Hotel Feasibility Study in Louisiana

Lodging near the top of Louisiana's SBA book

Few classes matter more to Louisiana's SBA lending than lodging. By loan count, Louisiana hotels and motels place 3 of 39 against every other class in the state, and the location quotient of 1.91x shows them taking far more of Louisiana's approvals than lodging takes of the national total. Across FY2017 to FY2026 the state approved 157 hotel loans worth $404.5 million, which ranks Louisiana 26 of 53 for hotel lending, and the median loan of $2.6 million is 1.19x the national hotel median. Our screen does not flag the median or either outcome floor as distinctive, because none stands apart from both Louisiana's all-class figures and hotels nationally. The cell's character is weight: a hotel book that counts for far more in Louisiana than lodging does in the program as a whole.

Flagged properties and large tickets

Franchised hotels account for 74.5% of loans, so most of these deals carry a brand and its standards. Half the Louisiana approvals sit between $1.5 million and $3.7 million. SBA 7(a) carried 144 loans and SBA 504 carried 13. Peoples Bank holds 16 loans worth $48.0 million and Readycap Lending, LLC 11 worth $29.7 million, with Celtic Bank Corporation at 7 and Wallis Bank at 6, the last worth $15.1 million. Calcasieu and East Baton Rouge parishes lead with 18 approvals each, then Lafayette with 13 and Orleans with 12. Lending peaked in FY2021 and FY2022, with 28 and 24 loans, the second year worth $79.9 million, and fell to 8 in FY2023.

Few cancellations, but losses to watch

Louisiana hotel approvals rarely fell through: the cancellation floor for the FY2017 to FY2024 cohort is 5.3%, and the ceiling 6.1%, below hotels nationally. The charge-off floor is the figure a lender should study. Of 86 Louisiana hotel loans funded in FY2017 to FY2021, 4.7% have been charged off to date and 1.2% within five years, a floor above the national hotel figure, although the screen does not mark it distinctive.

Losses that arrive after the early years point a Louisiana hotel study toward the full cycle rather than the opening. Demand should be built from the specific generators around the site, whether highway, industry, university, medical or leisure, with a view on how each has moved through past cycles, and from the supply already competing, including properties under construction. The budget must carry land, construction or acquisition, and whatever the brand's improvement plan demands, all at today's prices. Coverage of debt service should be tested on occupancy and rate at a stabilised level and under a downside, with franchise fees and reserves for replacement in the expenses. A hotel is valued on income as a going concern, so the study's revenue and expense forecast should be one the appraiser can adopt.

Louisiana's figures come from a single lodging code that does not distinguish motels from hotels or limited service from full service, so every kind of property is in these numbers.