£40,000 to refurbish a unique hotel: Cutting the costs of hospitality
At Rangewell, we can help independent operators find the funding they need for their refurbishment plans - and we recently provided a solution for a unique hotel.
With an increasing number of people choosing staycations, the UK hotel sector is booming.
Hotel owners have recognised the importance of providing the kind of environment demanded by today’s guests. Customers’ increasingly-high expectations mean that property owners are now investing in new services and infrastructure such as free Wi-Fi, spa treatments, gyms and pools.
Refurbishment spending in all styles of hotel, from budget groups such as Travelodge up to the luxurious end of the market, is up by more than 50% in the past few years - with more than £1billion being spent on rooms, receptions, facilities and grounds.
Moving with the times
Our client was an independent hotel that has been family-run for generations. With an island location, they provided accommodation for a range of visitors that included surfers and birdwatchers, as well as those who simply wanted to get away from it all.
“We had been relying on our location to bring in business - ours is the only hotel on the island. But we started to realise that guests were not entirely happy.”
When local property owners started to offer AirB&B, the hotel saw that they could not rely on their unique status any longer.
It is all too easy to think that the decor and furniture that has been working for years can simply go on doing so. But here is a new generation of guests who are not satisfied with the standards that their parents might have been happy to use.
Wherever you are based, guests have a choice. You cannot compete with the like of AirB&B on cost - so you must compete on quality and convenience.
Ensuites have become the norm. Rooms need to provide a quality environment - they can be nostalgic or they can be contemporary, but they must offer the highest standards of cleanliness and convenience - and be free from wear and tear.
“People come to say as a treat. They want accommodation that is at least the equal of what they have at home - and ideally better.”
With visitor numbers showing some signs of falling and guest comments showing increasing dissatisfaction, the owner realised that it was time to take action. He also realised that a major programme of updating and refurbishment had become essential.
His plans included:
- Providing ensuite facilities in those rooms that did not already have them
- Installing contemporary furniture rather than the nondescript items that had been in use for years
- Updating lighting to modern LED systems
- Installing wifi
- Creating a welcoming new bar with a contemporary theme
He worked out the costs involved, and realised that he would need to spend around £40,000, so started looking to find the most cost-effective way to provide the funding.
A cost-effective solution
At Rangewell, we know that Asset Funding can be the most appropriate way to provide equipment of all kinds, and this can include furniture for a hotel. Plus, rates as low as 4% can be offered for Asset Finance. Finance costs can be kept low because a lender can take the assets if repayments are not made - thus eliminating the risk.
However, with a refurbishment project, some of the cost will be for decorating work, and for ‘soft’ assets such as carpet. These have no potential resale value, and so cannot be covered by conventional Asset Funding.
This can drive up the cost of funding a refurbishment project, as a lender will focus on the soft assets and only offer a rate to reflect the cost of financing them. The best rate our client could secure would mean paying 10% interest on a loan over four years. So he turned to us help with finding a better deal.
We saw that, by splitting the funding into two parts, we could cut the client's costs substantially - which meant finding funding for all the ‘hard’ assets, such as furniture and equipment, with a suitable Asset Finance deal and providing the other funding with an Unsecured Loan.
We were able to provide the funding for the asset side of the refurbishment project for around 6% - ensuring a major reduction in monthly repayment costs.
By maximising lending on the assets, we could keep the cost for the other aspects of the refurbishment work to a minimum.
It is an approach that only an independent service like Rangewell can arrange.
At Rangewell, we’re an Access to Finance specialist working with over 350 lenders to offer you an overview of more than 23,000 business finance products, including hotel finance. That means, whatever your hotel funding need, a call to us can save you money.