Specialist hotel and hospitality property finance

A hospitality property is not valued like an office or a warehouse. In a hotel, a pub, a restaurant or a guest house, the building and the business are the same asset, so the debt is carried by the trade: occupancy, room rate and RevPAR in a hotel, covers and spend in a restaurant, wet and dry sales in a pub. Lenders underwrite the fair maintainable trade and the EBITDA the operation produces, then test the bricks-and-mortar and going-concern value behind it. Hotel finance is the specialist business of matching that trading story to the lenders who fund it.

We work with owners, operators and investors on freehold and leasehold assets, single sites and portfolios. We arrange the commercial mortgage that buys or refinances a trading hotel, the refurbishment bridging that funds a reposition before a longer-term refinance, the development finance that builds or converts a scheme, the cash-out refinance that releases equity once trade and value have grown, and the asset finance and VAT loans that sit alongside a purchase. We arrange the finance and negotiate the terms; we do not lend.

Because we sit across more than one hundred lender relationships, including the specialist hospitality desks and challenger banks that price trading risk, we take an asset to the lenders that actually fund its format. A branded budget hotel, a wet-led community pub and a coastal guest house are underwritten differently, at different leverage and on different terms. Knowing which lender backs which format, and how each reads the trading accounts, is the work.

Hotel finance is specialist commercial lending against a trading hospitality property, sized on what the business earns as much as what the building is worth. A high-street mortgage on a home looks only at bricks and a salary. A hotel, pub or restaurant is a going concern, so a lender underwrites the fair maintainable operating profit, the occupancy and rate history, the covenant of the operator, and the freehold or leasehold value behind them. The right facility, and the right lender, follow from that trading story.

What does hotel finance do?

It funds the things a hospitality business needs a large amount of capital for: buying a hotel or a pub, refinancing an existing loan onto better terms, refurbishing or extending, building or converting a new scheme, or releasing equity from a property whose trade and value have grown. We arrange each of these across our lender panel and structure the facility around the asset, the trade and the exit.

How do you finance the purchase of a hotel?

Most hotel purchases are funded with a commercial mortgage, typically covering a share of the price with the balance met by a deposit, and underwritten on the trading accounts and the going-concern valuation. Where a property is being repositioned, bought at auction or acquired faster than a term lender can move, a bridging loan can complete the purchase and then refinance onto a commercial mortgage once the trade is proven. We size the debt against the fair maintainable trade, the value and the operator, and place it with the lender most comfortable with the format.

How much can I borrow to buy a hotel?

As a guide, commercial mortgages for trading hospitality property are commonly arranged up to around 65 to 70 percent of value, with the exact figure set by the strength and history of the trade, the operator, the location and the lender. The binding test is usually debt service cover, not loan to value: the income has to cover the interest and any amortisation with headroom to spare. These figures are indicative and vary by case; the honest answer follows from your trading accounts, which is where we start.

How many years is a typical hotel loan?

A commercial mortgage on a hotel is typically arranged over a term of around 15 to 25 years, often on a mix of interest-only and capital repayment. Short-term facilities work to a different clock: bridging and refurbishment finance usually run for 12 to 24 months and are repaid by a refinance or a sale once the works are done and the trade has settled. We frame the term and the exit together, so the short-term facility always has a clear route out.