Hotel Feasibility Study in Maryland

Fewer hotel loans, far larger than the national norm

Maryland's hotel and motel lending combines low frequency with high ticket size. SBA signed off on 75 hotel and motel approvals across FY2017 to FY2026, worth $232.9 million, and the median of $3.1 million is 1.43x the figure for hotels nationally. Of its metrics, only the median is distinctive for this cell. Maryland sits 38 of 53 for the class and hotels hold 11 of 39 in the state's list of asset classes, and a location quotient of 0.41x shows lodging taking a smaller slice of the state's SBA book than it does nationally.

Program mix, lenders and flags

SBA 7(a) carried 57 loans and SBA 504 carried 18, so 7(a) accounts for most of the class here, with 504 making up the rest. The central band of loans runs from $1.7 million to $4.9 million. Franchise brands appear in 70.7% of loans, so the franchise agreement and its improvement plan belong in the study. GBank leads the 7(a) table with 12 loans worth $44.9 million, and Hanover Community Bank follows with 6 worth $22.8 million. In the 504 table Business Finance Group, Inc. has 9 loans and $27.4 million, ahead of 504 Capital Corporation with 5 loans and $12.8 million. Because lodging is coded once, economy inns and full-service hotels are counted together here.

Where the loans land and how they perform

Baltimore City recorded 8 loans, and Anne Arundel, Baltimore County and Prince Georges each recorded 7, with Allegany and Frederick at 5 apiece, which shows a spread across several counties rather than one. FY2021 produced 16 loans and $46.9 million, the busiest year in the series, against 4 loans in each of FY2019 and FY2023. Cancellations after approval ran at a floor of 5.5% for FY2017 to FY2024 approvals, or 9.1% counting undisbursed loans. Of 36 loans that funded in FY2017 through FY2021, neither the to-date rate nor the five-year rate has moved off 0.00%. That is a floor on a young portfolio and not a guarantee.

What the feasibility study has to test

Any Maryland hotel study must build demand from named, checkable sources of demand and compare the proposed rate with the competitive set. Because tickets are large, it should show the equity, the franchise fees and the reserve for replacement before it reaches debt service coverage, and test that coverage under a weaker occupancy case. Renovation scope should follow the brand's property improvement plan. The appraisal of a Maryland property should rest on income, so the revenue per available room build has to be traceable line by line. A low location quotient is not a reason for confidence or caution by itself; the submarket's own supply has to be tested.