Hotel Feasibility Study – How to Evaluate Occupancy, ADR, RevPAR & Brand Fit
A hotel can look like a great investment on paper—until you discover the market is oversupplied, demand is seasonal, or the chosen brand doesn’t match the location. That’s why a hotel feasibility study is one of the most important steps before you buy land, select a flag, or start construction.
At Falcon Data Service, we prepare bank-ready feasibility study reports that help investors, developers, and lenders evaluate whether a hotel project is truly supported by the market.
What a Hotel Feasibility Study Should Answer
A professional study focuses on four core questions:
- Is there enough demand to support a new hotel?
- What level of occupancy is realistic?
- What ADR and RevPAR are achievable based on comparable hotels?
- Which brand and hotel type fit the site and demand profile best?
Understanding the Key Hotel Metrics
Occupancy (%)
The percentage of available rooms that are sold over a period. Occupancy is heavily influenced by nearby demand generators and competing supply.
ADR (Average Daily Rate)
The average rate paid per occupied room. ADR reflects the market’s pricing power and your hotel’s positioning.
RevPAR (Revenue per Available Room)
RevPAR = ADR × Occupancy
This is one of the most important performance indicators because it blends both rate and occupancy.
How to Evaluate Demand Generators
Demand generators explain why people would stay near your site. A feasibility study should quantify and assess drivers such as:
- Corporate offices and industrial corridors
- Medical centers and hospitals
- Universities and campuses
- Event venues, sports complexes, convention centers
- Retail destinations and entertainment districts
- Highway travel corridors and airports
A hotel in a strong demand pocket can support better occupancy and rates—even with competition.
Competitive Set Analysis (The “Comp Set”)
A comp set is the group of comparable hotels you’ll compete with. A bank-ready study should evaluate:
- Hotel type and brand scale (economy, midscale, upper midscale, etc.)
- Room count (keys), renovations, and physical condition
- Guest ratings and reputation
- Amenities and meeting space
- Rate positioning and channel presence
Brand Fit: Choosing the Right Flag
Brand selection is not just marketing—it affects layout standards, FF&E requirements, franchise fees, and room rates. Your feasibility should identify the best fit among:
- Limited Service (strong for highway and suburban markets)
- Select Service (more amenities; higher ADR potential)
- Extended Stay (strong for industrial/corporate demand)
- Boutique/Independent (works only with strong destination drivers)
Common Red Flags We Look For
- Too much new supply planned nearby
- Weak or seasonal demand generators
- Poor access/visibility or difficult ingress/egress
- Brand standards that push costs too high for the market’s achievable ADR
- Comp set that is newer, better positioned, and price competitive
Why Lenders Ask for a Hotel Feasibility Study
Banks and SBA lenders want to see a defensible story: market demand, comp set performance, realistic projections, and a concept that fits the site. A well-structured feasibility report strengthens underwriting and helps you make the right decision early.
If you’re considering a hotel project, a feasibility study can help confirm whether the site supports a profitable, sustainable operation—and what concept makes the most sense.
Conclusion
A feasibility study is more than a formality — it’s your roadmap to profitability. Whether you’re an investor, developer, or franchise owner, Falcon Data Service can help you make confident, data-driven decisions that fuel long-term success.
📞 Contact Falcon Data Service today to request your Feasibility Study and take the first step toward a smarter, more secure investment.