While hotel development can be a highly lucrative venture, there are high costs to consider. In the wake of the COVID-19 pandemic, the hospitality industry was hit hard, with the majority of UK hotels closing their doors for several months, with a small percentage closing permanently. Along with a shift towards flexible working, this has sparked an increase in the number of empty commercial properties in key areas - the perfect investment opportunity for hotel developers looking to kickstart a new project or acquire a struggling business.
The hotel industry is not expected to hit pre-pandemic figures until at least Q4 2022, so many hoteliers are taking this time to reflect and re-invest in projects that fit with our new way of life. The UK holiday market saw a significant boom in 2021 as many people shifted away from their usual holidays abroad due to complex quarantine requirements. The likes of guesthouses and boutique hotels have seen significant benefit from this changing attitude as holidaymakers seek to explore their own shores, some for the very first time.
So, whether you are developing a new hotel or investing in an operational business, you will need a finance partner that understands the hotel development process.
At Rangewell, we work with hotel developers to apply for and secure finance that fits their needs by searching the whole of market, including a number of specialist hotel finance lenders. We understand that your finance can make or break a project, especially during these turbulent times, so make sure you have the right support from the start.
Want to find out more about hotel finance or start your application today? Get in touch to speak to one of our specialist advisors today, or keep reading to learn more about how it works.
Why do you need hotel development finance
Hotel development finance works alongside your investment to fund the project. However, even developing a small hotel can be expensive as there are considerable costs to take into account, including land or property charges, equipment, refurbishment... and that's before you hire staff or pay for ongoing maintenance.
The type of hotel development project you're working on matters to lenders just as much as your circumstances. There are several different types of specialist finance designed for a wide range of purposes.
Hotel development could refer to any number of projects, some of the most common include:
The development of a brand new hotel
If you are building from land or intend to demolish an existing property, then you will need significant upfront investment to secure the project's future. A bridging loan is common where a big funding boost is needed for a short-term period, bridging the gap between the land acquisition and the pay-out of a longer-term finance product.
The redevelopment of an existing building into a hotel
Whether you are looking to purchase an operational hotel or another commercial building to turn it into a new hotel, then hotel finance will help you along the way. If the property is not already a hotel, you may need to apply for planning permission for change of use, and whether you have this or not might impact the type and amount of finance you can access.
Equally, if you are taking on an existing hotel in financial difficulty, you will need to speak to an expert about how this will affect your venture. In both scenarios, you will benefit greatly from having a specialist finance broker on your side.
The redevelopment or extension of an operational hotel
If your hotel is already open to guests, then you may need finance to cover both the planned renovation works as well as any loss of earnings if you have to close part or all of your business for a period of time. For example, you may consider a secured loan to fund the redevelopment, while merchant cash finance or another specialised cash flow finance product can support you through a period of reduced business.
Renovations and aesthetic improvements
If your development is on a smaller scale, finance can still help ease the burden. Small loans can be released within a matter of days, and with payments spread out over a period to suit you, this could be just the support you need to take on those pesky aesthetic improvements, keeping your hotel in tiptop condition for guests.
So, whatever scale of hotel development you are planning, specialist finance can help. Tap into industry knowledge and access finance from specialist lenders with Rangewell. Contact us today to start your hotel development finance application.
How does hotel development finance work?
Typically, a hotel development loan comes in two parts.
1. Land or property purchase
The initial part of a development loan is used to support the purchase of the land or property. In some cases, this is a bridging loan that is re-assessed in the second stage, while in others, it is simply secured against the value of the asset for the duration of the hotel project and paid back upon completion.
2. Building costs
The next phase of finance required for hotel development covers all or part of the build costs. This will usually be drawn in stages instead of being given in one amount at the start. This will typically happen once a month as work is carried out on the project.
So, while no two projects are the same, this is a common structure you may expect if you are planning a significant hotel development project.
How much does hotel development finance cost?
There is no set cost for hotel development finance as projects can vary significantly, and each lender has its own pricing structure. Even in cases where the headline rate charged is identical, the overall cost can differ greatly.
The best way to ensure you get the optimum rate for your finance is to work with an experienced broker who can scour the whole of market. It's worth noting that first-time hotel developers should expect to pay a higher rate as the lender must consider risk versus reward.
So, whether this is your first hotel project or you are a seasoned developer, reach out to Rangewell today to get expert advice from advisors who help secure finance for projects like yours every day.
Bridging loans for hotels
In some cases, a short term hotel bridging loan may be all you require for your hotel project. For example, if you are purchasing a property at auction and require evidence of funds, a bridging loan can appear in your bank within just a few days. Alternatively, if you are only redeveloping part of your hotel, a refurbishment bridge loan typically covers 6-24 months of building costs.
Hotel development finance from Rangewell
So, whatever you have planned for your hotel development, make sure you have a finance partner by your side who understands the landscape. At Rangewell, we have a team of dedicated finance experts with experience helping hotel developers to find and secure finance on the best terms.
From supporting your application through to identifying risks and communicating with the lenders, Rangewell is more than just a broker - we are your partner.
Get started with your finance application and contact Rangewell to meet your dedicated advisor today.
