Hospitality financing programs
Each hotel financing strategy maps to a different lender universe.
- Hotel acquisition loans for stabilized and value-add hotels
- Hotel refinance and cash-out refinance
- PIP and renovation bridge loans for brand-mandated property improvement plans
- Conversion and adaptive reuse financing, office-to-hotel, hotel-to-multifamily, brand reflag
- Ground-up hotel construction with bank or debt-fund senior debt
- CMBS executions for stabilized full-service and select-service hotels
- SBA 504 and SBA 7(a) hotel financing for owner-operators
Why hospitality debt is different
Hotels are operating businesses sitting inside real estate. Lenders underwrite the operating business: trailing-twelve RevPAR, ADR, occupancy, GOP margin, and the franchise's brand health. Most senior commercial lenders simply do not underwrite hospitality risk. The ones that do, a focused group of banks, debt funds, and CMBS shops, require sponsor experience, brand credibility, and trailing performance data to clear committee.
VS Capital Group runs the process inside that universe. We know which lender will lean into a Marriott select-service in a secondary market, which lender will quote a Hilton full-service convention hotel, and which lender will finance a boutique independent in a destination resort market.
Representative hotel financing terms
Hotel debt is more bespoke than other commercial real estate, but typical terms include:
- Loan size: $5M to $300M+
- Term: 3 to 10 years (CMBS typically 5 or 10 years fixed)
- Leverage: 55% to 70% LTV; up to 80%+ loan-to-cost on construction and PIP bridge
- Pricing: SOFR + 300 to SOFR + 700 floating; fixed pricing competitive on CMBS
- Amortization: 25 to 30 years on permanent debt; interest-only on bridge
- Recourse: Non-recourse on most CMBS and debt-fund executions; recourse common on bank construction
Frequently asked questions
- Can I get non-recourse hotel financing?
- Yes. Non-recourse hotel debt is available from CMBS lenders and select debt funds for stabilized hotels with credible sponsors and acceptable brand relationships. Construction and heavy-PIP bridge loans for hotels are more frequently recourse or partial-recourse.
- What loan-to-value can I get on a hotel?
- Most stabilized hotel financing tops out at 65 to 70 percent LTV. CMBS lenders may go to 70 to 75 percent on flagged select-service hotels in stronger markets. Construction loans typically reach 65 to 75 percent loan-to-cost on the senior, with mezzanine or preferred equity layered behind.
- What is a PIP loan?
- A PIP (property improvement plan) loan is bridge financing used to fund a brand-mandated renovation of a flagged hotel, typically required at acquisition or franchise renewal. PIP loans are usually structured as bridge debt with a renovation reserve, sized to the cost of the PIP plus working capital through stabilization.
- Will CMBS finance hotels?
- Yes. CMBS conduit lenders actively finance stabilized full-service and select-service flagged hotels with trailing performance, typically at 60 to 70 percent LTV with 10-year fixed terms and 25 to 30 year amortization.
- Can I refinance a hotel out of a CMBS loan?
- Yes, subject to the original loan's prepayment provisions. Most CMBS hotel loans include defeasance or yield maintenance for the majority of the term, with an open prepayment window in the final three to six months. VS Capital Group runs a defeasance cost analysis as part of every CMBS refinancing assessment.