Running a hotel can be a highly competitive venture as there are always new businesses popping up across the country. The rise of Airbnb and third-party booking sites has meant that visitors now have a lot of information about every hotel at their fingertips, giving them the power to choose any hotel they want.
Finding success as a hotelier is all about providing unparalleled service and building both a loyal customer base and a constant influx of new guests. In order to stand out in this growing market, you need to invest in your property - that's where hotel refurbishment comes in.
Whether you have recently purchased a hotel or are looking to renovate an existing property in your portfolio, you'll need the right funds to make sure the project is delivered to your specifications and within the desired timeframe.
Hotel refurbishment can be costly as it requires a lot of work, but you also must consider any loss of income caused by partial or full closure of your business for the duration of the work. This is one of the many reasons it's worth working with an experienced hotel finance broker to find and secure the right investment to complete your project.
Here at Rangewell, we work with hotel developers and owners to secure business loans of all types, including specific refurbishment loans that allow businesses like yours to take their offering to the next level. Want to learn more about hotel refurbishment finance or begin your application today? Get in touch with Rangewell or keep reading to learn more about why development finance can help and how it works.
Why do you need hotel refurbishment finance?
Refurbishing any commercial property can be expensive. Even light renovations require a significant upfront investment, so it's no wonder that many hotel owners put off refurbishment until it causes bigger problems for the business.
Refurbishment covers a broad range of development work, from aesthetic changes all the way through to renovating whole areas of your hotel. Perhaps it's time to refresh your hotel rooms, or you want to rebrand the bar or restaurant in your hotel... whatever your ambitious plans, it's important to have the right finance to support the project.
As part of the finance project, you will need to provide a comprehensive refurbishment plan, including proposed costs and timeframe. With this information, we can help to determine the best type of loan to support your project.
Kick off your refurbishment with a hotel development finance loan; speak to Rangewell today.
How does hotel refurbishment finance work?
While there are many different kinds of refurbishment loans, most are calculated in the same way. A typical hotel refurbishment loan is based on the gross development value (GDV) of the planned project, i.e. the proposed value of the project upon completion. You may also see this referred to as the post-refurbishment works value.
Refurbishment loans range from £100k to £10m. Depending on the project, your application and your business background, lenders may provide up to 70% of GDV releasing funds in stages. If you are both purchasing and redeveloping a hotel, then we can help you with both the hotel commercial mortgage application and any other funding support to get your project started.
Depending on the scale of your project, loan terms of between 18-and 24 months are available, and there may also be short-term solutions like bridge loans to support cash flow between finance periods.
Typical fees associated with hotel refurbishment finance include:
- Arrangement fees: These are charged by the lender and are typically 1.5-2% of the total loan amount.
- Exit fees: Usually chargeable when a loan is cleared. However, not all lenders will charge exit fees.
- Valuation fees: Fees associated with the valuation process so the loan can be secured against an accurate GDV
There may be other costs to consider when applying for hotel renovation finance. To make sure you fully understand the costs and get access to the best possible finance product for your project, speak to Rangewell's team of experts for independent financial advice.
Who can apply for hotel refurbishment finance?
In order to access hotel refurbishment finance, you will need a hotel property as loan security. Like traditional loans, the lender will take control of the property if the loan is not repaid.
Other requirements include the submission of a business plan or development plan that demonstrates how you intend to spend the money, as well as any information about existing hotel loans and other investments.
To find out if you are eligible for hotel financing to fund a refurbishment project, speak to Rangewell's team of experts. We help hotel owners to find and secure finance. We search the whole of market, including traditional lenders and commercial lenders, to find the best finance and rates.
Types of hotel refurbishment
Hotel finance is a broad term. What you can access depends greatly on your circumstances and business plan, but knowing which finance to choose depends on your plans.
If you simply plan to redecorate your hotel, this is considered minor refurbishment. In most cases, this is work that needs to be carried out regularly (every few years) to keep the property up to a good standard. This may also be referred to as light refurbishment.
Typically, your business will remain operational while undergoing minor refurbishment with some areas closed to the public for safety. Any light refurbishment work should not require planning permission, change of use or structural work - think carpet fitting, lighting repairs and painting.
Major, or heavy, refurbishment covers anything larger than what we mentioned above. If you are building a new wing, changing the structure of your existing property or even acquiring a new property, then this is considered major work.
Since these projects are typically a lot more expensive and require longer-term financial support, you will need to provide a detailed breakdown of the work and all projected costs involved in the project, along with a timeframe. The lender will usually carry out an independent valuation to ensure the accuracy of this information. For major projects, lenders will also request evidence of your past projects.
Remember: lenders make decisions based on risk, so the more information you can provide, the better. As independent finance brokers, we help hoteliers to get the best possible hotel business loans for their circumstances. This includes supporting the application process and identifying any risks or issues that lenders may have with your finance request. Then, we search the whole of market to match your application with the right funding to turn your refurbishment plans into a reality.
Types of hotel finance for refurbishment
While a traditional development loan may be perfect for you, it's always worth taking the time to assess all of your options. Other common types of hotel finance that may benefit refurbishing businesses include:
As part of your refurbishment, you will likely be purchasing new assets such as office equipment, kitchen appliances or even furniture. Asset finance is a great way to fund such activity as you can spread the cost of these expensive purchases over a long period of time, rather than paying in bulk at the same time as the other refurbishment costs.
This type of loan is specifically designed to support the purchase or lease of assets, so ideal if you are looking for ways to fund these acquisitions.
Hotel bridge loans are short-term funding solutions that 'bridge' a funding gap. In one of the most common instances, a bridge loan will help kick off an acquisition or development while the main finance product is awaiting approval from the lender. Since bridge finance is typically short term, the funds are usually released quickly (sometimes within days).
Refinance and debt consolidation
If you already have a number of finance products secured to your hotel, then it's worth speaking to Rangewell about whether now is the right time to refinance your hotel. By refinancing your existing arrangements, you may get access to better terms or even improve your position for additional funding applications, thus improving your chances of getting the very best hotel refurbishment loan.
Whatever your plans, we'd love to hear from you. By supporting you throughout, we help to make what is typically a very complex and confusing process into a smooth and efficient application. Contact us today to find out what type of finance is right for you and to start your application.
Finance your hotel refurbishment with Rangewell
Refurbishing a hotel is a costly and time-consuming process to make sure it runs as smoothly as possible and reduce downtime for your guests. There's no better time to transform your hotel and stand out from the crowd, so get the financial backing you need to realise your refurbishment plans with Rangewell.
Your finance stack could make or break your project, so work with the experts at Rangewell to make sure you have the right funding for your refurbishment. Whether you're planning light work or a full building restoration, we can help. Get in touch today to speak to one of our expert team members about hotel refurbishment finance.