Hotel Feasibility Study in South Dakota

South Dakota hotels: modest tickets, heavy 504

What marks South Dakota hotel financing is the modest size of its loans. The FY2017 to FY2026 record shows 81 SBA hotel and motel approvals, totalling $106.5 million. The $942,000 median is only 0.43x the nationwide hotel median, while the central half of approvals sits between $560,000 and $1.8 million. Hotels hold the 2 of 39 position among South Dakota classes, and the location quotient reads 1.97x, yet South Dakota ranks 35 of 53 for hotel loans by count. The class therefore matters a good deal inside the state even though the state is a smaller player in the national hotel record. Loan size is what separates South Dakota hotels from the wider hotel record.

Of the 81 loans, 59 went through SBA 504 and 22 through SBA 7(a). The real estate program carries the class in this cell. Franchise affiliation reaches 58.0% of loans, so brand standards bear on cost and revenue for most borrowers. On the 504 side the loans are held by Dakota Business Finance with 36 loans and $42.4 million, South Dakota Development Corporation with 11 loans and $14.7 million, and Ally Dakota Development, Inc. with 9 loans and $9.4 million. Those three holders account for most of the 504 record, so a borrower reading this page can see which institutions carry the program.

Where and when the loans landed

Minnehaha County holds 24 loans, Pennington 18 and Hughes 7, with Codington at 5 and Lawrence at 4. Approvals ran at 11 in FY2017, fell to 5 in FY2019 and reached 12 in FY2021. The largest dollar year was FY2025, with 11 loans worth $23.0 million. FY2026, a complete fiscal year ending 2026-09-30, shows 4 loans for $9.3 million.

Cancellation after approval touched at least 10.6% of FY2017 to FY2024 hotel approvals in the state, with a ceiling of 12.1%. Across the 41 disbursed loans of the FY2017 to FY2021 cohort, charge-offs to date are at least 2.4%, while the five-year measure sits at 0.00%. A cohort of 41 loans is small, so a lender should treat both figures as minimums.

What a South Dakota hotel study must prove

A South Dakota hotel study should test occupancy and room rate against comparable properties rather than national brand averages. Cost should include any brand improvement plan, since 58.0% of loans carry a franchise. Coverage should be tested with a weak stretch of the year built in, and an appraiser should treat the hotel as an operating business, net of brand fees. Loan sizing should be set against the $942,000 median and the $560,000 to $1.8 million middle band, so that the project is placed honestly among its peers. One caution on the data: South Dakota hotels and motels are filed together in this record, which keeps limited-service and full-service properties from being told apart, and the loan sizes mix very different buildings.