Would the lender come after the partners for the whole amount of the remaining loan..i.e. whatever is left on the $4.2M or are the partners only responsible for the delta between what the lender recovers from sale of hotel and what's left on the loan?

The safer investments right now would be RE seeing as RE isn’t as heavily effected by the CoronaVirus as the stock market is right now (Major companies such as Disney closing, or JNJ and other companies with warehouses being closed, along with airlines and hotels taking a hit).

That won't work for a mini-hotel. 

The articles below mention the Volcano area specifically getting re-zoned to accommodate STRs since there aren't many hotels to serve tourists' needs. https://www.westhawaiitoday.co...https://www.westhawaiitoday.co...

Take a good look at Airdna (even the free version is a good start) as well as Hotstats.com, one of my favorite hotel intelligence sites and see how your competition (comp set) is performing.   

A lot of people prefer to be right at the hotel but I'm sure more and more people would not mind being 5-10 minutes away for more space. 

The condo and town only communities tend to be a race to the bottom with rates, far less than a hotel room and they just don't make sense (IMO)

People are viewing AirBNB as safer and cleaner alternatives to a hotel which was already viewed as being "germy". 

(I suggest using Airdna)  If you purchase a studio or 1 bedroom then you not only are competing with other vacation rentals, but hotels as well. 

I believe they are very strict with STRs and properties allowed are minimal.The city is very pro-hotel/resorts.