Financial Feasibility Case Study: Insights from a Recently Built Economy Hotel (WoodSpring Suites)

WoodSpring Suites Atlanta McDonough - 625 Industrial Blvd, McDonough, GA

In this article, we will focus on analysis of how recently built economy hotel property performs financially as an investment. This hotel financial analysis provides a detailed evaluation of the WoodSpring Suites Atlanta McDonough – a 123-room economy extended-stay hotel in the Atlanta South submarket – and assesses its performance and viability for investors. The report is structured into the following sections:

Executive Summary

• New Economy Hotel Asset: WoodSpring Suites Atlanta McDonough is a 123-room, economy-class extended-stay hotel opened in 2020 under the WoodSpring Suites brand (Choice Hotels). As a recently built property with modern amenities (four-story, interior-corridor, all-suites configuration), it benefits from franchise backing and an interstate-accessible location in McDonough, GA (Atlanta South submarket).

• Strong Operating Performance: In 2024 the hotel achieved approximately 77% occupancy, with an estimated ADR ~$73 (average daily rate), producing Revenue per Available Room (RevPAR) around $56. This translated to about $2.63 million in effective gross revenue, against $1.42 million in operating costs, resulting in Net Operating Income (NOI) of ~$1.21 million (roughly $9,827 per room, a 46% NOI margin). After a capital reserve allowance (~$105k), net cash flow was about $1.10 million ( ~$8,973 per room). The expense ratio was ~54% of revenue, yielding a debt service coverage of 2.31× on NOI (2.11× on net cash flow), indicating comfortable ability to meet debt obligations.

• Submarket Trends: The Atlanta South submarket has seen softening occupancy amid new supply. As of mid-2025, 12-month occupancy is ~63.7% with ADR ~$93 and RevPAR ~$59. Year-over-year, occupancy declined ~2.4% while ADR inched up 0.4%, leading to a slight RevPAR drop of 2.1%. This pressure is driven by supply growth outpacing demand – available room nights grew ~+2.9% YOY versus demand (room nights sold) up only +0.4%. Approximately 540 new rooms delivered in the past 12 months and ~840 rooms (6.7% of inventory) are under construction in the submarket, suggesting competition will remain intense. Notably, within the economy/midscale segment of this submarket (to which WoodSpring belongs), occupancy averages only ~60% with ADR around $69 – indicating that our property outperforms its segment on occupancy and RevPAR.

• Project Cost & Valuation: The development was appraised at $12.3 million in November 2021 at stabilization. The current mortgage balance is ~$7.60 million (originated Jan 2022), implying roughly 65% loan-to-value (LTV) at origination and an estimated current LTV in the ~60% range given today’s value. Based on the trailing NOI of ~$1.21M, a market cap rate ~9.4% (typical for Atlanta South) yields an implied value of about $12.9 million(≈$105k per room). Using a reasonable cap rate range (9%–10%), the property’s valuation is estimated between ~$12.1–$13.4 million (≈$98k–$109k per room). This suggests the asset’s market value is well above the debt balance, providing a healthy equity cushion.

• Investment Outlook – Base Case: Financial feasibility is strong in the base case scenario. The hotel is generating a solid cash-on-cash yield (NOI equates to ~9.8% of the appraised value) and covering debt service with ample room, even after capital reserves. The extended-stay economy model has proven resilient demand (as evidenced by >90% occupancy in 2022–2023) and the WoodSpring Suites franchise affiliation provides marketing and operational support. However, investors should note the recent occupancy normalization (down to ~77% in 2024 from 90%+ in prior years) as new supply in the submarket comes online, which could temper growth in the near term. Overall, the property’s combination of stable cash flows, competitive operating metrics, and conservative leverage underpins an attractive investment case for a long-term hold, assuming prudent asset management to maintain its performance in the face of rising competition.

Property Overview

Location & Site: The WoodSpring Suites Atlanta McDonough is located at 625 Industrial Blvd, McDonough, GA, in the Atlanta South submarket of metropolitan Atlanta. The site is just off Interstate 75, providing strong visibility and accessibility (the hotel is an “Interstate” location type). This area is in Henry County, roughly 30 miles south of downtown Atlanta, characterized by a mix of distribution centers, commercial businesses, and growing residential neighborhoods. The immediate vicinity has a very low Walk Score (18 – “Car-Dependent”), underscoring that guests rely on highway access and vehicles, typical for suburban interstate hotel sites.

Property & Building: The hotel is a four-story, interior-corridor building with 123 suites (all guest rooms are studio suites featuring kitchenettes). The property was built in 2020 (construction started Feb 2019 and completed by May 2020), making it a modern asset with minimal deferred maintenance. The gross building area is ~20,000 square feet(approximately 5,000 SF per floor), situated on a 2.29-acre lot, which provides ample parking and the possibility of future site improvements (e.g. adding amenities or outparcel development, if needed). The hotel’s physical configuration (all-suites, limited communal areas) is optimized for the extended-stay economy segment, focusing on cost-efficient operations.

Brand & Operation: WoodSpring Suites is an economy extended-stay brand owned by Choice Hotels International. The property operates as a franchise (with Choice Hotels as franchisor). As an extended-stay hotel, it caters to guests seeking lodging for weeks or months (such as business travelers on assignment, relocating families, or contractors). The franchise model provides national brand recognition, reservation system support, and standards, while the local owner/operator handles day-to-day management. The hotel opened in May 2020, which, notably, was during the COVID-19 pandemic – yet extended-stay hotels generally fared better than traditional hotels during that period due to demand from essential workers and housing needs. The ownership and management structure involves Parador Investments LLC as the owner-operator, under the umbrella of the franchise and parent company (Choice).

Capacity & Amenities: With 123 rooms all configured as suites with kitchenettes, the hotel does not offer full-service amenities like a restaurant or conference space – typical for economy extended-stay properties. This limited-service profile helps keep operating costs low. The property likely offers basic amenities such as laundry facilities, vending, and Wi-Fi, focusing on the core needs of long-term guests. The absence of on-site food & beverage outlets is reflected in the financials (no F&B revenue), and it relies on nearby eateries and grocery stores for guest needs. The franchise affiliationalso means the hotel participates in Choice’s loyalty program, which can drive occupancy. Overall, the property’s physical and operational setup is well-aligned with its target market (budget-conscious extended-stay guests) and supports an efficient cost structure.

Market Context – Atlanta South Submarket

Submarket Overview: The WoodSpring Suites is situated in the Atlanta South hospitality submarket, which encompasses the southern portion of metro Atlanta including towns like McDonough, Stockbridge, and others along I-75 south. This submarket is a suburban lodging market that captures demand from highway travelers, local corporate/business demand, and overflow from the Atlanta metro. It is a diverse submarket with a mix of economy, midscale, and some upper midscale hotels, but generally fewer upscale hotels compared to closer-in Atlanta submarkets.

Current Performance: As of mid-2025, the Atlanta South hotel market’s 12-month occupancy is 63.7% and ADR (average daily rate) is about $92.95, resulting in a RevPAR of roughly $59. These figures represent a slight decline in performance from the previous year – occupancy is down 2.4% year-over-year and RevPAR is down 2.1%, even though ADR saw a modest 0.4% uptick. Essentially, demand growth has stagnated while new supply enters the market, putting downward pressure on occupancy. Total room-night demand grew only +0.4% YOY in the past year, while room supply (available room-nights) increased by ~2.9%. Consequently, even with ADR holding steady, hotels are selling fewer rooms proportionally, hence the dip in occupancy and RevPAR.

Supply & Demand Dynamics: The Atlanta South submarket is experiencing a notable influx of new hotel supply. In the last 12 months, approximately 540 new rooms opened (across 6 properties) in this submarket. This represents about a 4.6% increase in the room inventory. Furthermore, the pipeline remains robust: around 840 rooms are under construction, which is roughly 6.7% of the existing inventory. Such a pipeline is significant – for context, a 6.7% inventory expansion in the near term could further intensify competition, especially if demand growth does not keep pace. The new supply includes a mix of chain scales; recent data shows 370 rooms delivered in the Upscale/Upper Midscale segment and 173 rooms in the Midscale/Economy segment in the past year, indicating that both higher-end and budget segments are adding capacity.

On the demand side, room-night demand has been essentially flat, with only +0.4% growth YOY. This anemic demand growth comes after a strong post-pandemic recovery in 2021–2022 (Atlanta South saw a 30% jump in occupied rooms in 2021 as travel rebounded). But that rebound has given way to stabilization – the data for 2023–2024 show demand even declined slightly in 2023 (-3.0% YOY) and was flat in 2024. Meanwhile supply kept climbing each year (3–5% annually). The imbalance of higher supply growth vs demand is expected to keep overall occupancy rates in check in the medium term.

Segment Performance: Within Atlanta South, performance varies by class/segment. Economy and Midscale hotels(like WoodSpring Suites) currently report about 60.1% occupancy and $69 ADR, equating to a RevPAR around $41.50. In contrast, Upscale and Upper Midscale hotels in this submarket see around 69.0% occupancy at $114.66 ADR(RevPAR ~$79). This gap is typical – higher-scale hotels achieve higher rates and slightly better occupancies due to their broader demand base. Notably, WoodSpring Suites Atlanta McDonough outperforms its immediate segment averages: its 2024 occupancy was 77% (versus 60% segment average) and its ADR ($73) is a bit above the economy segment average. This suggests the property is capturing a strong share of the extended-stay and budget traveler demand in the area, likely due to its newness, location, and brand.

Market Outlook: The broader outlook for Atlanta South is one of moderate growth with competitive pressure. CoStar’s market analytics indicate that, going forward, occupancy is expected to hover in the mid-60s percentage range, as the market digests new supply. Market-wide ADR is forecast to grow modestly (low single-digit percentages annually) as economic conditions and inflation stabilize. The market cap rate for Atlanta South hotels is around 9.4% (higher than the Atlanta metro average of ~8.7%, reflecting the slightly higher risk/return expectations in this peripheral submarket). For an investor, this means valuations in this submarket tend to be at higher yield levels (lower price per dollar of NOI) compared to core Atlanta. Overall, investors should anticipate steady but unspectacular market metrics: supply will likely keep occupancy from rising much, but demand should continue at stable levels given the economic development in the southern metro (industrial and logistics growth along I-75, etc.). The WoodSpring is well-positioned in the economy extended-stay niche, which historically has resilient demand (e.g., construction crews, long-term project workers, etc.) even during economic softening.

Financial Performance Analysis

In this section, we examine the detailed financial performance of the WoodSpring Suites Atlanta McDonough, focusing on income, expenses, and profitability on both aggregate and per-room bases. All figures are drawn from the hotel’s reported operating results (from the MMCG database) for the year 2024, which we use as a representative “stabilized” year of performance.

Revenue: The hotel’s Effective Gross Income (EGI) in 2024 was approximately $2,625,991 (total) which translates to about $21,350 per room. This revenue is almost entirely derived from room rentals, as is typical for an extended-stay hotel with no food & beverage outlets. The breakdown of revenue per room shows about $20,440 coming from room revenue and a small additional ~$1,099 per room classified as “other income” (which could include things like laundry, vending, or miscellaneous fees). There was also a minor negative adjustment in “other departmental revenue” (-$189 per room), likely reflecting allowances or bad debt – but this is negligible in the context of total revenue. Overall, revenue per available room (RevPAR) for 2024 was roughly $56, which, given a 77% occupancy, implies an average daily rate (ADR) in the low $70s as noted.

Operating Expenses: Total operating expenses for 2024 were $1,417,233 (about $11,522 per room), which is approximately 54% of revenue (the hotel’s operating expense ratio was 53.97%). This indicates an efficient cost structure – it is common for limited-service and extended-stay hotels to operate with 50–60% expense ratios, and this property is at the favorable end of that range. The major components of the cost structure include:

• Rooms Department Expenses: ~$428,000 (16.3% of revenue) for the direct operating costs of the rooms (housekeeping labor, front desk staff, guest supplies, etc.) Notably, the hotel’s payroll is relatively low for 123 rooms, reflecting the lean staffing model of extended-stays (limited daily housekeeping, often one staff member on duty overnight, etc.).

• Repairs & Maintenance (R&M): ~$223,000 (8.5% of revenue), which is somewhat elevated for a newer property. This could include not only routine maintenance but also any initial replacement of furnishings or fixings as the property moved out of its warranty period. It might also reflect costs for maintaining the in-room kitchen appliances and HVAC, which are critical in extended-stay rooms.

• Utilities: ~$225,800 (8.6% of revenue). Utility costs (electric, water, gas) are a significant expense given the property’s all-suites setup – long-stay guests use in-room kitchens, which can increase energy and water usage. Still, the cost is in line with expectations, and the extended-stay model may encourage guests to conserve (as they effectively live there and might be more mindful of usage).

• Franchise Fees: ~$126,980 (about 4.8% of revenue). This likely represents the royalty and marketing fees paid to Choice Hotels for the WoodSpring brand. ~5% of room revenue is standard for franchise royalties in economy hotels, so this aligns with the $2.51M room revenue.

• Sales & Marketing: ~$129,610 (4.9% of revenue). This includes advertising, online travel agency commissions, and local marketing. Interestingly, this line item is fairly high, suggesting significant spend on advertising or third-party booking channels to drive occupancy. It may also encompass the fees for loyalty program point reimbursements or other marketing assessments by the brand.

• Management Fee: ~$105,040 (4.0% of revenue). The hotel’s management fee (whether paid to an external management company or allocated internally by the owner) is around 4% of gross revenue, which is a market-rate management fee for limited-service properties.

• General & Administrative (G&A): $72,760 (2.8% of revenue). G&A covers administrative salaries, credit card commissions, office supplies, etc. The G&A expense here is quite modest on a per-room basis ($592 per room), reflecting the lean back-office operation (likely a small on-site management team).

• Property Taxes and Insurance: Real estate taxes were about $62,604 in 2024, which is only ~2.4% of revenue (benefiting from a low county tax assessment of the property at ~$1.667M total, or just $13.5k per room). Property insurance was ~$42,894 (1.6% of revenue), a figure that jumped in recent years (2022 insurance was lower), likely due to industry-wide insurance cost increases and the hotel being in a high-risk (FEMA flood zone A) area.

Overall, the cost structure is well-controlled, with no single expense category overly dominant. The largest single line is the Rooms department at ~16% of revenue, and combined undistributed operating expenses (utilities, maintenance, admin, sales, etc.) make up the rest. It’s worth noting that the hotel’s operating expenses in 2024 dropped compared to 2023 – in 2023 the expense ratio was about 66%, likely due to one-time costs or lower efficiency during a period of extremely high occupancy. By 2024, as occupancy normalized and perhaps cost-saving measures took effect, the expense ratio improved to ~54%. This indicates management’s ability to scale costs appropriately with occupancy levels.

Profitability: After deducting operating expenses, the property’s NOI for 2024 was $1,208,758 (which is $9,827 per room). This is a healthy NOI margin of ~46%. In other words, for every dollar of revenue, about $0.46 is operating profit before capital costs and debt service. This margin is quite strong for a hotel in the economy segment – it reflects both the benefit of the extended-stay operating model and the relative newness (limited major repair needs) of the asset.

From NOI, we consider capital reserves or expenditures. Industry practice is to set aside a percentage of revenue (typically 3–5%) for replacement of furniture, fixtures, and equipment (FF&E) and other capital needs. In 2024, the hotel’s financials show Capital Expenditures of $105,040 (which is about 4% of revenue, or $854 per room). This likely represents funding of a reserve for future renovations (given the property is only a few years old, actual capital spendingwould be minimal beyond warranty-covered items, so this is prudent reserve allocation). After this reserve, the Net Cash Flow (NCF) (or cash available before debt service) was roughly $1,103,700 (approximately $8,973 per room).

To summarize the 2024 financial performance in both per-room and aggregate terms, the key metrics are tabulated below:

Financial Metric (2024)	Per Room	Total (123 Rooms)
Occupancy Rate	77.0%	–
Average Daily Rate (ADR)	~$73 (est.)	–
Revenue per Avail. Room (RevPAR)	~$56 (calc.)	–
Effective Gross Income (Revenue)	$21,349	$2,625,991
Operating Expenses	$11,522	$1,417,233
– Rooms Dept. Expenses	$3,482	~$428,339
– Repairs & Maintenance	$1,815	~$223,263
– Utilities	$1,835	~$225,758
– Franchise Fees	$1,032	~$126,978
– Advertising & Marketing	$1,054	~$129,611
– Management Fee	$854	~$105,040
– Other G&A + Fixed Exp. (incl. Tax, Ins.)	$1,450 (approx.)	~$178,254
Net Operating Income (NOI)	$9,827	$1,208,758
NOI Margin (% of Revenue)	46.0%	46.0%
Capital Reserve (FF&E)	$854	$105,040
Net Cash Flow (NCF, pre-debt)	$8,973	~$1,103,700 (approx.)
NCF Margin (% of Revenue)	42.0%	42.0%

(Note: ADR and RevPAR are not explicitly stated in the source financials but are derived from occupancy and room revenue; they are included for context.)

As shown, on a per-room (“per key”) basis, the property generated about $21.3k in revenue, $11.5k in OPEX, and $9.8k in NOI per room in 2024. These figures are robust for an economy hotel – for comparison, economy hotels nationwide often target around $5k–$8k NOI per room; this property far exceeded that due to exceptional occupancy in its early years. Even after a recent occupancy dip, it’s still yielding nearly $9k NCF per key. Such performance underscores the feasibility and profitability of the investment at the operational level.

Project Cost and Valuation

In this section, we analyze the property’s value from multiple angles: the original development cost/appraisal, current loan metrics, and a current valuation range based on income capitalization (cap rates). We also consider the loan-to-value (LTV) implications and how the asset’s value per room compares in the market.

Original Appraisal & Development Cost: The WoodSpring Suites Atlanta McDonough was appraised at $12,300,000 in November 2021, shortly after opening and stabilization. This appraisal was likely conducted for refinancing into a CMBS loan (the property was securitized in early 2022). The implied value per room at that time was about $100,000 per key. The appraisal coincided with the hotel ramping up operations (2021 actual occupancy reached ~96% per underwriting). It’s likely that the appraisal assumed a stabilized NOI near what was underwritten (roughly $1.17M NOI was projected per room data) and applied a cap rate around 9.5%–10% or considered a cost approach, given it was a new build. In terms of project cost, while we don’t have a direct figure, the appraisal of $12.3M and the fact that an $8.0M loan was 65% LTV suggests the development cost (including land and construction) was in that $12M range. Being an economy extended-stay product, that cost ($100k/key) is plausible for 2020 construction.

Current Debt and Loan Metrics: The property’s current loan balance is $7,601,384 as of mid-2025. This loan originated on 1/1/2022 for $8,000,000, so about $399k of principal has amortized in the past ~3.5 years. The interest rate is 5.13% fixed with a maturity in January 2029. The loan is on a 30-year amortization (no interest-only period remaining) and is performing (current). The debt service in 2024 was about $523,298 annually, which is covered 2.31× by the NOI – a very healthy NOI DSCR. Even on net cash flow after reserves, DSCR was ~2.1×. These metrics indicate no financial stress on the loan; in fact, the property generates significant excess cash after paying debt service. The current LTV can be inferred by comparing the loan to the property’s value. If we take the 2021 appraised value of $12.3M, the current LTV = $7.60M / $12.3M ≈ 62%. If the property’s value has increased or held (as we analyze below), the LTV would be even lower. This moderate leverage (roughly 60% LTV) and high DSCR position the asset well from a financing perspective (e.g., potential to refinance or withstand revenue declines).

Cap Rate-Based Valuation: The most common approach to valuing an income-producing hotel is applying a capitalization rate (cap rate) to its stabilized NOI. Given the hotel’s TTM (trailing 12-month) NOI of ~$1.209M (2024 figure), and considering current market cap rates for similar assets in the submarket, we can estimate its value. According to CoStar’s data, the market cap rate for Atlanta South hotels is around 9.4% as of mid-2025. Economy/limited-service hotels often trade at or above the market average cap rate (due to higher perceived risk or lower growth prospects). We will therefore examine a range of cap rates from 9.0% (aggressive valuation) to 10.0% (conservative valuation) to gauge a valuation range:

Valuation Metric	Value Estimate	Notes
Origination Appraisal (Nov 2021)	$12.3 million	~$100k per room; at opening stabilization
Current NOI (TTM 2024)	$1,208,758	Used as basis for cap rate valuation
Cap Rate – 9.0% (low yield scenario)	~$13.4 million	Implied ~$109k per room (higher-end value)
Cap Rate – 9.5% (market/avg scenario)	~$12.7 million	Implied ~$103k per room (mid-point)
Cap Rate – 10.0% (high yield scenario)	~$12.1 million	Implied ~$98k per room (conservative)
Indicative Value Range (9–10% cap)	$12.1M – $13.4M	~$98k–$109k per room (123 rooms)
Current Loan Balance (2025)	$7.6 million	Loan-to-Value ~58%–63% under above range

Under these assumptions, the most probable current market value is around the mid-$12 million range (we will use ~$12.7M as a midpoint for discussion). This equates to roughly $103,000 per key, which is higher than the original ~$100k/key appraisal – a reflection of the property’s strong NOI (even with occupancy off its peak, the hotel’s ADR gains and cost control have kept NOI high).

It’s useful to also cross-check this valuation with market comparables:

• Recent sales in the Atlanta South submarket show an average sale price of ~$126,562 per room over the past 12 months. However, this average includes some upper midscale assets; for example, a newly built Holiday Inn Express (Upper Midscale, 93 rooms) in the submarket sold in April 2025 for $13.8M ($148k per room). On the other end, an older economy hotel (Americas Best Value Inn, 51 rooms, built 1999) sold in 2024 for $3.78M (~$74k per room). A relevant comparable is a 2023-built Candlewood Suites (Midscale extended stay, 86 rooms) that sold in Nov 2024 for $11.53M (~$134k per room). The WoodSpring is slightly more economy-oriented than Candlewood, but also relatively new (2020). These comps suggest our cap-rate-based valuation (~$103k/key) is reasonable, if not slightly conservative. It’s below the Candlewood sale metric, reflecting WoodSpring’s economy positioning, but comfortably above the older economy asset sale.

• The “market pricing” analysis projects values for the submarket’s economy segment around $66,952 per room at a 9.4% cap going forward. This figure appears low relative to actual trades – likely due to including many older assets. Our subject property, being new and high-performing, justifies a higher per-key value than the broad average.

In summary, we estimate the WoodSpring Suites Atlanta McDonough is currently worth roughly $12–13 million in the base case, and even under conservative scenarios likely not less than ~$12 million. This valuation is supported by both the income approach (cap rate method) and the market approach (comparable sales in its segment). With the loan at $7.6M, the implied equity value is on the order of $4.5–$5.5 million. This strong equity position provides safety for investors and optionality (e.g., potential refinance or supplemental financing, given the high DSCR and lower leverage).

It should be noted that rising interest rates in the broader economy (as of 2024–2025) could put upward pressure on cap rates, but the hospitality sector’s recovery and inflation-driven ADR growth can offset some of that. Our range up to 10% cap is meant to reflect a fairly cautious valuation given current capital market conditions.

Investment Case Assessment

Bringing together the market context, financial performance, and valuation, we now assess the investment case for the WoodSpring Suites Atlanta McDonough under a base case scenario. The base case assumes continued operations as-is with no major disruptions, reflecting current performance levels and known market trends.

Cash Flow and Yield: The property is generating a healthy cash flow yield relative to its value. With ~$1.1M in annual net cash flow, and a value around $12.7M, the unlevered yield (NCF/Value) is approximately 8.7%. On an NOI basis, the cap rate at our midpoint value is ~9.5%, which is on the high side for hotel investments (indicating a strong income return). These figures are attractive to investors seeking income-producing assets. Furthermore, the levered cash-on-cash return is even stronger: after debt service of ~$523k, the annual cash flow is around $580k to equity, which on ~$4.7M of equity (originally) is about a 12% cash-on-cash yield. This indicates that the investment is performing above typical hurdle rates, thanks to the low leverage and solid operating results.

Debt Service & Coverage: As noted, the debt service coverage ratio is around 2.3× on NOI and 2.1× on net cash flow. This substantial coverage provides a cushion against downturns. Even if a recession or new competition caused a significant drop in NOI (say 30% decline), the property would still cover its debt (~1.6× DSCR in that scenario). Thus, from a lender’s or conservative investor’s perspective, the risk of default is very low under base case and moderately stressed scenarios. Additionally, the loan’s fixed interest rate (5.13%) insulates the property from rising rate risk through 2029, and there is no near-term refinancing need. The loan is also currently defeasance open in 2028, meaning prepayment flexibility will improve as it approaches maturity, giving the owner options to sell or refinance by late 2028 without significant penalty.

Competitive Position: The WoodSpring Suites holds a strong position in its competitive set. It is one of the newest hotels in the submarket (opened 2020, versus many competing economy hotels built in early 2000s or prior). Its performance, as shown, has been superior to the average economy hotel in occupancy – indicating it captures demand preference, likely due to its newness, cleanliness, and the strength of the WoodSpring brand (which has a niche following among extended-stay guests). The extended-stay segment itself is a relative sweet spot: during economic downturns, extended-stay hotels often maintain occupancy better than transient-focused hotels, as they cater to essential workforce lodging needs. In Atlanta South, the presence of distribution centers, infrastructure projects, and logistics businesses should continue to feed demand for this property. We saw occupancy remain very high (over 90%) through 2022–2023 when many full-service hotels were still recovering – a testament to this resilience.

That said, risks exist in the competitive landscape. The pipeline of new hotels (840 rooms under construction) includes some direct competitors. For example, new midscale extended-stay brands (like a TownePlace Suites with 56 rooms under construction in Newnan, or others possibly in Henry County) could siphon some demand, especially if they are closer to certain demand generators. Also, if the local economy softens or a major demand source (say a long-term construction project) winds down, the WoodSpring might need to rely more on transient interstate business, which is more rate-sensitive and seasonal. We already observe occupancy normalized to 77% in 2024 from 93% in 2022, which likely reflects both increased competition and a shift from long-term guests to slightly shorter stays. Investors should monitor the hotel’s ADR strategy – in 2024, the hotel was able to increase ADR to ~$73 to partially offset occupancy drops, which kept RevPAR relatively stable. The continuation of this strategy (yield management to maximize revenue per available room) will be critical in a competitive market. The hotel’s affiliation with Choice Hotels should aid in distribution and pricing power via national sales and loyalty programs.

Asset Management Considerations: Being a newer property, capital expenditure needs are low in the near term. The owner’s continuation of funding ~$105k/year in reserves is prudent; by the time the first renovation cycle comes (typically year 6–8 for soft goods, year 12–15 for case goods), there should be a healthy reserve built up. The franchise (WoodSpring/Choice) will have property improvement plan (PIP) requirements at renewal, but given the brand and the recent build, those should be manageable. Investors should also consider the exit strategy: The CMBS structure indicates the owner might consider a sale or refinance by 2028 (when defeasance burn-off allows). By that time, the hotel will be ~8 years old – still in good physical shape – and ideally the submarket will have absorbed the new supply, potentially allowing occupancies to lift again into the 80% range. If performance is maintained, the exit cap rate might be similar or lower if interest rates normalize, which could mean an upside in value beyond the current ~$12–13M estimate. However, a risk to exit value is the broader economy and hotel investment market sentiment; cap rates for economy hotels could rise if investors perceive higher risk or if alternative investments demand higher returns.

Conclusion (Base Case): The base case analysis indicates that WoodSpring Suites Atlanta McDonough is a financially feasible and attractive investment. It is operationally efficient, produces strong cash flows, and carries moderate debt. The key investment metrics – NOI margin ~46%, NOI yield ~9.5%, DSCR >2×, and a secure equity cushion – all point to a robust financial footing. While the Atlanta South market’s headwinds (new supply, flat demand) may curb significant growth in the short term, the property has demonstrated it can perform above market averages, suggesting a degree of competitive moat in its niche. For an investor, this asset offers a blend of current income and long-term value stability, with upside potential if the submarket improves or through active revenue management.

In essence, the feasibility study finds that the hotel’s recent performance validates the original investment thesis of a profitable economy extended-stay hotel in a growing suburban market. The recommendation for the base case scenario is to continue to hold and actively manage the asset, capitalizing on its strengths (brand, location, efficient operations) and mitigating risks (through dynamic pricing and marketing to sustain occupancy). With its sound fundamentals, the WoodSpring Suites Atlanta McDonough stands as a solid investment in the economy lodging sector, capable of delivering reliable returns to investors under current market conditions.

June 26, 2025 by Michal Mohelsky, J.D., principal of MMCG Invest, LLC, Hotel Feasibility Study Consultant

Sources:

CMBS Data, MMCG database