Limited-service hotel feasibility study.
The mid-market sweet spot — Hampton Inn, Holiday Inn Express, Home2 Suites, La Quinta — financed predominantly through SBA 7(a) and 504, with conventional bank as the alternative path. This page sets out what a limited-service feasibility study contains and how the deliverable is scoped to the SBA pathway.
SBA SOP 50 10 8 · 4–6 property STR comp set · 24–36 month ramp · 1,800 words
Limited-service hotels are the mid-market sweet spot of U.S. hospitality finance. The product class — typically 100 to 130 keys, no banquet space, no meeting rooms, limited food and beverage — fits cleanly inside the SBA 7(a) and 504 underwriting boxes, and SBA dominates the $5 million to $15 million deal range that the sub-segment occupies. Conventional bank construction takes the larger end. Conduit and life-co execution becomes available at stabilization for the higher-quality properties. The franchise approval committee at Hilton, IHG, Marriott, or Choice runs in parallel with the lender on every transaction.
A limited-service feasibility study is built around a tight set of structural variables: highway exposure, AADT counts, demand-generator depth in the trade area, capital cost per key against published franchise benchmarks, and a competitive set drawn from four to six in-class properties. The study is shorter than a full-service or resort study — the demand segments are simpler, the revenue lines are fewer — but the analytical bar on the inputs that matter is no lower.
What limited-service means and the dominant flags.
Limited-service is a chain-scale and product-class definition. The properties operate without on-site full-service food and beverage, without banquet or meeting space beyond a small breakfast or board room, and without the staffing footprint that full-service requires. The guest experience is built around the room, a complimentary breakfast, and core amenities (Wi-Fi, fitness center, business corner, indoor or outdoor pool depending on geography).
The dominant franchise flags in the U.S. limited-service market cluster across four franchisors. Hilton operates Hampton Inn, Hampton Inn & Suites, and Tru by Hilton in this tier, with Hampton Inn the volume leader and Tru positioned as the newer prototype targeting the value end. Marriott operates Fairfield Inn, SpringHill Suites, and TownePlace Suites, with Fairfield as the limited-service flagship and SpringHill and TownePlace stretching toward upper-midscale and extended-stay respectively. IHG operates Holiday Inn Express, Holiday Inn Express & Suites, and Candlewood Suites; Holiday Inn Express is the dominant brand in the SBA-financed limited-service market. Choice operates Sleep Inn, Comfort Inn, and Comfort Suites at the value-to-midscale tier.
The franchise selection drives every other variable in the study. The competitive set is constructed within the chain-scale tier; the projected ADR is anchored to the brand's national rate position; the capital cost per key tracks the brand's prototype standards; the PIP cycle follows the franchisor's published renovation cadence. A study that addresses limited-service generically without anchoring to the specific flag the borrower is pursuing produces an output the franchise committee will not accept and the lender cannot rely on.
Site selection variables for limited-service.
The limited-service product class is built around interstate exit and suburban office-park locations. The structural site-selection variables that drive feasibility are highway exposure, traffic counts, demand-generator depth, and competitive saturation in the immediate trade area.
Highway exposure is the first filter. A limited-service property without direct visibility from the interstate exit ramp, or without a hotel cluster that pulls transient traffic into the parcel, faces a structural occupancy ceiling that the projection has to acknowledge. Annual Average Daily Traffic counts on the adjacent highway and the immediate exit ramp are documented from state DOT data and tied to the demand-segment analysis — transient leisure and transient business demand both correlate with traffic volume in the limited-service market.
Demand-generator depth is the second filter. A limited-service site needs a documented mix of corporate, leisure, and transient demand generators within the 5- to 10-mile trade area: office parks, manufacturing employers, hospitals, universities, retail destinations, sports complexes. The feasibility documents each generator with a defensible room-night estimate — based on employer headcount, project schedules, event calendars, or visitor counts — and ties the projected occupancy to the demand-segment mix.
Competitive saturation is the third filter. A trade area with seven competing limited-service properties at 65 percent occupancy is a different feasibility outcome than a trade area with four properties at 75 percent occupancy. The penetration analysis in Section 6 quantifies the saturation question; site selection sets the inputs.
Capital cost per key benchmarks.
The structural cost benchmark in limited-service feasibility. The 2026 range for new construction in the dominant flags runs $90,000 to $140,000 per key, all-in, including land, hard costs, soft costs, FF&E, and pre-opening.
| Prototype | Per-key range (2026) | Notes |
|---|---|---|
| Hampton Inn / Holiday Inn Express | $100,000–$120,000 | Prototype build in secondary and tertiary markets |
| Home2 Suites / SpringHill Suites | $115,000–$135,000 | Higher-end limited-service positioning |
| Tru by Hilton / value-tier prototypes | $90,000–$110,000 | Smaller footprint, reduced public space |
| Conversion (PIP only) | $40,000–$80,000 | On top of acquisition price; combined basis often within $20–30K of new build |
Hampton Inn and Holiday Inn Express new construction in secondary and tertiary markets typically lands at $100,000 to $120,000 per key on the prototype. Higher-end limited-service positioning — Home2 Suites, SpringHill Suites — typically runs $115,000 to $135,000 per key. Tru by Hilton and similar value-tier prototypes can land at the lower end of the range, $90,000 to $110,000 per key, where the prototype permits a smaller footprint and reduced public space.
Conversion projects — taking an existing motel or off-brand limited-service property to a major flag — typically run $40,000 to $80,000 per key in PIP cost, on top of the acquisition price. The combined cost basis frequently lands within $20,000 to $30,000 per key of new construction once the acquisition is included, but the conversion timeline is materially shorter, which compresses the construction-period interest reserve and the working-capital ramp-up.
Capital cost above $140,000 per key in a limited-service deal is a flag that the project either includes substantial extras (oversized public space, premium FF&E, structured parking, expensive site work) or is overpriced relative to the prototype standard. The feasibility documents the cost build-up against the franchise prototype to put the project's per-key cost in the comparative context the lender and the franchise committee will look for.
ADR, occupancy, and RevPAR projection by sub-tier.
| Sub-tier | Stabilized ADR (2026) | Stabilized occupancy | Notes |
|---|---|---|---|
| Hampton Inn / Holiday Inn Express | $115–$140 | 65–75% | Standard secondary markets |
| Home2 Suites / SpringHill Suites | $120–$150 | 68–75% | Extended-stay-adjacent product |
| Tru / Sleep Inn / Comfort Inn | $90–$115 | 62–72% | Value tier |
| Resort and high-cost MSA placements | Above ranges | Variable | Documented case-by-case |
The ADR range for limited-service hotels in the U.S. mid-market runs $90 to $160 in 2026, depending on flag, geography, and demand-segment mix. The projection is built bottom-up from the competitive-set penetration analysis, adjusted for the sub-market's seasonal pattern and any documented induced demand from new generators in the trade area.
Stabilized occupancy in the same product class typically runs 65 to 75 percent. Projected stabilized occupancy above 75 percent in a limited-service feasibility requires a documented operational case — a structural under-supply in the trade area, a meaningfully better location, a brand upgrade — and is benchmarked against the competitive set's actual peak occupancy rather than its average.
The ramp-up period to stabilization typically runs 24 to 36 months for new construction and 12 to 18 months for conversions. The ramp curve is documented month-by-month for the first two operating years and stress-tested against a slower-ramp scenario in the lender case.
PIP cycle integration.
Limited-service franchise agreements impose a renovation cadence that the financial projection has to model. The standard PIP cycle in the major flags runs 5 to 7 years from initial opening or last major renovation, with brand-specific variation: Hilton typically runs a 6-year cadence on Hampton Inn; IHG runs a 5- to 7-year cadence on Holiday Inn Express; Marriott runs a 6- to 8-year cadence depending on prototype.
The PIP cost in limited-service typically runs $8,000 to $20,000 per key on a routine cadence renovation, scaling up to $25,000 to $40,000 per key on a brand-prototype refresh that updates exterior, public space, and guestroom finishes simultaneously. The feasibility integrates the PIP at three levels: a documented expected cost from the franchise PIP cadence and current per-key benchmarks; a renovation downtime in the occupancy projection (typically a phased renovation holding 60 to 70 percent of stabilized occupancy across an 8- to 12-month renovation window); and a capital reserve in the financial model that accumulates against the next-cycle PIP.
A limited-service projection that does not model the next-cycle PIP within the stabilized projection horizon is an incomplete deliverable. The SBA lender — particularly on a 25-year amortization — will want to see how the property carries the next renovation through the loan term.
STR comp set construction for limited-service.
The competitive set for a limited-service feasibility typically runs 4 to 6 properties, drawn from the same chain-scale tier and the same trade-area radius. The standard convention pulls in the dominant in-class flags within a 5- to 8-mile radius — a Hampton Inn benchmarks against the nearest Holiday Inn Express, Fairfield Inn, La Quinta, and Comfort Inn, with adjustments for product class and demand-segment match.
Boundary-case selection follows the same documented criteria as the parent pillar: explicit inclusion or exclusion rationale where a property fits two of three filters but not the third. A higher-end limited-service property (Home2 Suites, SpringHill Suites) added to a Hampton Inn comp set without rationale will lift the projected ADR above defensible; a value-tier property (Sleep Inn, Days Inn) added without rationale will pull it down below defensible. The set has to balance comparable position with comparable performance.
The trailing-twelve and stabilized penetration analysis runs against the documented set, with the subject's projected RevPAR expressed as a percentage of the competitive-set average. Projected penetration above 105 percent in the limited-service tier requires an explicit operational case (location, brand, product class) and is otherwise written down to the competitive-set average in the lender case.
SBA financing for limited-service hotels.
Limited-service hotels are the largest single sub-segment of the SBA-financed hospitality market. SBA 7(a) and 504 finance a meaningful share of new construction, acquisition, and refinance volume in the franchised limited-service tier, particularly for owner-operator borrowers in the $5 million to $15 million project-size range.
SOP 50 10 8 — the current SBA standard operating procedure governing 7(a) and 504 loan eligibility, underwriting, and collateral — treats hotels as special-purpose property. The special-purpose treatment triggers two structural requirements: a third-party feasibility study by an independent qualified source, and an as-stabilized appraisal that recognizes the property's value as a going concern rather than as a generic commercial real estate asset. The feasibility study is the analytical input that the appraisal builds on for the going-concern value derivation.
The SBA lender's underwriting works to standard ratios: 1.20x to 1.25x DSCR at the underwriting constants, with stricter tests for higher-leverage 504 structures. The feasibility content has to support the projected stabilized NOI at a level that clears DSCR with the cushion the lender's credit policy requires. Feasibility studies that present optimistic projections without operational support routinely return as conditional approvals with re-projection requests, which extend the loan timeline by 30 to 60 days.
Detailed SBA pathway content lives at the SBA program page.
Limited-service hotel feasibility — FAQ.
Building or acquiring a limited-service hotel?
Get a feasibility study scoped to SBA 7(a)/504 or conventional bank, aligned to your franchise approval committee, and built to the limited-service sub-segment.
Continue across the limited-service ecosystem.
Hotel feasibility study (pillar)
Parent hospitality pillar covering all six capital sources and eight sub-segments.
Select-service hotel feasibility
One product class up — Courtyard, Hilton Garden Inn, Hyatt Place — bank construction and life-co fit.
Extended-stay hotel feasibility
Residence Inn, Homewood Suites, Staybridge — distinct demand-segment profile and cost structure.
Bank construction lending
Conventional bank construction execution for select-service through upper-upscale hotels.
SBA hotel sample report
Redacted SBA 7(a) limited-service hotel feasibility study excerpt prepared under SOP 50 10 8.