After a tough few years in the industry it’s fair to say that UK travel, tourism and hospitality is having something of a bumper season thanks to the release of pent-up demand following the restrictions of 2020.
That means that there are many who are now looking to get into, or expand, hotel finance in order to develop a hotel for the new UK focused travel and hospitality industry.
Experiencing something of a rebound, many who are in property development are now turning their attention to the potential profit in converting or developing a UK hotel ready for this huge rise in demand. Added to that, the UK’s successful vaccine programme has made it one of the safest places to visit a hotel in the world, so there are many looking to holiday in the UK from abroad too.
The government will also likely be pumping money into the economy around this time and encouraging people to travel domestically rather than abroad, so the likelihood is that people going on holiday in the UK will soar in numbers, and the demand will follow with them. This is why our large panel of lenders have expanded their products and services, with some specifically targeting this industry, in order to bring on board more hotel financing.
Most across the UK are now confident that investing into hotels and the UK tourism industry is a good bet and this will continue to be the case for some years whilst the world slowly returns to some form of normality, which is likely to take some time for international travel as governments ensure safety.
That has meant a huge boom in demand for hotel finance and hotel financing. Lenders have subsequently increased and expanded their finance products to accommodate this increase.
What is hotel development finance?
It does what it says on the tin, essentially. Hotel finance is a specialised type of development finance and a type of mortgage that has been created to help investors who want to purchase a property with the view of turning it into a hotel.
It works similarly to a commercial mortgage in that the criteria for lending and being approved isn’t enormously different than a commercial mortgage. The rates are broadly the same too, however, it’s easier to obtain large sums of money with great rates when you have a good track record of these types of developments.
How to finance a hotel purchase?
First and foremost, the type of property you’re looking to purchase will be key. Have you done your research? The location, type of property, cost of development and time scales are going to be important.
Are there competitors in the area? And if there are, are they doing well or are they struggling?
If you have experience in hotels and hospitality already that will count as a huge advantage when looking to get funding for your hotel project.
Once you’ve found the building you’re looking to develop, you’ll need to start putting together a business plan that can articulate how you intend to start and complete the project, how much money you’re going to make and, importantly, how you intend to repay any funding that you received.
Once you’ve established all this, you can then start to approach brokers and intermediaries who will take a look at your financing requirements and tell you if you might need to do a bit more work on your application or whether it’s good to go, before eventually getting an agreement in principle and getting the financial details sorted.