An accurate valuation of your hotel’s worth is often necessary to obtain hotel financing arrangements and provide added information for owners, investors and stakeholders. Understanding the valuation methods used to determine this figure can help assess the current value of your hotel more effectively. This can allow you to make practical business decisions regarding acquisitions, renovations and hotel financing options.
Three Primary Valuation Methods
Real estate appraisers and hotel valuation firms typically use one of three methods to determine the actual value of a particular property. These three methods may be tweaked to produce accurate information about the hotel’s value in the market.
- The income approach for valuation looks at cash flows and uses a predictive method to determine the likely revenue streams for the hotel. This can help in determining hotel loans based on valuation of an existing property. Past results are not a guarantee of future performance. However, lenders often request historical data on occupancy rates, profits and revenue streams when applying the income approach to property valuation.
- The cost approach is based on the idea that the hotel is worth as much as it would cost to rebuild less any depreciation. The value of the land on which the hotel sits will also be factored into this valuation.
- The market comparison approach uses comparable properties in similar markets to determine the most accurate selling price for a specific hotel. The amenities, physical characteristics, size and capacity of the hotel will be taken into consideration. Special features or distinctive advantages or disadvantages of the property will also be considered.
Each of these methods can provide valuable information on the actual worth of your hotel investments. With accurate information, the likelihood of success in acquiring hotel construction financing for new projects or acquisitions increases.
At Stonehill, we offer many hotel financing options for investors. We work with our clients to ensure the best lending solutions for every need. Our commitment to going above and beyond for those we serve is demonstrated in every transaction we handle. If you need hotel financing, call Stonehill today at 713-666-2544. We look forward to the chance to serve you.
Acquiring the right hotel construction financing is essential to achieve solid returns on your financial investment. A thorough approach will help your company secure the best loan options for an acquisition, construction or renovation project. A few key strategies are required to bolster your chance of obtaining competitive loans and terms.
Know What You Want
The first step in your loan acquisition process is to determine the amount of funding needed and terms that will be most favorable. Achieving a clear idea of what is needed helps tailor the loan application to your own specific set of needs.
Organize Your Documentation
Before applying for hotel financing, be sure to organize data and documentation in a clear and easy-to-understand way. Preparation and organization give a positive impression on potential lenders, which will increase the likelihood of acquiring hotel loans on the terms you prefer.
Create an Executive Summary
An executive summary is a condensed version of the details of your project plan and loan proposal. This document is designed to streamline the evaluation process for lenders. An executive summary makes it easy for lending companies to assess your financing proposal quickly. This may increase the odds of success in acquiring preferable hotel construction financing.
Perform the Necessary Research
A competitive set is a list of properties that are comparable with the hotel property your company intends to develop. Obtaining historical data and details on available amenities with competition will help your company compare market trends to support your lending request. Market research on average rates, revenue and occupancy levels ensures a profitable investment and supports the funding requests to lenders.
At Stonehill Strategic Capital, we specialize in providing lending options for companies throughout the hospitality industry. We offer bridge, mezzanine, permanent, preferred equity and Small Business Administration lending options tailored to the precise needs of our clients. As a leading direct hotel lending institution, Stonehill provides the best solutions and the proven experience for your next project. Call us today at 713-666-2544 to discuss hotel construction financing with our knowledgeable loan originators. We are here to serve you.
Some of the most iconic and luxurious hotels in the world are undergoing renovations and updates to ensure their continuing success in the hospitality industry. The right hotel financing options are critical to provide financial support for these major projects. Many large-scale renovations and reconstructions are occurring in the hotel industry this year.
The Hotel Okura in Tokyo
A landmark location next to the U.S. embassy in Tokyo, the Hotel Okura began reconstruction in 2015 and is expected to reopen in September 2019. The project is estimated to cost $979 million and will feature two new towers with a combined total of 18 stories worth of office space.
The Mandarin Oriental in Hyde Park, London
With a grand reopening date sometime in Spring 2019, the Mandarin Oriental will hope for better luck with this renovation project. After completing an upgrade and refurbishment project in 2018, the newly remodeled hotel was severely damaged by fire just one week after its opening. Three bars and a spa and fitness center opened in December 2018.
One Aldwych in Covent Garden, London
Another London property, One Aldwych in Covent Garden, will enjoy an update courtesy of designs by Robert Angell, a leading creative force in the hospitality industry. There is no word yet on the type of hotel construction financing chosen for the upgrade to the 150 rooms of this establishment. Four new suites and enhanced technological support are among the most important changes to this London icon.
The Grand Hotel Quellenhof in Switzerland
Closing in February 2019 and expected to remain offline for four months, the Grand Hotel Quellenhof is part of the Grand Resort Bad Ragaz. This is a popular stop for guests interested in spa treatments at the thermal waters of the Tamina gorge. Founded in 1869, the Grand Hotel Quellenhof is undergoing a much-needed update and renovation. The project is expected to cost about $42 million.
Raffles Hotel in Singapore
The renovations that began in 2017 are still underway at this instantly recognizable and iconic hotel. The Raffles Hotel will incorporate restaurants by famed chefs Anne-Sophie Pic and Alain Ducasse. The hotel will also feature soundproofed rooms and improved access to electric outlets. A careful balance has been struck, however, between the necessary upgrades and the classic aesthetic of this one-of-a-kind hotel.
At Stonehill, we offer innovative hotel loans designed to suit your needs and to help you make the most positive impression on your guests. We provide hotel financing for renovations, rebuilds and new acquisitions for clients in the U.S. and around the world. Call our office today at 713-666-2544 to discuss your hotel financing needs with us. We look forward to the opportunity to serve you.
Finding the right hotel loans help you make the most profitable investments in the hospitality industry. By monitoring current trends in the financial marketplace, you gain the understanding of right funding options for your upcoming acquisitions, renovations or expansions. There were many trends in the hotel lending marketplace for 2018 and 2019.
Increased Fluidity in the Hotel Financing Marketplace
While values and sales have remained strong throughout 2018, the hotel financing market has been booming for investors and hotel owners. Private equity arrangements are gaining in popularity for acquiring and financing larger chain hotels and franchises. For smaller hotels, alternative lending options are developing into the traditional financing marketplace.
A Slowdown in New Construction
Demand for hotel accommodations and new properties in many areas are strong. However, most experts believe that hotel construction financing will continue to see a downturn in 2019. At least part of the recent slowdown in new construction is associated with tariffs on building materials coming from overseas. This has led to slower growth in the hotel construction field and reduced the need for funding.
Increased Renovation and Refinancing
In 2018, lenders saw a marked increase in the refinance market. This trend is expected to continue through 2019, as hotel owners and investors hang on to properties rather than attempting to sell them. Rising interest rates also make accessing equity in existing properties more appealing than acquire financing for new hotel acquisitions. Finding the right hotel loans and solutions allow for flexibility in managing upgrades to existing hotel properties.
Shopping for the Right Lenders
For most real estate investors, the right lending has a significant impact on the profitability of their hospitality investments. For 2019, these investors are likely to be particular about the lenders they work with for their financing needs. Working with a leading company in hotel lending helps investors to obtain the right arrangements for their funding requirements.
As an established leader in the hotel lending marketplace, Stonehill provides a wide range of financial options for investors in need of solutions. We offer a variety of loans designed to suit the needs of our clients perfectly. Call us today at 713-666-2544 to discuss your hotel loans and financing requirements and to schedule a consultation with us. We look forward to the opportunity to serve you.
Selecting the right hotel financing can have a real impact on the success of your investment in these facilities. Determining whether equity or debt financing is the right choice for you can be a challenging task. Here are some tips on choosing the most practical loans and hotel financing options for your renovations, constructions or acquisitions in the hospitality industry.
Cost Advantage: Equity Financing
In most cases, equity financing can be obtained at a much lower cost than other hotel loans. By selling shares in your property, you can take advantage of your existing equity to access the funding you need to manage renovations and new acquisitions while keeping the costs as low as possible for you and your company. In some cases, the only out-of-pocket costs you will incur will involve the legal process necessary to transfer ownership interests in your company and the fees associated with that process.
Control Advantage: Debt Financing
While taking on additional debt may not be especially appealing for your business operations, equity financing arrangements may limit your ability to make unilateral decisions about your hotels and the ways in which they are managed and renovated. Taking on partners is always a balancing act between acquiring necessary capital and retaining control over your projects. Determining exactly how much control you are willing to surrender to access the funding available through equity financing is an essential step in determining whether debt financing or equity financing is the right choice for your project.
Convenience Advantage: Debt Financing
Opting for debt financing can provide you with added convenience when managing your hotel construction financing requirements. In many cases, you will have a greater range of options to choose from when selecting debt financing over equity financing. The process for debt financing is typically faster than that associated with equity finance arrangements, which can sometimes drag on for months while the various stakeholders and investors in your project provide the required information and funding needed to complete this process.
Access Advantage: Equity Financing
Business loans acquired through debt financing typically require an unblemished credit record and solid collateral for approval. By contrast, equity financing can be acquired through private investors who may not be as particular about the track record of the other investors. Because they are making an investment in a property rather than a borrower, equity investors can often overlook minor problems with cash flow and credit problems in the past.
At Stonehill, we offer practical financial solutions for the hospitality industry. We can provide access to debt and equity financing solutions that work for your business and your ongoing needs. Call us today at 713-666-2544 to discuss your hotel financing requirements with our experts. We look forward to the opportunity to serve you.
First impressions can have a lasting impact. Ensuring that your hotel makes the most positive impression on guests is essential to stay profitable and relevant in the modern hospitality industry. Regular updates and renovations may even be required by your franchise through a property improvement plan (PIP) agreement signed at the time of acquisition. Renovating your hotel can be an expensive process, however. Finding the right hotel loans can help you to manage the expense and disruption of these activities more easily to maintain greater productivity now and well into the future.
Hotel Financing for Renovation Projects
The U.S. Small Business Administration (SBA) offers loan programs for small to medium-sized businesses in the hospitality industry:
- SBA 7a loans are designed specifically for the acquisition of commercial real estate and are available in amounts up to $5 million and for terms of up to 25 years.
- SBA 504 loans work in a similar way but offer larger loan amounts of up to $20 million. The loan terms are shorter and range between 10 and 20 years.
The restrictions and paperwork associated with these government-backed loans, however, can be a significant deterrent for hotel owners and managers looking for the right hotel construction financing options. There are other options for financing hotel renovations in the lending marketplace:
- Refinancing your hotel can provide you with cash on hand to manage upgrades to furniture, fixtures and equipment or to fund structural improvements. This approach typically requires that you already have significant equity in your hotel and may require you to provide a detailed plan outlining what the funds will be used for during your renovation project.
- Business lines of credit can be used to fund smaller renovations, including updating signage and replacing flooring in selected areas.
- Conventional bank loans are often available for companies that have an existing relationship with the lending institution and a clean credit record.
- Bridge loans, as their name suggests, are designed to bridge the gap between necessary funding and the acquisition of longer-term or more favorable financing terms and arrangements.
Finding the right hotel loan for your planned renovations can help you manage these necessary tasks to keep your facilities looking their best for your guests.
Stonehill offers hotel loans designed specifically to suit the needs of the hospitality industry. We can design a renovation loan that is tailor-made to supply the cash you need for your upcoming renovation project. Our expert loan originators can provide you with the right guidance and financial solutions for your hotel. Call us today at 713-666-2544 to discuss your funding requirements with us. We look forward to the chance to serve you.