Why Hotel Experience Matters to Lenders

Both buyers and sellers are doing much more due diligence in preparing and listing a property for sale and, from a buyer’s standpoint, knowing what it’s likely to trade at. From a seller’s standpoint, you must be aware of the financial markets and what your buyer is likely to look like so you can prequalify that buyer for your property. Has the buyer owned other hotels and if so, how many? Does the buyer know the business and how it operates, rather than being a manager who knows five or six people with money?

When you’re considering a buyer, look for an owner – at least; an owner-operator is even better.   Operating history helps; it’s easier for a veteran than a newcomer to secure a loan, just as it’s easier to work with a franchise than an independent.  You might attract buyers that present higher offers, but if they lack experience in the hotel industry, it might be harder to close such transactions.

That’s because in the lending community, history counts. To persuade a lender to finance a project, a newcomer has to present lots of equity, join forces with a qualified management company or partner with somebody that has that hotel experience.

Say you’re an industry newbie with no prior ownership experience. You’d do well to persuade a management company to join you in an arrangement calling for a bit of equity and management of the property. After all, the owner of a hotel doesn’t have to be an hotelier.