan with a certified development company. New England Certified Development Corporation dominates the 504 table with 23 loans worth $78.2 million, and Community Investment Corporation follows with 6 loans and $18.5 million. Among 7(a) lenders, Hanover Community Bank holds 10 loans worth $22.9 million and Shoreham Bank holds 5 worth $16.5 million. Franchise brands account for 61.5% of loans, so a flag, its property improvement plan and its franchise fees are part of nearly every underwriting file. The files assign one industry code to every hotel and motel, so a limited-service inn and a full-service property land in the same row and cannot be pulled apart.

Geography and the calendar

The Capitol and Southeastern CT regions each recorded 14 loans, with New London and Western CT at 10 each and South Central CT at 9. Annual volume has been steady rather than spiky, from 4 loans in FY2019 to 10 in both FY2024 and FY2026, though dollars climbed from $8.6 million in FY2019 to $37.2 million in FY2026. Among approvals from FY2017 through FY2024, 11.9% at the least fell away before closing, and 15.3% once Connecticut loans that never drew funds are added in; both numbers are floors. The charge-off rate for this cohort is withheld because it rests on fewer than 30 disbursed loans, and we give it no figure at all.

What a feasibility study for a Connecticut hotel must test

Because tickets run large, the study carries more weight than for a small-business class. It has to establish demand from corporate travel, universities, hospitals, leisure and event traffic, and test the proposed rate and occupancy against the supply already open in the submarket. Seasonality in a New England market makes the shoulder months decisive for debt service coverage, so the model should show a downside case, not only a stabilised year. Construction or renovation cost, the brand's required improvements and the reserve for replacement need line-by-line support. An appraiser prices a hotel off earnings and brand affiliation, which means the study's revenue per available room logic must survive review. A lender should also read the cancellation floor as evidence that many approvals do not reach closing.