For decades, first-generation hoteliers built their businesses with a focus on ownership and operations, cementing a strong foundation in the hospitality industry. Today, the second and third generations are not only continuing this legacy but also expanding their reach into broader real estate investments, requiring increased access to capital. As the industry evolves, so must the financial resources available to hoteliers, mainly through essential programs like the Small Business Administration (SBA) 7(a) and 504 loans. With the recent reintroduction of the Loans in Our Neighborhoods (LIONs) Act designed to increase SBA 7(a) and 504 loans from $5 million to $10 million, the opportunity to expand funding options has never been more critical.
Survey Results: The Need for Greater Access to Capital
The hospitality industry thrives on investment, whether in property acquisition, renovations or expanding portfolios into new markets. However, securing financing remains a significant hurdle. Traditional lending avenues often fall short for hotel owners, who face unique challenges, including stringent underwriting criteria, fluctuating market conditions and the capital-intensive nature of hotel ownership.
A recent survey by AAHOA on SBA 7(a) loan usage underscores hotel owners' reliance on this program. Over two-thirds (67.8 percent) of respondents reported utilizing an SBA 7(a) loan, demonstrating its vital role in funding hotel acquisitions and improvements. However, a substantial portion of borrowers (35 percent) tapped into the upper end of the current $5 million loan limit, indicating that many hoteliers are already pushing the boundaries of what this program allows.
Bridging the Funding Gap with the LIONS Act
The LIONs Act, recently reintroduced this term by Reps. Shri Thanedar (D-MI) and Mark Alford (R-MO) and Sen. Thomas Tillis (R-NC) seeks to raise the SBA 7(a) and 504 loan cap from $5 million to $10 million—a move that directly addresses the financing limitations faced by hotel owners. The demand for higher loan limits is evident: when surveyed, an overwhelming 89.5 percent of respondents expressed interest in applying for a larger loan if the cap were increased. The message is clear: $5 million is not enough.
Raising the cap to $10 million would empower small business owners to invest more freely, driving economic growth and job creation within the hospitality sector.
The Changing Landscape of Hotel Ownership
While first-generation hoteliers focused primarily on single-property ownership and operations, subsequent generations are diversifying into real estate development, mixed-use properties and larger-scale investment opportunities. This shift underscores the need for flexible and robust financing options. With an increased cap, the SBA 7(a) and 504 loan program can serve as a bridge for these hoteliers as they transition from individual ownership to broader real estate ventures.
Moreover, the expansion of loan limits would support hotel development and provide critical funding for renovations and rebranding efforts—key factors in maintaining competitiveness in a fast-changing industry. Many hotel owners are looking to upgrade their properties to meet evolving guest expectations, but these efforts require substantial capital investment.
What's Next: Advocacy and Action
The strong response from AAHOA members regarding the LIONs Act serves as a clear call to action. Policymakers must recognize the impact that higher loan limits would have on small business owners. With bipartisan support, there is a real opportunity to drive legislative change that benefits both hoteliers and the broader economy.
In the coming months, continued advocacy efforts will be critical. Hoteliers must engage with lawmakers, share their financing challenges and emphasize the role that increased capital access plays in sustaining and expanding their businesses. AAHOA remains committed to championing this cause and ensuring that the hospitality industry has the financial tools it needs to succeed.
Conclusion
The hospitality industry stands at a crossroads, with new generations of hoteliers poised to expand their influence beyond traditional ownership into broader real estate ventures. However, without adequate access to capital, these opportunities remain out of reach. The LIONs Act presents a timely solution and the overwhelming support from hoteliers emphasizes its necessity. By increasing SBA 7(a) and 504 loan limits, we can unlock new potential, foster economic growth and ensure that the next wave of hotel owners has the resources they need to thrive. The time to act is now.
Laura Lee Blake is the president and CEO of the Asian American Hotel Owners Association (AAHOA).
This article was originally published in the May edition of Hotel Management magazine. Subscribe here.