Hotel Finance

The very nature of hotels means that complex and international ownership structures are the norm. Properties are often located in various countries, and they are held through different corporate structures. Working with lenders who are comfortable with international lending and understand how your properties are structured is critical to success.

With hotel financing, every transaction is unique. The corporate entities and geographies covered in every deal will be different, so every deal will need to be financed and structured from scratch. You will also need to ensure your finance is optimised from a fiscal perspective.

The complexity of your structures and how international your deal is will also influence how you structure your loan and the lender's Enness approaches. For example, a £15 million loan to purchase a boutique hotel through a privately-owned corporate structure is very different from a £100 million loan for a large business with multiple investors and stakeholders who all have interests in the deal.

Enness has close contacts with all the lenders who offer hotel finance for international deals. No matter how complex your ownership structures are, or if you need finance for a project with an international element, Enness’ broker will source the best hotel finance deal for you. You will also benefit from the team’s ability to optimise the tax efficiency of your finance with an advantageous legal structure.

Whenever you want to borrow capital, your lender will want to understand how you run your hotel(s) and the agreements and processes you have in place. Lenders are looking at lots of different things, but a couple of points will be especially important. The first is that your lender will want to ensure that any potential deal is structured so that nothing constrains them from taking over the asset(s) if you default on loan repayments. Secondly, the finance deal will need to be planned carefully around the operating structure you have in place, rather than trying to fit a package deal: hotel financing is always bespoke.

There will also be other considerations. Your lender will need to ensure that you can take on a loan – some management agreements can limit how much capital can be borrowed as a % of the property’s value, for example. In other cases, some stakeholders can also veto a lender, so having all parties on board and working together is essential. This point is particularly important when multiple stakeholders are involved in your hotel's management, lease, and operation.

Repayment will also be a critical piece of the puzzle. Lenders will need to see that the entity making repayments can prioritise repayments to the lender ahead of other financial commitments. In some cases, this can mean that amendments need to be made to management or lease agreements, effectively deferring financial obligations or payments and favouring loan repayments to your lender. Lenders will want to see a willingness from all stakeholders to undertake these changes.

In principle, how you operate your hotel will not affect your ability to access finance, although it will affect how the deal is structured. For example, your structure may well influence how much you can borrow, and in many cases, lenders may need to enter into additional agreements with different parties to protect their interests.

Developing a hotel is no easy feat and generally requires very significant capital. Specialist lenders tend to be the go-to players for hotel development finance due to the complexity of these types of transaction.

Where commercial property is often 'good to go' at the end of development, hotels are a different ballgame entirely. Even the best hotels can take some time to get into a profit-making position, and lenders will factor this

in carefully. Lenders will look very closely at where you plan to build or the property you plan to buy. Like traditional commercial developments, lenders will look at the whole project to determine how much (and if) they want to lend. The reputation of your partners, suppliers and builders, how much experience you have, where you will develop your project, the market the hotel will serve, and the loan-to-cost ratio will all be carefully considered. The hotel's launch, marketing the hotel, its management team, projected occupancy/income and how long it will take to reach normal occupancy levels will also make a difference. You will need to have a rock-solid financial case to take to lenders and be prepared for lenders to go into very explicit detail to see if your numbers and timeline add up.

As with any type of borrowing, you will have several options for hotel development finance. Enness will help you find the most competitive deal in terms of rates. Your hotel development broker will also be able to negotiate advantageous terms for you and work with your team to structure your finance in the most advantageous way.

Getting the best hotel finance is rarely a straightforward case of approaching a few lenders and negotiating the best deal. Lenders often have specific interests in certain types of deals. Even if you have worked successfully with one lender before, the details of your next project may mean you need to approach other institutions for subsequent transactions. As well as your own interests, the needs of multiple stakeholders will generally need to be considered. Managing everyone’s interests as well as your own can be challenging if you are sourcing and negotiating finance alone.

Enness will help you source competitive finance that meets your needs as well as satisfies the requirements of the other parties with an interest in your deal.

In addition to having close relationships with all lenders in the hotel finance marketplace, Enness’ hotel finance brokers understand how hotels run and the different ways that they operate and are managed. You will benefit from a competitive deal, structured in a way that meets your broader needs and long-term objectives.

Hotel finance can be structured in several ways depending on the nature of the asset, operating model, and business objectives of the borrower.

Common solutions include investment loans secured against stabilised, income-producing hotels, development finance for new hotel construction or conversion projects, and bridging finance for acquisitions or repositioning strategies. In some cases, refinancing solutions are also available to restructure existing hotel debt or release equity for reinvestment.

Lenders will typically assess factors such as trading performance, occupancy rates, RevPAR (revenue per available room), location, brand strength, and operational structure, whether the hotel is owner-run, franchised, leased, or operated under a management agreement. More complex ownership or international structures may also be considered by specialist lenders with cross-border experience.

Working with a specialist broker helps ensure the most suitable lender is matched to the asset type and operating model, particularly where performance history, structure, or jurisdiction adds complexity to the transaction.

Hotel finance is structured differently from standard property lending, as it is underwritten against both the physical asset and the performance of the business itself. Lenders do not rely solely on the value of the property, but instead assess how the hotel operates, including its revenue profile, occupancy levels, and projected EBITDA.

The process typically begins with a detailed review of the asset and its market position. This includes analysing location, demand drivers, and the competitive landscape to understand how the hotel is expected to perform over time. From there, lenders assess operational performance, focusing on both historical trading figures and forward-looking projections to determine the hotel’s ability to service debt.

Funding is then structured according to the nature of the transaction. This may involve senior debt for acquisitions or refinancing, with additional layers such as mezzanine finance or equity introduced for more complex or development-led projects. The level of leverage and pricing will depend on both the strength of the asset and the experience of the operator, with stronger fundamentals typically supporting more favourable terms.

Because hotels are operational assets, facilities are often accompanied by ongoing reporting requirements and performance-based covenants throughout the loan term. This reflects the fact that lending decisions are based not only on the property itself, but on the sustainability of the business behind it.

Structuring the right facility therefore requires aligning the financing with both the asset and its long-term operating strategy, particularly in higher-value or more complex transactions.

Enness arranges hotel finance through a global network of specialist lenders and private banks, structuring facilities to reflect the operational and financial dynamics of each project.

Financing a hotel purchase typically involves structuring a combination of equity and debt, with lenders assessing both the value of the asset and the performance of the underlying business. Unlike standard real estate transactions, hotel acquisitions are evaluated on their ability to generate consistent revenue, making operational performance a central part of the funding process.

In most cases, investors will contribute an element of equity, often in the region of 30-40% of the purchase price, with the remainder funded through senior debt provided by banks or specialist lenders. For more complex or higher-leverage transactions, additional layers of capital, such as mezzanine finance or structured debt, may be introduced to optimise the overall funding structure.

Lenders will undertake a detailed review of the hotel’s historical and projected performance, including occupancy levels, average daily rate (ADR), and EBITDA. The strength of the operator, brand positioning, and the asset’s location also play a critical role in determining both the level of leverage and the pricing available.

For transactions where timing is critical, short-term bridging finance may be used to secure the asset quickly, particularly where a repositioning or refinance strategy is planned. This is often followed by a longer-term facility once the hotel’s performance has been stabilised or improved.

Given the operational and capital-intensive nature of hospitality assets, structuring the right mix of funding is essential. Early engagement with lenders and a clearly defined strategy can have a significant impact on both execution and the terms achieved.

Enness arranges hotel acquisition finance through a global network of lenders and private banks, structuring funding solutions that align with both the asset and the long-term objectives of the investment.

Hotel finance can be structured in several ways depending on the stage of the project, the profile of the asset, and the objectives of the investor. Rather than a single product, it typically involves a combination of funding solutions tailored to the lifecycle of the hotel and the complexity of the transaction.

Acquisition finance is commonly used to support the purchase of an existing hotel, with facilities structured around both the asset value and its trading performance. For new developments, development finance is used to fund construction costs, often released in stages as the project progresses and subject to detailed monitoring by the lender.

Where an existing hotel requires repositioning, refurbishment or capital expenditure, lenders may provide dedicated refurbishment or capex facilities designed to enhance the asset’s performance and long-term value. In situations where timing is critical, bridging finance can be used to secure a property quickly, with a view to refinancing onto a longer-term facility once stabilisation has been achieved.

More complex transactions may involve layered structures, including mezzanine finance or other forms of structured debt, particularly where higher leverage is required or where the capital stack needs to be optimised. These structures are typically tailored to align with both the operational profile of the hotel and the broader investment strategy.

Given the operational nature of hospitality assets, the most effective financing solutions are those that combine flexibility with a clear understanding of how the hotel performs over time. Structuring the right mix of funding is therefore essential to supporting both execution and long-term returns.

Enness arranges a wide range of hotel finance solutions through a global network of lenders, structuring facilities that reflect the complexity and scale of each transaction.