Hotel Feasibility Study in Texas

Texas is the largest hotel market in the SBA record, 1 of 53 among states, with 1,327 hotel and motel loans for $3.73 billion approved from FY2017 to FY2026. Among Texas classes lodging stands 3 of 39. With a location quotient of 1.54x, lodging weighs far more in Texas than in the national SBA book. Texas parts from its own record and from lodging nationally on loan size: a median of $2.7 million, or 1.23x the national median for hotels, with the middle half between $1.6 million and $4.1 million.

Branded, 7(a) heavy and well concentrated

Franchise properties make up 75.2% of Texas hotel loans, and the program mix runs strongly to 7(a), 1,178 loans against 149 under 504. Wallis Bank is the leading lender with 121 loans for $317.4 million, then US Metro Bank (77 loans, $260.2 million), Celtic Bank Corporation (53 loans, $154.0 million), and GBank and Bank of Hope at 49 loans each. Capital Certified Development Corporation tops the 504 list at 45 loans for $146.9 million, ahead of LiftFund, Inc. (18) and Greater East Texas Certified Development Company (15). Harris County alone has 230 loans, far more than Bexar (83), Dallas (79) or Tarrant (67).

Low losses, steady closings

Texas hotel loans close more reliably than Texas loans in general. Cancellation after approval was 9.1% for FY2017 to FY2024 approvals, or 10.7% counting undisbursed loans, below the state's all class rate. Losses are low: of 642 loans disbursed in FY2017 to FY2021, 1.4% have been charged off to date and 0.78% inside five years. That is far below the Texas floor across classes, though somewhat above the hotel class nationally, and it remains a floor. The FY2021 spike, 212 loans for $581.0 million, stands out in the trend; approvals then settled near 94 to 136 a year before 152 for $512.8 million in FY2026.

What a Texas hotel study must prove

With so many branded properties financed in the same counties, supply is the first test. A study has to list every competing hotel and every one under construction in the submarket, then show the room nights left for a new or acquired property. Cost must cover the brand's prototype or improvement plan, with contingency. Debt service coverage needs a stabilized year and a downside year with lower occupancy and rate, because a loan near $2.7 million has little cushion if a new competitor opens next door. The appraisal must allocate value among real estate, furniture and equipment, and the going concern, and test the as complete value against recent hotel sales.

One limitation applies: hotels and motels share a single code, so the record mixes limited service and full service properties and cannot pull them apart.