Brand affiliation is a major underwriting factor. National or internationally recognized brands typically improve financing options due to established demand channels, operating standards, and lender familiarity.
Seasonality is closely analyzed. Properties with highly seasonal demand are underwritten conservatively, often using weighted average cash flow and higher reserves to account for off-peak periods.
Hospitality lending is highly cyclical. In downturns, leverage decreases, pricing increases, and lender availability contracts more quickly than for other asset types.
Management quality is critical. Lenders review operator experience, track record with similar assets, and the terms of the management agreement. Weak management increases perceived risk and can limit leverage or lender options.
PIPs are treated as required capital expenditures. Lenders account for PIP costs in loan sizing and may escrow funds or reduce proceeds to ensure brand compliance and asset quality.
