Hotel Feasibility Study in Nevada

Nevada hotel approvals often fail to close

The Nevada hotel record is defined by deals that never closed. Of hotel and motel loans approved in Nevada during FY2017 to FY2024, 23.4% were cancelled after approval, and the ceiling rises to 25.0% when undisbursed loans are counted. Our test finds that cancellation floor higher than both the national hotel rate and Nevada's SBA cancellation rate across all its classes, each by more than our margin; no other Nevada hotel gauge clears that bar. For a hotel borrower in Nevada, an approval is a starting point, not a closing.

The loans themselves are large but not unusual for hotels. Across 84 approvals from FY2017 to FY2026, totalling $192.5 million, the median is $1.9 million, 0.86x the national hotel median, with Nevada's quartiles at $930,000 and $3.2 million. Franchised properties take 53.6% of the loans. Lodging is underweight in Nevada's SBA activity, a location quotient of 0.68x, and the state ranks 34 of 53 for the class, though hotels are 8 of 39 among Nevada classes. SBA 504 carried 21 approvals against 63 under 7(a). Nevada State Development Corporation carries 10 Nevada hotel 504 loans worth $28.1 million and The Mortgage Capital Development Corporation 6 worth $20.7 million, and among 7(a) holders US Metro Bank has 10 for $26.4 million, Open Bank 8 for $17.1 million and GBank 5 for $12.2 million.

Clean repayment, thin volume

Once funded, Nevada hotel loans have performed. The 36 Nevada hotel loans paid out in FY2017 to FY2021 have recorded no charge-off at all: the Nevada floor reads 0.00% now and 0.00% at the five-year mark, though the group is small and both floors can rise. The gap between that repayment record and the cancellation rate says the risk sits between commitment and closing: appraisals that come in short, franchise approvals, property improvement plans that grow, or sellers who move on. Volume fell from 17 approvals in FY2017 to 3 in each of FY2019 and FY2020, and was 12 in FY2025 and 8 in FY2026.

What a Nevada hotel study must test

Clark County holds 29 approvals and Washoe 14, but Elko and Humboldt have 9 each and Carson City 6, so a good share of Nevada's SBA hotels sit along the rural interstate corridor rather than in the gaming markets. A feasibility study has to identify the demand generators that fill rooms midweek and in the off season, whether highway traffic, a single large employer or regional events, and test how dependent the hotel is on any one of them. Because so many Nevada approvals fail before closing, the study should be complete before commitment: a current appraisal, a franchise approval in hand and a priced property improvement plan. Debt service coverage must hold at the market's trailing occupancy and rate, not a recovery forecast. The appraisal should value the property under another flag and as an unbranded hotel. SBA's code puts every Nevada hotel and motel in one bucket, so full-service and limited-service properties are not told apart here.