The Cool Way to Finance Hotels

Our moderator, Arent Fox’s Rich Brand, asked panelists about hotel chains launching new brands and categories. Brian says the demographic he’s pursuing doesn’t value a big flag, and he notes independent hotels weathered the downturn along with their bigger cousins. Maki says loyalty points matter to Baby Boomers and Gen X, but a large portion of Millennials are brand-agnostic. Bob says there are certain locations where you might be better off without a big brand if there’s an external room generator you can use instead (think beaches or convention centers). In addition, construction lenders now are more open to projects without a brand.

Rich says he’s seeing a lot of deals for limited and select-service hotels, and fewer full-service ones being built. Bob says the former have a higher profit margin because you don’t have a big spa, room service or gobs of meeting space. “It’s a rooms-only box.” Brian says the debt and equity markets love limited service because they view it as less risky. For his San Francisco project, he cobbled together EB-5 financing, historic and New Market tax credits, and a low-leverage senior construction loan.