Extended-Stay Hotel Feasibility Study for SBA, USDA and Bank Loans

Extended-stay demand rose about 2.2 percent in 2025 while total U.S. hotel demand fell about 0.8 percent, and extended-stay occupancy ran about 12 percent above comparable transient hotels. Extended-stay RevPAR still declined about 2.2 percent for the year, because supply grew about 4 percent and economy extended-stay supply grew about 8.7 percent, mostly through conversions. The segment recovered in 2026: second-quarter extended-stay RevPAR rose about 4.2 percent to about $97.67 on a $126.41 rate and 77.3 percent occupancy, and July demand rose more than 6 percent year over year.

Developers have followed the demand. Across the upper midscale, midscale and economy chain scales, new construction is now weighted toward extended-stay prototypes. The economics explain it: a 120-room economy or midscale extended-stay hotel operates with roughly seven to eight full-time equivalent staff, the room count sits on about two acres, and the first prototype of the newest economy extended-stay brand was built for about $117,000 per key before developer fees, against a national limited-service median between about $170,000 and $197,000 per room. Brand targets of 80 to 85 percent occupancy and gross operating profit margins near 60 percent are franchisor projections, not audited results, and a lender-grade study haircuts them to the 45 to 50 percent gross operating profit range a rural or secondary-market operator can defend.

The consequence for every hotel study in these chain scales is that the competitive set is likely to gain extended-stay rooms during the ramp. For an extended-stay study the consequence is sharper: the subject will compete against both transient hotels discounting weekly rates and new extended-stay product with lower cost bases.

Extended-stay guests average about 25 nights in purpose-built extended-stay hotels and about 14 nights when they stay in conventional hotels. Stays of seven nights or more account for roughly a fifth of all U.S. room nights sold, against about 9 percent of supply in the purpose-built segment. Brands price in tiers, commonly one to six nights, seven to fourteen, fifteen to twenty-nine, and thirty or more, and the discount from the transient rate widens with length of stay: purpose-built extended-stay hotels have offered weekly stays at about 22 percent below conventional hotels, narrowing to a few percent at thirty nights or more.

The study therefore projects demand and revenue by band rather than as a single occupancy and rate. Each band carries its own segment mix, its own rate, its own seasonality and its own housekeeping cost, and the bands are summed to the operating statement. A single blended rate hides the fact that a hotel at 80 percent occupancy with half its room nights in thirty-plus-night stays is a different business, with different revenue, different costs and a different regulatory position, from a hotel at 80 percent occupancy on weekly stays.

SBA eligibility requires that more than 50 percent of a hotel's prior-year revenue come from guests staying 30 days or less, and a startup must demonstrate the same in its projections. The rule exists because a building that houses residents for months at a time is residential property, not an eligible business. Stays of 30 nights or more are also commonly exempt from state and local occupancy tax, which changes the revenue line.

For an extended-stay study the rule is the first test. The study projects room nights and revenue in the one-to-six, seven-to-twenty-nine, and thirty-plus night bands, states the thirty-plus share of revenue in each projection year, and shows that the share stays within the limit the lender applies. Where the competitive set includes older economy extended-stay product with a large residential population, the study does not carry that product's length-of-stay mix to a new branded hotel; it builds the subject's mix from the brand's system data and the subject's demand segments.

USDA Business and Industry does not apply the SBA transient test, but USDA reviewers read an extended-stay projection for the same risk: whether the hotel is in substance workforce housing dependent on a single employer.

Extended-stay hotels in secondary and rural markets draw a large share of room nights from contract demand: construction crews, utility and energy workers, traveling clinicians, rail and airline crews, insurance adjusters after storms, and corporate project teams. The study carries contract demand as its own segment with its own end date, because it carries its own risk.

Two cases are run. The concentration case removes the largest contract customer and tests coverage on what remains. The post-generator case removes the finite generator entirely and tests coverage on the demand base that will exist when construction ends; for a hotel beside a multi-year industrial project, this case is the base case for the later years of the loan.

Workforce housing is counted as competing supply. Where a general contractor builds a 300-site RV park or a crew camp for its own workers, those beds compete directly with the subject for the seven-to-twenty-nine and thirty-plus night bands, and the study adds them to the supply schedule with their expected opening and closing dates.

Energy, utility and industrial construction produce the deepest extended-stay demand and the sharpest decline when the project ends. A data center campus with 7,500 workers at peak construction and 1,000 permanent roles is the clearest current example; a hotel delivered in 2028 and stabilizing in 2030 meets the end of construction at the moment it reaches stabilization, and the study is built around that timing.

Regional medical centers produce steady extended-stay demand from traveling clinicians and patient families, with less concentration risk and no end date.

Military installations, universities and government agencies produce relocation, training and temporary-duty demand on predictable calendars.

Corporate relocation and project work in secondary metros produces midscale and upper midscale extended-stay demand with a transient profile that comfortably meets the 30-day rule.

Storm recovery and displaced-resident demand is treated as one-time and excluded from the stabilized projection.

Extended-stay operating statements differ from transient hotels in three places, and the study reflects each. Housekeeping cost per occupied room is lower because rooms are serviced weekly rather than daily, and labor is built from local wage evidence for a lean staffing model. Utilities per occupied room are higher because guests cook and launder. Food and beverage is minimal or absent. Brand fees are carried at full load, which for the leading economy and midscale extended-stay brands means a 5 to 5.5 percent royalty and a 3.5 percent marketing contribution on a 20-year term, plus an initial fee near $35,000. A 3 percent base management fee is included regardless of ownership and the FF&E reserve ramps to 4 percent of revenue.

The projection runs over a three-year ramp. Extended-stay hotels often stabilize faster than transient hotels in markets with established contract demand, and the study states the evidence where it projects a shorter ramp.

Under SBA 504 a new extended-stay hotel by a new operating entity falls in the 20 percent special-purpose and new-business equity tier; an existing operator with more than two years of history is at 15 percent. The 504 job creation standard is $95,000 of debenture per job, which a lean-staffed extended-stay hotel meets less comfortably than a full-staffed transient hotel, and the study documents the job count against the standard. Under USDA B&I a new business requires 20 percent balance sheet equity or 25 percent project investment, and a construction project guaranteed before completion requires 25 percent.

Conventional and CMBS lenders underwrite extended-stay collateral to a higher debt yield and a lower leverage than transient select-service product: recent conduit pools show extended-stay loans sized to about a 17 percent net operating income debt yield at about 52 percent loan-to-value, against about 15 to 16 percent and 58 to 62 percent for limited-service hotels. The study reports the debt yield alongside the program coverage ratio.

The extended-stay study includes the market area and generator analysis with construction schedules and end dates; demand segmented by source and by length-of-stay band; the verified competitive set, including transient hotels discounting weekly rates, other extended-stay product and workforce housing; the ramp and penetration projection by band; the 30-day revenue test by year; the USALI operating projection on an extended-stay cost model with local wages; the project cost estimate benchmarked to the current national survey and the brand's prototype cost; the capital stack by program; coverage by year with the standard sensitivities plus the concentration and post-generator cases; and a signed conclusion.

An MMCG extended-stay hotel feasibility study runs between 90 and 140 pages and is delivered in 9 to 16 business days from engagement and receipt of the project file, or from 5 business days on an expedited basis. Fees begin at $4,900 for a single-site SBA 7(a) study and range from $7,500 to $18,000 for SBA 504 special-purpose studies depending on scale and scenarios. USDA and conventional studies are quoted on scope. Payment is 50 percent at engagement and 50 percent at delivery, and revisions required by the lender, CDC or agency are made at no additional cost under MMCG's written acceptance guarantee.

The lead extended-stay case is the USDA B&I new build in Richland Parish, Louisiana, where a data center campus expanded from $10 billion to more than $50 billion between December 2024 and July 2026, with more than 7,500 workers at peak construction and about 1,000 permanent roles, and where the general contractor's own 300-site RV park, a parish moratorium on new RV parks and rents that rose from about $650 to $2,500 a month describe the housing pressure. The study projects demand by length-of-stay band, counts the crew housing as supply, carries the construction demand to its 2030 end date, and tests coverage on the permanent, utility and regional demand that remains. The full case study is published on the USDA hotel feasibility study page.