SBA 7(a) Hotel Feasibility Study in West Virginia

Franchise hotels at nearly every loan

The first thing West Virginia's hotel record shows is branding: 93.8% of the loans carry a franchise flag, which is far above most classes in the state. Over FY2017 to FY2026 the program approved 48 West Virginia hotels and motels with $132.4 million in gross dollars, and a $2.6 million median, which is 1.17x the nationwide hotel median. The middle half spans $1.6 million to $4.1 million, a tighter band than most states show. Hotels hold 3 of 39 places among West Virginia's asset classes, though the state is only 38 among states by number of hotel loans.

Specialty lenders and a mountain geography

GBank holds 15 loans and $47.4 million, and First Western SBLC, which appears under its Peachtree Group trade name, holds 11 loans and $28.9 million. Together they account for a large part of the class, and the dollars per loan are well above the median, which suggests larger transactions than the typical loan. What the table gives is each loan's current holder, so it describes holdings. Kanawha County has 8 loans, Cabell, Marion and Wood 6 each, Harrison 4, and Berkeley and Jefferson 3 each, with Braxton and Monongalia at 2 and Jackson at 1.

Yearly volume and cancellation

The record is steady rather than boom-and-bust. Annual loans range from 3 in FY2019 and FY2023 to 9 in FY2024, when dollars reached $26.6 million, and FY2021 added 7 loans and $18.5 million. FY2026 shows 4 loans and $10.7 million. The cancelled-after-approval floor for FY2017 to FY2024 approvals is 15.4%, the same as the ceiling when undisbursed loans are counted, which is high enough that a borrower should expect some approvals not to proceed. West Virginia hotels have a loss rate that SBA's early disbursed loans are too few to support, so it is held back and is no zero. One code covers hotels and motels, and select-service and full-service hotels are not distinguished.

Brand, demand and exit in a West Virginia hotel file

With nearly every loan flagged, the study must begin with the brand: its franchise agreement, property improvement requirements and the fees that reduce margin, tested against the likely room revenue. Demand drivers such as business travel, recreation and highway traffic must each be evidenced for the actual site, with seasonality. A new property has to prove it can win share from existing hotels in the same market, with occupancy and rate set against comparables. Construction or acquisition cost needs to be tied to the appraisal, and the payment on a loan of this scale must be covered under a downturn case with a slow opening. Lenders will also look at the exit if the flag is lost.