What do lenders look for when considering funding applications for boutique hotel developments?
Anthony Say, head of hotels, NatWest Corporate Banking says:
Hoteliers are in the race to offer customers ever more unique and engaging experiences, so this is a question I am regularly asked.
Traditional brands can of course provide lenders comfort by offering a degree of predictability around market uptake and resultant cash flows, given the vast amounts of data available across the market. However, if you have a clearly articulated plan for a well-located project, you should still see a very healthy degree of interest from lenders.
As with any hotel development (or any hotel, for that matter), location lies at the heart of a hotel’s prospects as it is the one thing that can’t be altered! I would say this is even more important for boutique offerings. Thorough research of the market is required to convince a lender that the concept will work in a particular locale, and lenders take significant comfort when it is clear that investors have approached the scheme with an open mind and gained a deep understanding of what brand concept is best suited to the target market.
A strong business plan with a clear view of the route to market is also particularly important when a proposition is slightly more niche or unproven. If you have these boxes ticked and can demonstrate credentials in understanding and delivering such hotel projects, lenders are likely to consider the proposition as a very fundable one.