Previously dominated by large hotel chains, the hospitality industry has seen a shift towards small, independent businesses offering luxurious and personal guest experiences. Even in the wake of COVID-19, independent hotels are reopening their doors to serve a wide array of visitors searching for a unique place to stay.
A boutique hotel typically has no more than 100 rooms, although many are much smaller. Not all boutique hotels are independent businesses. In fact, over the last few years, we've seen a rise in chains of boutique-only hotels, such as umbrella companies owning two or more hotels.
It's not just the size that makes a hotel 'boutique'. A boutique hotel typically has its own unique style and sometimes even a theme throughout the establishment. In a boutique hotel, you may find original artwork, features of the original building, furniture made by local designers... and many other unique facets that make this hotel extra special.
If you are considering opening a boutique hotel or already own one and are planning redevelopment, you will need to assess your hotel financing options. Considering your operational costs, business plans, and future developments, Rangewell can help you find and secure the right hotel finance for your boutique business. Ready to start your hotel loans application?
Get in touch with Rangewell today or keep reading to learn more about how finance can transform your boutique hotel and the types of funding available to you.
Opening a boutique hotel
The rising popularity of boutique hotels has led many hotel developers to shift their attention to small, luxurious developments rather than larger establishments. The benefits of running a boutique hotel include lower utilities, smaller property values, less staff and generally lower running costs for hotel owners.
The hotel startup cost depends heavily on the property you choose, whether it is leasehold or freehold and whether it requires significant redevelopment before opening the doors to guests. So, if you are planning to acquire a property for your boutique hotel, here are some factors to consider:
Freehold or leasehold: The type of property ownership depends on whether you own the land and the building or just the building and lease the land. The prior is often preferred but much more expensive as the land brings with it significant value. In contrast, leasehold is more common for hotels, especially those in urban settings. A leaseholder is expected to pay maintenance to the freeholder, i.e. the person or company who owns the land.
Planning permission and change of use: Many boutique hotels start their lives as another kind of property, such as a stately home or disused department store. As a result, you may need to apply to the council for a change of use and additional planning permission before starting the development of your boutique hotel.
Room capacity: If the property is already a hotel, then this might be an easy question to answer. However, if you intend to convert a property or build from the ground up, you will need to consider the number of rooms you will have and how all the other facilities will fit around that.
Local competition: Be careful when choosing an area and consider the location of your hotel in your business plan. Are there already established boutique hotels in the local area? If so, take the time to create a sales and marketing plan to ensure your property stands out from the crowd.
There's a lot more to consider, but there are just a few starting points to get you thinking. If a boutique hotel fits your business model, then be sure to contact Rangewell to organise suitable finance for your development.
We have a team of dedicated experts who can access the whole of market, including a number of specialist hotel finance lenders, so you can rest easy knowing the hotel financing rates and terms we can provide are the very best for your circumstances. Contact us today to start your application.
Boutique hotel redevelopment
Whether you are transforming one type of property into another or renovating an existing boutique hotel, development finance might be just what you need to get the project off the ground and through to completion.
A typical hotel redevelopment relies on a number of different funding sources, including investment from you - the owner - as well as private investors, lenders' finance and possibly even cash from growth capital companies. Securing and maintaining the right investment mix is critical to the success of any hotel development project. You want to ensure you have the right financial backing to ensure your project is a success.
Redeveloping a hotel could be anything from updating a few rooms through to renovating or even building a new wing. As a result, the type of finance you need will differ greatly. It's not just about how much you can lend, but also the terms and interest rate on offer impact the success of your project.
A boutique hotel redevelopment may differ from that of a traditional hotel in a number of ways. Firstly, owners of boutique hotels tend to own fewer properties than large, corporate hotel chains. In addition, these buildings are more likely to be Grade-II listed or on a conservation area, as the charm of a boutique hotel really does lie in what makes it unique. For these reasons, it's important to work with a finance specialist who understands the needs of boutique hotels like yours and can advise accordingly.
While it depends heavily on your circumstances, the most common types of finance available to hotel developers for this project are hotel bridging loans, secured and unsecured loans and even Jigsaw funding - a combination of different loans - alongside other finance products both long and short term.
Ready to start your boutique hotel finance application to fund all or part of your redevelopment plans? Get in touch with Rangewell's team of experts today, and we will search the whole of market to find the right finance for you.
Refinancing a boutique hotel
There are many scenarios in which you may consider refinancing your boutique hotel. Refinance is an effective means of consolidating debt and improving cash flow, both of which are common challenges facing hoteliers in the post-pandemic world.
You may require hotel refinance if you have taken out a bridging loan or another short-term funding package to cover the initial land or property purchase. Typically, developers will then refinance in favour of a better suited long-term solution to support their future plans.
In addition, hoteliers who are still feeling the effects of the COVID-19 pandemic and, in particular, the several national and local lockdowns may find that now is an excellent time to refinance. While the government did offer business support packages, many companies felt this did not match the severity of the financial impact. As a result, hotel owners turned to lenders for short term finance.
Since then, hotels have reopened their doors, and the return of guests has resulted in improved cash flow and profitability for many establishments. When your circumstances change, it is often a good idea to take another look at your finance with an expert advisor by your side, as you could make savings or secure better terms on another finance product.
Another reason boutique hotel owners may choose to refinance is to consolidate debt. Whether your circumstances have changed or you are looking for investment for a new development project, make sure you work with Rangewell to secure the best finance for your boutique hotel business.
Types of boutique hotel finance
Now we've explored some of the scenarios in which finance can help transform your boutique hotel business; it's time to examine the types of finance available to hotels like yours. Of course, it's important to get financial advice tailored to your situation, so we recommend speaking to Rangewell about whether any of the following suit your needs.
Common types of boutique hotel finance include:
As the name suggests, bridging finance is designed to 'bridge a gap' where finance is required. As a bridge loan can typically be secured and paid out within a matter of days, it is a good choice for hotel owners buying land or property while they wait for the hotel's commercial mortgage funding.
Secured and unsecured loans
Typically, finance comes in two different types - secured and unsecured. The first refers to often large amounts that are secured against the value of a significant asset like a property - a commercial mortgage is a secured loan. In comparison, unsecured loans might be an option for hoteliers that don't own the property or lack the assets required for secured.
Refinance and debt consolidation
The pandemic brought with it a period of intense struggle for the hospitality sector as a whole. With the majority of hotels closing their doors to the public and losing almost all of their bookings, it's no wonder that they are still yet to recover.
The effects of COVID-19 will be felt for years by hotel owners. During the most difficult times, some hoteliers were able to tap into government funding, while many found this did not meet their needs and sought finance to cover the necessary costs of keeping the business afloat. Now that hotels are back to receiving income, with many even benefiting from the UK holiday boom, it might be a good time to revisit finance stacks and possibly even refinance to consolidate debt.
To find out whether this is an option for you, we recommend getting in touch with our team of experts to assess your current situation and how we can help.
Merchant cash advance
This type of finance is particularly useful for businesses that don't have the cash flow to repay large sums. Merchant cash advance is repaid via a small percentage of each payment made by your customers on your credit or debit card machine, so you don't need to organise repayment manually. This can work well for boutique hotels with bars and restaurants that take regular card payments.
This is a specialised type of loan designed to support businesses with their tax bills. Many hotels see cash flow fluctuate based on seasonal highs and lows, so paying a large VAT return or annual tax bill might come during a period of low liquidity. A tax loan allows you to spread the cost of your tax bills across smaller monthly payments in line with your cash flow.
Whether one or multiple of the above sound appealing, jigsaw funding might be just the ticket for you. This typically refers to two or more finance products put together in a bespoke package, so it requires the knowledge and skills of an experienced broker like Rangewell to assemble this type of funding.
These are just some of the most common types of funding available to boutique hotels. To find out what is available to you and how much you can lend, speak to Rangewell's team today.
Boutique hotel finance from Rangewell
With consumer confidence on the rise and the many people still choosing to holiday in the UK, it's safe to say boutique hotels are here to stay. If you are opening a brand new hotel, redeveloping an existing establishment, or even requiring a cash flow boost, you'll need an experienced finance broker.
At Rangewell, we work with hotel owners to find the best finance for them by searching the whole of market, including specialist lenders with a track record of supporting boutique hotels like yours. So, contact us today to start a conversation with one of our expert advisors and let us help you find the right boutique hotel finance to help you succeed.