Hotel Feasibility Study in Tennessee

Tennessee hotel lending: big tickets, mostly flagged

Hotels are a leading class in Tennessee. By loan count they stand 4 of 39 among Tennessee classes; at a 1.42x location quotient, Tennessee hotels sit well above their national weight. Tennessee itself ranks 23 of 53 states, with 172 hotel approvals worth $448.4 million from FY2017 to FY2026. The typical Tennessee deal is large: a median of $2.5 million, 1.14x the hotel median nationwide, with the middle half running from $1.5 million to $3.6 million. The cell's features are scale and brands.

Brands dominate. Franchised properties account for 82.0% of Tennessee hotel approvals. SBA 7(a) carried 138 loans and SBA 504 34. Brightbridge, Inc. holds 24 of the 504 loans, worth $65.1 million Tennessee's 7(a) holders carry large amounts: GBank has 15 loans worth $46.2 million, Peoples Bank 10 worth $31.3 million, Celtic Bank Corporation 9, Farmers State Bank of Alto Pass, Illinois 8 worth $27.0 million and Shoreham Bank 6 worth $22.2 million. The deals spread across the state rather than clustering in one metro: Shelby County leads with 23, Hamilton has 20, Knox 13, Sevier 12 and Madison 11, while Davidson has 9. After only 4 loans in FY2017, approvals rose to 31 for $63.8 million in FY2021, and FY2026 has brought $57.4 million on 16.

Tennessee hotel outcomes

No less than 10.1% of Tennessee's hotel approvals in FY2017 through FY2024 were cancelled, and 10.9% counting undisbursed loans as cancelled, the ceiling. Losses are low and late: of the 79 hotels Tennessee funded during FY2017 to FY2021, 1.3% have been charged off, and 0.00% before year five. Both figures are floors.

What a Tennessee hotel study has to prove

At a median of $2.5 million, a Tennessee hotel study is a large undertaking. Demand testing means the submarket's occupancy, rate and revenue per available room over a full cycle, the demand drivers (the traffic, visitors and business travel the site can draw) and every competing hotel open, under construction or planned. Cost testing covers land, construction or purchase, the brand's improvement plan and its fees. Tennessee coverage of debt service belongs at an occupancy and rate the submarket has actually achieved, and a loan near $3.6 million should be stressed for a soft year. The appraiser has to split a Tennessee hotel's going-concern value into its real estate, its furnishings and equipment, and the business itself.

A coding limit applies: Tennessee carries a single code for hotels and motels, so service level, limited or full, is not visible.