Hotel Feasibility Study in Pennsylvania

Pennsylvania's SBA hotel book is spread across the state rather than concentrated in its largest cities. The leading counties are Dauphin and Lancaster with 21 approvals each, Monroe with 20 and Allegheny with 17, while Philadelphia has 11. From FY2017 to FY2026 SBA approved 313 hotel and motel loans in Pennsylvania worth $775.0 million, ranking the state 13 of 53. Hotels are 7 of 39 among Pennsylvania's classes, and a location quotient of 0.82x leaves them with less of the state's SBA lending than their national share. On median, cancellation and charge-off alike, the Pennsylvania hotel cell stays inside our distinctness margin.

Cancellation, not losses, is the risk

Charge-offs are rare: 0.67% of the 149 Pennsylvania hotel loans disbursed from FY2017 through FY2021 are written off, a floor, and the five-year rate is 0.00%. The bigger Pennsylvania hotel risk is cancellation, with a floor of 13.1% and a ceiling of 14.3%. On a hotel deal that can mean a franchise approval that stalled, a property improvement plan estimate that grew, or an appraisal short of the contract price. Franchise units are 72.2% of loans, so brand approval sits inside most transactions.

504 lenders carry much of the book

SBA 504 carries 80 of the approvals and SBA 7(a) 233. The biggest 504 holder is Empire State Certified Development Corporation, with 23 hotel loans worth $58.3 million; NEPA Alliance Business Finance Corporation has 17, then South Eastern Economic Development Company of Pennsylvania at 16. Fulton Bank, National Association holds 23 7(a) loans worth $63.7 million, Hanover Community Bank 17, GBank 15 and Shoreham Bank 11 worth $49.7 million. The lender list uses SBA's present-holder field, so a hotel loan sold on carries its buyer's name. The median loan is $2.2 million, 1.01x the national median, and half of the loans sit between $1.2 million and $3.8 million.

What a Pennsylvania hotel study needs

Each of these markets is small enough that one new property changes it, so demand testing must model the specific competitive set by segment, with weekday and weekend demand treated separately. Cost testing has to price the property improvement plan or the construction budget from bids. Coverage needs a base case and a downside, since annual approvals fell from 52 in FY2018 to 21 in FY2023 before recovering to 27 and $79.5 million in FY2026. The appraisal must be realistic, because a value short of the price is one way an approved hotel loan fails to close. Since motels and hotels sit under one code, the Pennsylvania cell cannot tell a limited-service property from a full-service one.