Whether it’s borrowing or financing, stick to your knitting and go with what you know. Proceed, but proceed with caution. Don’t be afraid to take risks, but make sure to manage them.
Lenders like to see that you have a proven track record in a specific hotel niche and will be more likely to help you continue with these projects as long as you don’t venture too far away from what you know.
Say you’re accustomed to building and developing limited service hotels in secondary markets; keep on doing that. Don’t, for example, think too big and try to build a 500-unit full-service hotel in an urban market.
If you’re a buyer used to acquiring an underperforming hotel property, upgrading it and repositioning, that’s a risk – but it’s a familiar risk and you know how to manage it, so keep on that track. You can manage your risk as long as you know you’re going to be successful, but if you do something you’ve never done before, there’s a high risk of failure.
The buyer accustomed to repositioning a hotel property shouldn’t try to build new. Different kinds of expertise are involved in those alternatives, and you don’t want to embark on such a steep learning curve your project could tank.
When it comes to borrowing, be prudent. Showcase your expertise when you create a detailed plan of your hotel project to present to a lender so he or she feels confident enough to help finance you. Part of that involves gauging your market and competitive set so you know what you’re getting into – better yet, so you know how you’re going to end up – and can get a loan.
By: Greg Morris