The hospitality industry has almost fully recovered to pre-pandemic levels.  RevPAR, or revenue per available room is overperforming for 2023 as is ADR (Average daily rate) 

When it comes to lending, special purpose facilities such as hotels, gas stations and car washes,  the desirability of lending to the asset class is cyclical.  There are very few lenders that consistently do them. 

There are lots of reasons why many lenders will pass on many hotel loans.  Some lenders do not like unflagged hotels.  Others do not like hotels with few rooms. Many do not care for hotels with exterior entrances.

The truth of the matter is, less than 1% of all banks lend to hotels.

What are the most important factors in getting a hotel loan? Direct industry experience is probably the most important factor, plus sufficient non-borrowed equity in the deal.  Loans where the borrower has no direct industry experience has a significantly higher default rate than those with experience.  

With regards to financing, we are able to do all types of financing for hospitality, such as SBA both 7a and 504, conventional, Rural Development, CMBS, bridge and private / hard money, mezzanine financing, preferred equity and REITs. What type is the best for you?  It depends on your motivation.  

You probably know that in 2024, rates are higher than they were a few years ago, regardless of the index used. .  There is no 4% money out there like a few years ago.  Right now with prime sitting at 8.5%, if you research the history of primer over the past few decades, you’ll find historical rates to be much closer to what they are than for a solid decade when prime was 2.5%.

Right now the 7a to 504 refinance option is VERY popular as most of the 7a loans have a floating rate the the 504s offer fixed rate financing.  Many hotel operators have rates in the 10s and 11s whereas with the 504 refi, you can get rates in the 7s.  Some people are savings 10s or even 100s of thousands of dollars on their note payments. 

How to apply for a loan? 

Initially the client will either fill out the online application or a longer form to submit.  We will evaluate and communicate back our level of interest.  We will then email or tell the client over the phone the documents we initially need.  After receipt, we run a transaction informally up the flagpole with a lender to make sure they are still active in the hotel lending space and get tentative quotes on rates to make sure we have given them accurate rates.