Hotel and Hospitality Finance
Hotel and Hospitality Finance UK
Hotel and hospitality finance is a specialist area of commercial lending requiring lenders with genuine sector expertise, the ability to read trading accounts, understand RevPAR and occupancy metrics, and assess the operational risks specific to hospitality businesses. Platinum Global Bridging Finance arranges hotel finance, guest house mortgages, and hospitality property loans from £250,000 to £150m+ across the UK and internationally, through a panel of over 100 lenders. No broker fee on facilities of £500,000 or above.
What Is Hotel and Hospitality Finance?
Hotel and hospitality finance covers mortgage and bridging lending secured against hotels, guest houses, bed and breakfasts, serviced apartments, apart-hotels, pubs with letting rooms, and other hospitality assets. Unlike conventional commercial property investment, where a lease provides a predictable, contractual income stream, hospitality assets generate income operationally, with revenue dependent on occupancy, average daily rate (ADR), and RevPAR (revenue per available room). Facilities can be structured for outright purchase, refinance of an existing trading business, or to fund a refurbishment or repositioning programme.
This operational income characteristic means hospitality assets attract a specialist lender pool. Most mainstream commercial mortgage lenders have limited appetite for hotels and hospitality; specialist lenders, challenger banks, and debt funds provide the majority of UK hotel finance. The lender selection decision is critical, approaching a lender without hospitality sector expertise will typically result in a decline regardless of how strong the trading performance is.
Types of Hospitality Assets We Finance
- Hotels, budget, mid-market, boutique, and luxury
- Guest houses and bed and breakfasts
- Serviced apartments and apart-hotels
- Pubs with significant letting room income
- Holiday parks and lodges (specialist assessment)
- Hostels and budget accommodation
- Conference and events venues with accommodation
UK Hotel Market Context 2026
The UK hotel market has recovered strongly from the disruption of 2020–2022. London hotel RevPAR remains significantly above the pre-pandemic peak in nominal terms, driven by international tourism recovery and a structural reduction in new supply as development finance conditions tightened. Regional UK cities, Manchester, Edinburgh, Birmingham, Bristol, have also seen strong performance in both corporate and leisure segments, supported by growing domestic staycation demand alongside recovering international visitor numbers.
The Bank of England base rate stood at 3.75% in early 2026, its lowest level since late 2022, which has brought greater predictability to sterling-denominated hotel debt servicing costs and supported measured but steady lender engagement. Senior sterling debt for prime hotel assets is typically available at loan-to-value ratios of 55% to 65%, with margins reflecting sponsor track record and cash flow sustainability alongside the strength of the asset itself. Refinancing, rather than new acquisition, is expected to remain the primary driver of UK hotel debt volumes through 2026, as owners who fixed rates during the higher-rate years reach the end of their term.
Lender appetite for UK hotel assets has improved considerably since 2023 as trading performance data provides a clear picture of post-pandemic performance. The strongest cases, branded hotels in primary markets with 3+ years of strong RevPAR and clean credit borrowers, are achieving competitive terms from a small but active panel of specialist hospitality lenders. Weaker trading, poor operator history, or deferred maintenance requirements will constrain the lender pool significantly.
How Hotel Finance Is Assessed
Hotel lending is assessed on the operational trading performance of the business rather than a simple rental income figure. Key metrics lenders examine include:
- RevPAR (Revenue Per Available Room): The primary performance metric for hotel operations, combining occupancy rate and average daily rate. Most lenders want to see RevPAR benchmarked against the hotel’s competitive set to assess relative performance.
- EBITDA: Earnings before interest, tax, depreciation, and amortisation, the adjusted operating profit of the hotel business. Lenders typically normalise EBITDA for any non-recurring costs or owner-management salary adjustments.
- DSCR: Debt service coverage ratio calculated against normalised EBITDA, typically required to be 1.3x to 1.5x of annual debt service. Because hotel revenue is inherently more volatile than contracted lease income, hospitality lenders require materially higher coverage than a standard commercial investment mortgage to absorb seasonal and cyclical swings.
- Occupancy history: Minimum two to three years of trading history is typically required, with seasonal analysis for leisure hotels and weekend/weekday split analysis for city centre corporate hotels. Lenders generally like to see acquisition occupancy above 60% as a starting benchmark for a stabilised asset.
- Star rating and brand affiliation: Branded hotels with franchise or management agreements from recognised operators (IHG, Marriott, Hilton, Premier Inn) often attract better terms than independent properties of equivalent trading quality because the brand provides demand generation and operational standards assurance, and reduces the perceived risk around future occupancy.
- Property condition and capex requirements: Lenders assess whether significant capital expenditure is needed to maintain or improve the property, with particular attention to FF&E (furniture, fixtures and equipment) refresh cycles and building condition reports.
Branded vs Independent Hotels
Whether a hotel carries a recognised brand flag materially affects the lender pool and terms available. Branded hotels benefit from centralised reservation systems, loyalty programme demand, and standardised operating procedures that give lenders more confidence in future revenue predictability, which typically translates into more competitive pricing and, in some cases, higher achievable LTV. Independent hotels, particularly well-established boutique properties with a strong local reputation and online review profile, remain readily financeable through specialist lenders, but the underwriting leans more heavily on the individual property’s trading history and the operator’s personal track record, since there is no brand standard to fall back on if management changes.
Lending Criteria for Hotel Finance
| Parameter | Typical Range |
|---|---|
| Loan size | £250,000 to £150m+ |
| LTV | Up to 65% to 70% |
| Term | 3 to 25 years |
| Rate (2026) | 6.5% to 9.5% pa |
| DSCR | 130% to 160% of debt service (assessed on EBITDA) |
| Trading history | Minimum 2 to 3 years typically required |
Rates for hotel finance in 2026 range from approximately 6.5% to 9.5% per annum depending on the strength of the trading performance, the LTV, the quality and location of the asset, and whether there is a recognised brand affiliation. Branded hotels in primary markets with strong RevPAR and low LTV requirements achieve the lower end of this range. Independent hotels in secondary markets, or properties requiring capital expenditure, sit toward the upper end.
Lease-Based Hotel Investment
Not every hotel transaction is underwritten on trading performance. Where a hotel is let to an operator on a long institutional-style lease, common with budget and mid-market branded operators, the loan can instead be underwritten primarily on the lease terms and the strength of the operator covenant, in a similar way to a standard commercial investment mortgage. Even where the rent is underwritten rather than the trading performance, lenders will still stress-test whether the rent is affordable against the hotel’s realistic trading potential, since an unsustainable rent ultimately threatens the operator’s ability to pay regardless of the lease’s contractual strength.
Worked Example: Regional Boutique Hotel
A hospitality operator acquires a 28-bedroom boutique hotel in a cathedral city for £2,800,000. The hotel has traded for 6 years with a current RevPAR of £92 and EBITDA of £380,000 per annum.
- Purchase price: £2,800,000
- LTV: 60% = Loan of £1,680,000
- Rate: 7.25% pa interest only
- Annual interest: £121,800
- DSCR: £380,000 / £121,800 = 3.12x (well above minimum)
- Arrangement fee: 1.5% = £25,200
- Deposit required: £1,120,000
Strong EBITDA and established trading record support placement with a specialist hospitality lender. No broker fee on this facility as it exceeds £500,000.
Worked Example: Branded Budget Hotel
An investor acquires a 65-room branded budget hotel let to a national operator on a 20-year FRI lease at £310,000 per annum, for £4,200,000.
- Purchase price: £4,200,000
- LTV: 60% = Loan of £2,520,000
- Rate: 6.5% pa interest only
- Annual interest: £163,800
- Rent cover: £310,000 / £163,800 = 1.89x
- Deposit required: £1,680,000
No broker fee applies. The long institutional lease and strong national brand covenant support pricing at the lower end of the hotel finance range, closer to a standard commercial investment mortgage than a trading-performance-led hotel loan.
Worked Example: Independent Guest House
An owner-operator purchases an 11-bedroom independent guest house with 4 years of trading history, occupancy of 68%, and EBITDA of £95,000 per annum, for £850,000.
- Purchase price: £850,000
- LTV: 60% = Loan of £510,000
- Rate: 8.0% pa interest only
- Annual interest: £40,800
- DSCR: £95,000 / £40,800 = 2.33x
- Deposit required: £340,000
No broker fee applies. The absence of a brand affiliation and smaller scale of the property mean the lender pool is narrower than for a branded asset, but the healthy DSCR and consistent trading history support placement with a specialist independent hospitality lender.
Hotel Bridging Loans
Where a hotel acquisition requires speed, where the property is under-trading and needs operational improvement before mainstream lenders will consider it, or where refurbishment is required, a hotel bridging loan provides short-term funding. We regularly arrange hotel bridge-to-mortgage transactions, the bridge funds the acquisition and any improvement programme, with the long-term hotel mortgage arranged once trading performance has been established or improved.
For new-build hotel development or significant hotel conversion projects, development finance is the appropriate route, with staged drawdowns against a build programme. We arrange development finance for hotel schemes across the UK and internationally.
Serviced Apartments and Apart-Hotels
Serviced apartments and apart-hotels sit between conventional hotel operation and residential buy-to-let, combining hotel-style short and medium-stay bookings with self-contained, kitchen-equipped units. Lenders assess these assets on a hybrid basis: where the units are run through a centralised operator on a genuinely operational basis, EBITDA-based hotel-style underwriting typically applies. Where units are individually titled and let on longer licences with lighter management, some lenders will assess the asset closer to a standard investment property. The distinction matters significantly for which lenders will engage and how the loan is structured, and getting this categorisation right from the outset avoids wasted time with lenders who are not a genuine fit for the specific operating model.
Pub Finance
Pubs with significant food and accommodation income are assessed similarly to hotels, on operational EBITDA rather than a simple rental figure. The pub market has its own specialist lender panel, and we work with lenders who understand the sector and actively lend on licensed premises. The wet-led vs food-led mix, accommodation income proportion, and lease vs freehold structure all affect how the loan is underwritten. Leisure bridging loans are available for pub acquisitions requiring speed or short-term funding.
Seasonality and Cash Flow
Hospitality income is rarely evenly spread across the year, and lenders build this into their assessment rather than simply annualising a single quarter’s performance. Leisure-led hotels in coastal or rural tourist locations typically see a concentrated peak trading season, with occupancy and ADR both materially lower outside the core months. City centre corporate hotels tend to be more evenly spread but still show a weekday-weekend split, with corporate travel driving midweek occupancy and leisure trade filling weekends. Lenders want to see that the DSCR calculation holds up across the full seasonal cycle, not just during the strongest months, and that the business has sufficient working capital or a facility structure that accommodates the lower-trading off-peak periods without straining debt service.
Hotel Remortgages
Refinancing an existing hotel is one of the most common transactions we arrange in this sector, whether to move onto a better rate as a fixed period ends, to release equity that has built up through trading performance improvements, or to fund a refurbishment or brand conversion programme. Where a hotel’s RevPAR and EBITDA have grown since the original mortgage was arranged, the improved DSCR position can unlock materially better refinance terms, a higher LTV, a lower rate, or both, than were available at the time of the original transaction. No broker fee applies on hotel remortgages of £500,000 or above.
Frequently Asked Questions
Can I get hotel finance if the property has been closed?
A closed or mothballed hotel requires a bridging loan or development finance rather than a commercial mortgage, as there is no trading income to assess. Once the hotel is reopened and has established a trading record, a commercial mortgage can be arranged to refinance the short-term facility.
What is the minimum trading history required for a hotel mortgage?
Most lenders require a minimum of two to three years of filed accounts showing consistent trading performance. Some specialist lenders will consider 12 months of trading where the business has strong RevPAR, a recognisable brand affiliation, or an experienced operator management team with a track record in comparable properties.
Can I finance a guest house or B&B?
Yes, smaller hospitality assets including guest houses and B&Bs are considered by specialist lenders, though the loan size minimum and lender appetite vary. We arrange finance from £250,000 for smaller hospitality assets where the trading income supports the DSCR requirement.
What is RevPAR and why does it matter for hotel finance?
RevPAR (Revenue Per Available Room) is calculated by dividing total room revenue by the number of available rooms. It combines both occupancy rate and average daily rate into a single performance metric. Lenders use it to assess how the hotel performs relative to its competitive set and whether the trading income is sustainable. A hotel with high RevPAR relative to its market is a more compelling lending proposition than one with equivalent absolute revenue but weak market position.
Does a branded hotel get better mortgage terms than an independent one?
Generally yes. Brand affiliation reduces perceived operational risk through standardised systems and centralised demand generation, which typically translates into a wider lender pool and more competitive pricing than an equivalent independent hotel, though well-established independents with strong trading records remain readily financeable.
Does Platinum Global charge a broker fee for hotel finance?
No broker fee on facilities of £500,000 or above.
Can I finance a serviced apartment or apart-hotel investment?
Yes, though the assessment approach depends on the operating model. Centrally-managed serviced apartment blocks are typically assessed on an EBITDA basis similar to a hotel, while individually titled units on longer licences may be assessed closer to a standard investment property. We can advise which approach fits your specific asset.
How does the Bank of England base rate affect hotel finance pricing?
Variable rate hotel finance is typically priced as a margin over the Bank of England base rate, so movements in the base rate feed directly into monthly debt service costs. Fixed rate products protect against this for the duration of the fixed period, which many hospitality borrowers value given the inherent volatility of trading income.