Hotel Feasibility Study vs STR Report vs Appraisal: What Each Proves

A credit officer opening a hotel file in September 2026 finds an STR competitive set report, a going-concern appraisal and a feasibility study, and often a fourth document, the franchisor's market evaluation, that the sponsor believes is a fifth version of the same thing. The confusion is expensive. Each document was prepared by a different party, under a different standard, to answer a different question, and a lender who reads the STR report as a projection, the appraisal as a viability opinion, or the feasibility study as a valuation is relying on a document for something it never claimed to do.

This is the reading we give lenders, CDCs and USDA State Offices when the three documents land on the same desk: what each proves, what each cannot prove, where the three have to reconcile, and the numbers, from the CoStar and Tourism Economics August 2026 forecast, the HVS 2025 development cost survey and the AHLA 2026 State of the Industry, that a hotel feasibility study is now measured against. It is current as of 7 September 2026, with SOP 50 10 8.1 noted where it changes the acquisition rules from 1 October.

The STR report: what a chosen set of hotels did

STR, now part of CoStar, is the benchmarking source for U.S. lodging, and its reports are the first thing a lender asks for on any hotel file. They come in three forms. A Trend report is a historical time series for a market, submarket or defined set: supply in room nights available, demand in room nights sold, occupancy, average daily rate and revenue per available room, with monthly and running twelve-month views. A competitive set report benchmarks a subject hotel against a set the subject's operator selected, expressed as three indices where 100 is fair share: the Market Penetration Index for occupancy, the Average Rate Index for ADR, and the Revenue Generation Index for RevPAR. The Forecast, produced with Tourism Economics, projects supply, demand, occupancy, ADR and RevPAR at national, chain-scale and market level.

The competitive set is governed by published rules designed to protect the confidentiality of contributing hotels, and those rules matter to a lender because they define what the report can and cannot show. Under STR's competitive set guidelines, a set must include a minimum number of participating properties and at least two companies not affiliated with the subject; no single property may account for more than 50% of the set's participating room supply, no single brand more than 50%, and no single company more than 70%, all measured excluding the subject and its affiliates; a set change must add or remove at least two participating properties open at least five months; and no change may be made that would isolate the data of a single named hotel. The report shows the set's aggregate. It never shows any one competitor's numbers.

What the STR report proves. That the hotels in the set, over the period reported, achieved the occupancy, rate and RevPAR shown, and that the subject, if it exists and reports, captured the share the indices state. It is the best available evidence of what a market did.

What it cannot do. It cannot report on a hotel that does not exist. For a proposed hotel the only STR product is the history of a set someone chose, and the choice of set is the single most consequential assumption in the file, made before the study is written. It cannot segment demand by source, so it says nothing about whether the subject's brand, location and product will capture corporate, group or leisure business the set is not serving. It does not see new supply until it opens. It contains no site analysis, no cost, no debt and no projection for the property. And it is aggregated by design: a set that meets the confidentiality rules can hide a single dominant competitor's collapse or surge inside the average. A lender who reads an STR Trend report as a forecast for a proposed hotel is reading the wrong document.

The appraisal: what the property is worth, and to whom

The appraisal answers the value question, and for a hotel the value question is unusually layered because the asset is an operating business inside a building. Under USPAP the appraiser must identify the type and definition of value, identify items that are not real property, and, where the assignment requires, allocate the going-concern value among real property, tangible personal property and intangible assets. The Appraisal Institute's guidance on tangible and intangible assets, and the Uniform System of Accounts for the Lodging Industry, supply the conventions: a market management fee is deducted even where the owner operates, commonly around 3% of gross revenue, and a furniture, fixtures and equipment reserve is deducted, commonly 4% of total revenue, before the income is capitalized.

SOP 50 10 8 makes the hotel appraisal a regulated report. Hotels and motels sit on the SOP's non-exhaustive special-purpose property list, and for special-purpose property the lender must obtain a going-concern appraisal from a Certified General Real Property Appraiser who has completed at least four going-concern appraisals of equivalent special-use property in the prior 36 months. The report must be a full USPAP Appraisal Report, must allocate value to land, building, equipment and intangibles, must be ordered by the lender, and may not be one prepared for the borrower or seller. For new construction or substantial renovation the appraisal must estimate value at completion, and the loan amount is capped at appraised value. SOP 50 10 8.1 carries all of that forward unchanged.

What the appraisal proves. The market value of the going concern on the effective date, or at completion, allocated across its components, developed by a credentialed and independent professional under a signed certification. That is what the lender's collateral position rests on.

What it cannot do. The appraiser is not engaged to conclude on feasibility. An income approach for a proposed hotel needs a stabilized income to capitalize, and the appraiser gets that income from somewhere: from the market study inside the appraisal, from the franchisor's evaluation, or, very often, from the feasibility study itself. A value conclusion built on the study's projection is not an independent test of the projection. The appraisal is also silent on the questions that decide a hotel loan's first three years: the ramp from opening to stabilization, the capital stack, the debt service and the coverage at the lender's floor. It states a value. It does not say the hotel will earn it.

The feasibility study: whether this hotel will produce the cash flow

The feasibility study is the only one of the three documents that tests the future, and it is the one neither program prescribes in detail. SBA "may require" it under 13 CFR 120.160(b); SOP 50 10 8 names no content list, but the 504 program's stated circumstances for obtaining a study, market saturation, an unproven concept, a specialized or special-purpose property, a project disproportionate to the applicant's size, and rapid growth on unseasoned debt, describe most hotel loans. Under USDA, hotels and motels are eligible Business and Industry projects under 7 CFR 5001.105(b)(8), and a study by an independent qualified consultant acceptable to the Agency is required on loans over $1 million to a new business, built to the five components of Appendix A.

A lender-grade hotel feasibility study does, in order, the work the other two documents do not.

Demand by segment. It builds the market's lodging demand by source, commercial, group, leisure and, where relevant, extended-stay and contract, from generators the study names and dates, not from the aggregate the STR report shows. It then documents the competitive set it uses, which should meet STR's own rules so the benchmarking can be reproduced, and adds supply STR cannot see: hotels under construction, approved, or in the pipeline.

Penetration and rate positioning. It applies fair-share and penetration analysis to that demand, concluding on the subject's occupancy and ADR relative to the set in each of the first three to five years, with the indices stated. It positions ADR against the set by brand, product, age and location, and shows the ramp from opening: year-one occupancy and rate well below stabilization, with the stabilization year identified and defended.

The operating build. It builds expenses on USALI lines from comparable operating statements, with the franchise royalty and marketing fees at the brand's published schedule, a management fee whether or not the owner will manage, the FF&E reserve, and property taxes and insurance at the site's actual exposure. On a conversion or acquisition it prices the Property Improvement Plan and its timing, because the franchisor's PIP is a condition of the flag and the SOP requires the franchise agreement and any PIP to be reviewed before disbursement.

Coverage and stress. It reconciles the development budget to the lender's draw schedule and to the appraisal's completion value, presents debt service coverage at the applicable floor, 1.15x for a Standard 7(a) loan, 1.10x for a Small Loan, 1.25x on trailing results for an Initial Acquisition numbered on or after 1 October 2026, and shows the sensitivity that breaks coverage: a slower ramp, a lower ADR index, a new competitor opening in year two.

The conclusion. It ends with a signed opinion of feasibility, conditioned, by an independent author with stated qualifications and no interest in whether the loan closes.

What the feasibility study proves. That a specific hotel, at a specific site, with a specific brand, budget and capital stack, is projected to produce cash flow sufficient to service the debt, and how far the assumptions can move before it does not. That is the question the lender is actually lending against.

What it cannot do. It is not a valuation, and it should not be used as one; the appraisal is the collateral document. It cannot report a proposed hotel's actual performance; it can only project it. And it depends on the quality of the comp set and the demand build behind it, which is why the study, not the STR report, is where the comp set has to be defended.

Where the three have to agree

A reviewer reads across the three documents, and the returns come from where they disagree.

The comp set. The set in the STR report, the set the appraiser used to develop stabilized income, and the set the feasibility study used for penetration should be the same set, or the differences should be explained. Three different sets in one file is three different markets.

The stabilized numbers. The study's stabilized occupancy and ADR are the appraiser's income-approach inputs. If the appraisal capitalizes a higher stabilized NOI than the study projects, the value and the coverage are inconsistent and the lower figure governs. If the appraisal adopted the study's projection wholesale, the file has one projection, not two, and the lender should know it.

The allocation. The appraisal's allocation to intangibles carries the brand and management contribution. The study's ADR premium for the flag and its franchise fee line should be consistent with that allocation; a study that projects a branded ADR while the appraisal allocates little to intangibles, or the reverse, is telling two stories.

Completion value and budget. On a ground-up hotel the study's cost build-up, the lender's draw budget and the appraisal at completion should reconcile, including the FF&E and pre-opening lines and, on 504 construction, the 15% contingency.

The ramp. The appraisal values the stabilized year. The lender lends through the first three. The study is the only document that models the years between, and its year-one and year-two coverage, not the stabilized figure, is the binding test on most hotel loans.

The numbers a hotel study is measured against in 2026

The August 2026 CoStar and Tourism Economics forecast, released at the Hotel Data Conference on 6 August, raised full-year 2026 U.S. RevPAR growth to 4.4% from 2.8%, on demand up 1.7% and ADR up 3.1%, with occupancy at 63.1%, after a first half that sold a record number of room nights, up 11.4 million on 2025, lifted by the World Cup and America 250. For 2027 the same forecast has RevPAR up 2.1% on demand up 1.1% and ADR up 1.6%, occupancy at 63.4%, with June and July offsets against the World Cup comparison. Supply growth is forecast at 0.4% in 2026 and 0.6% in 2027, which the forecasters attribute to inflation, business costs and above-average interest rates making new builds hard to pencil, with what development there is weighted to upper midscale, midscale and economy. Growth is concentrated at the upper end: households earning $200,000 or more account for 25% of travel spending from 11% of households, and RevPAR growth in the midscale and economy scales is coming from demand rather than rate.

Two consequences for the study. A projection that assumes market ADR growth above 3% in 2026 or above 2% in 2027 is running ahead of the forecasters, and a projection for a midscale or economy hotel that leans on rate rather than occupancy is running against the grain of the segment. Supply growth of half a percent nationally is not supply growth of half a percent in the subject's submarket; the study has to count the pipeline itself.

On cost, the HVS 2025 U.S. Hotel Development Cost Survey, built from actual budgets for projects proposed or under construction in 2024, reports median per-room costs of $167,000 to $169,000 for limited-service and midscale extended-stay, about $223,000 for select-service, about $265,000 for upscale extended-stay, $409,000 for full-service and over $1,057,000 for luxury, with a median of $219,000 across all surveyed properties, stable on the prior year. A limited-service budget materially below $167,000 a key needs an explanation; one materially above it needs the ADR to carry it.

On operating cost, AHLA's 2026 State of the Industry puts hotel wages and benefits at nearly $128 billion in 2025, approaching $131 billion in 2026, 15.3% above 2019 against total operating revenue up 12.8% over the same period; labor cost per occupied room rose 2.5% through the third quarter of 2025; and rising expenses held gross operating profit per available room at roughly 90% of 2019 levels. A study that projects 2019 operating margins for a 2027 opening is projecting a cost structure the industry has not seen since.

The SBA and USDA layer

Three program rules shape how the three documents are read. First, the special-purpose classification: under 504 the borrower contribution rises to 15% for special-purpose collateral and 20% where the business is also a start-up, and the going-concern appraisal rules above apply to every hotel. Second, the franchise: the SBA Franchise Directory governs eligibility, the lender must review the franchise agreement and any PIP, and the study's fee and PIP assumptions must match those documents. Third, from 1 October 2026, an Initial Acquisition of an existing hotel is underwritten under Appendix 15 of SOP 50 10 8.1 at 1.25x coverage on trailing EBITDA with no use of projections to meet the floor, with total debt capped at the appraised business value and a lender-ordered quality of earnings report where the business purchase price, net of the real estate, is $3 million or more. On such a file the STR report and the QoE prove the past, the appraisal caps the debt, and the feasibility study's role narrows to the buyer's plan: the PIP, the reflag, the repositioning, and the coverage risk in the years it takes to execute them.

Under USDA the study is required on the $1 million new-business line and the State Office reviews it against Appendix A before commitment; the appraisal follows 7 CFR 5001.203 and the Agency's environmental review runs on its own track.

What a lender should ask for

1. The STR report with the competitive set stated and a confirmation that the set meets STR's guidelines, plus the set's history for at least the trailing three years.
2. The feasibility study's demand build by segment, with generators named and dated, and its pipeline of hotels under construction, approved and proposed within the trade area.
3. Penetration indices by year from opening to stabilization, with the stabilization year identified.
4. The same competitive set across all three documents, or a written reconciliation of the differences.
5. The appraisal's stabilized NOI reconciled to the study's, and the appraiser's stated source for the income-approach inputs.
6. The franchise agreement, the fee schedule and the PIP, with the study's fee and capital lines tied to them.
7. Coverage at the applicable floor for years one through three, not only at stabilization, with the sensitivity that breaks it.
8. The study's signed certification of independence and qualifications, and its statement of which figures are primary-verified and which are carried.