7 Reasons hotel deals stall in underwriting in 2026 (and how to prevent each one)

Most hotel deals in 2026 won't fail because capital is unavailable. Hotel loan originations hit $27 billion in the first half of 2025, and CMBS issuance was on pace to exceed $120 billion, the highest since 2007. Money is out there. The problem is getting your deal through underwriting.

Lenders have tightened their criteria across the board: higher DSCR thresholds, stricter documentation requirements, and less tolerance for speculative projections. The deals that close are the ones structured to survive scrutiny before they ever reach a credit committee.

Here are the seven reasons hotel deals stall in underwriting in 2026, and what you can do about each one.

1. Weak NOI documentation

Hotels are operating businesses, not passive real estate. Lenders treat them that way. A hotel's net operating income (NOI) has to be documented with the same rigor as its balance sheet.

What kills deals: submitting a one-line NOI figure without the backup. Lenders want to see departmental profit-and-loss statements (rooms, F&B, parking, other operated departments), trailing 12-month financials, and segmentation by revenue source (transient, group, contract). A hotel running 75% occupancy but earning 40% of revenue from a single corporate contract is a different risk profile than one with diversified transient demand.

According to Amimar International, "poor documentation, incomplete feasibility work or overly optimistic modelling is no longer seen as a sign of 'early stage.' It is viewed as a red flag."

What to prepare: Trailing 12-month departmental P&Ls, 3 years of operating statements, revenue segmentation by source, and a clear breakdown of fixed vs. variable expenses. If your property management system can export these reports, pull them before you apply.

2. Deferred PIP obligations

A Property Improvement Plan (PIP) is a franchise brand's mandate for upgrades, and it creates a hidden liability that lenders underwrite against your deal.

PIP costs have increased more than 30% above pre-COVID levels, according to HFTP. Franchisors deferred many renovation requirements during 2020-2023, and that backlog is now hitting simultaneously. If a PIP is pending or the scope is unclear, lenders either reject the deal or demand a fully funded renovation reserve before closing.

The deeper issue is cost credibility. As reported by KeyCrew, Greysteel Capital Markets Director Alex Haase notes that "lenders really don't believe in the cost estimates from some of these groups. They don't want to provide funding to a deal where there's probably going to be cost overruns."

What to prepare: Get the PIP from the franchisor before submitting your loan package. Have an independent contractor or experienced hotel renovator scope and price each line item. Budget a 10-25% contingency, and present it to lenders as part of your total project cost, not as a surprise that surfaces during diligence.

3. Wrong lender selection

Sending a hotel acquisition deal to a bank that specializes in multifamily or office loans wastes weeks. Hospitality underwriting requires lenders who understand seasonal revenue cycles, brand affiliation dynamics, and operating-business risk. A generalist CRE lender will either decline the deal outright or request documentation your team wasn't prepared to produce.

The mismatch also works in reverse. A borrower seeking a $3 million SBA 504 loan for a limited-service hotel doesn't belong in a CMBS pipeline designed for $25 million full-service assets. Loan product, deal size, and property type all need to match.

This is where a marketplace approach creates real value. Instead of pitching one lender at a time and hoping the fit is right, platforms like Bridge Marketplace match your deal data against live lender criteria and return credible interest from hospitality-specialist lenders within 48 hours. One application replaces weeks of cold outreach.

4. Missing or incomplete STR reports

Smith Travel Research (STR) reports, now distributed by CoStar, are the standard benchmarking tool for hotel underwriting. They compare your property's occupancy, ADR (average daily rate), and RevPAR (revenue per available room) against a defined competitive set of similar hotels in your market.

Without STR data, lenders have no way to validate whether your revenue projections are realistic. According to EHL Hospitality Insights, STR reports give "owners, lenders, and management companies" a "reliable, standardized way to measure performance not just in isolation, but relative to the market." Lenders use your RevPAR Index and ADR penetration metrics to stress-test whether projected cash flows can support target DSCR of 1.25-1.30x.

What to prepare: Pull at least 12 months of STR competitive set data. Ensure your comp set is defensible (similar class, location, and size). If you're acquiring a hotel and don't have the current owner's STR login, request the reports as part of your purchase due diligence, or subscribe directly through CoStar.

5. DSCR shortfalls

Debt Service Coverage Ratio (DSCR) measures whether a property's net operating income covers its debt payments. A DSCR of 1.25x means the property generates 25% more income than needed to service its debt.

Hotels face the strictest DSCR requirements in commercial real estate. While standard CRE loans typically require 1.20-1.25x, hotel properties often need 1.40x or higher due to their revenue volatility and lack of long-term leases. Lenders also stress-test at 100-150 basis points above the note rate, meaning your deal needs to pass coverage at rates higher than your actual loan terms.

The common mistake: modeling DSCR at the quoted interest rate instead of the stressed rate. With debt costs ranging from 6.25-7.0%+ in 2025-2026 (up from 3.0-4.5% in 2020-2022), borrowers who built their proformas around 2022 assumptions find their deals falling short at credit committee.

What to prepare: Model your DSCR at the stressed rate, not the note rate. If your property's NOI doesn't support a 1.25-1.40x DSCR at a 150 basis point stress, identify the gap before you apply. Options include increasing the equity contribution, negotiating a lower purchase price, or restructuring operating expenses.

6. Optimistic pro forma projections

Lenders in 2026 are comparing your projections against market-level data, and the numbers aren't generous. Through 2025, U.S. RevPAR grew just 0.2% year-to-date, with ADR increasing 1.0% offset by a 0.8% occupancy decline, according to Bridge's analysis of industry data. Hotels budgeted average ADR of $191.35 for H1 2025, but actuals came in at $186.14. RevPAR underperformed even more: $123.89 budgeted vs. $105.12 actual.

Meanwhile, economy hotels saw RevPAR decline roughly 2.5% through August 2025, with a 5.7% year-over-year drop in August alone, per MMCG Invest's hospitality underwriting analysis. If your pro forma assumes 5% ADR growth in a market that's flat or declining, a lender will reject it.

What to prepare: Anchor projections to STR comp set data, not internal targets. Show seasonal adjustments and ramp periods for newly acquired or renovated properties. Include a downside scenario alongside your base case. As MMCG advises, "a defensible case is one that would be credible if later audited against the information that was available at the time of underwriting."

7. Sponsor experience gaps

Lenders underwrite the borrower as much as the property. A first-time hotel buyer with no hospitality operating experience faces a harder path through credit committee, regardless of how strong the asset looks on paper.

SBA lenders, for example, require active owner-operators rather than passive investors and evaluate the borrower's management track record as a core underwriting criterion. CMBS and bank lenders assess sponsor experience through the lens of asset management capability, renovation execution history, and familiarity with the brand system.

This doesn't mean first-time buyers can't get funded. It means they need to address the experience gap proactively: pair with an experienced management company, bring on a partner with a hospitality track record, or demonstrate transferable operating skills from adjacent industries.

For first-time buyers exploring their options, Bridge has published a detailed guide on how to secure hotel financing without prior hotel ownership experience.

How to structure your deal before submission

Each of these seven problems shares a common root: the loan package wasn't structured for the lender's actual criteria before it was submitted. Borrowers guess which lender to approach, assemble documents reactively, and learn what was missing only after the deal stalls.

Bridge Marketplace was built to solve that coordination problem. The platform connects hotel owners and buyers with a curated network of hospitality-specialist lenders, matches deal data against live underwriting criteria, and returns multiple term sheets for side-by-side comparison. Bridge has funded over $50 million across hotel deals including SBA 504 acquisitions, CMBS refinances, and working capital facilities.

Here's how the process works:

1. Submit one application with your property details, financials, and project scope.

2. Get matched to lenders whose criteria fit your deal type, size, and brand.

3. Compare term sheets within 48 hours, evaluating rate, leverage, recourse, and prepayment terms.

4. Close with the right lender, supported by Bridge's deal coordination across appraisers, environmental consultants, title companies, and franchise brands.

Whether you're acquiring a flagged property, refinancing at better terms, or funding a PIP renovation, the goal is the same: walk into underwriting with a package that's already structured to the lender's standards.

Start a 10-minute application at Bridge Marketplace and compare offers from hospitality-focused lenders.

FAQs

What DSCR do hotel lenders require in 2026?

Most hotel lenders require a minimum DSCR of 1.25-1.40x, with some requiring 1.40-1.50x for properties with higher revenue volatility. Lenders also stress-test at 100-150 basis points above the note rate, so your actual coverage needs to be stronger than the minimum threshold suggests.

Why do lenders require STR reports for hotel loans?

STR (Smith Travel Research) reports provide standardized benchmarking data comparing your hotel's occupancy, ADR, and RevPAR against a competitive set of similar properties. Without this data, lenders cannot independently verify whether your revenue projections are realistic. Most hospitality lenders treat STR reports as a required document, not optional.

Can first-time hotel buyers get financing?

Yes, but the path requires extra preparation. Lenders evaluate sponsor experience as a core underwriting criterion. First-time buyers can strengthen their applications by partnering with an experienced hotel management company, bringing on a co-sponsor with hospitality credentials, or demonstrating transferable skills from related industries. SBA programs are often more accessible for owner-operators entering the hotel space.

How long does hotel loan underwriting take?

Timeline varies by loan product and lender. SBA loans typically take 60-90 days from application to closing. CMBS and bank loans can close in 30-60 days when the borrower submits a complete package upfront. Delays almost always stem from missing documents, unclear PIP scope, or financial projections that require rework.

What documents do lenders need for a hotel loan in 2026?

A complete hotel loan package typically includes: trailing 12-month departmental P&Ls, 3 years of operating statements, STR competitive set reports, the current or pending PIP with cost estimates, a pro forma with conservative assumptions, borrower financial statements and liquidity verification, and a franchise agreement (if applicable). Submitting all documents upfront is the single most effective way to prevent underwriting delays.

Conclusion

Hotel deals stall in underwriting for fixable reasons. Weak NOI documentation, unresolved PIPs, mismatched lenders, missing STR data, thin DSCR margins, inflated projections, and sponsor experience gaps all share a common thread: the loan package wasn't built for the lender's actual criteria.

The borrowers who close do their homework before they apply. They pull their STR reports, stress-test at realistic rates, scope their PIP costs with independent contractors, and target lenders who actually fund hotel deals. None of this is complicated. It just has to happen before submission, not during it.

If you're preparing a hotel acquisition, refinance, or renovation loan in 2026, start by pressure-testing your package against the seven pitfalls above. And if you want multiple lender options without weeks of cold outreach, Bridge Marketplace can match your deal to hospitality-focused lenders in 48 hours.