Hotel lenders and financiers are navigating a market where operating costs are up, RevPAR growth has slowed and competition is focused on only the strongest deals. Ryan Bosch, principal, Arriba Capital; Tim Maher, president, Pinnacle Hotel Finance; and James Reivitis, chief development officer, Access Point Financial, pointed to tighter standards, limited capital and a preference for extended-stay and select-service hotels.
—Gregg Wallis
What are the biggest challenges you see in the hotel financing landscape today?
Bosch: The biggest challenge is that hotel fundamentals and credit markets are moving in opposite directions. RevPAR growth has stalled in many markets, while operating costs continue to climb, so the cash flows lenders are underwriting today appear weaker than they did 18 months ago. Meanwhile, even with Fed cuts, permanent loan pricing is still anchored to the 5- and 10-year Treasuries, which haven’t budged. That’s forcing more creativity on the capital stack to fill the gap between what debt will cover and what sponsors need to close. The lenders winning deals right now aren’t necessarily offering the lowest rate; they’re the ones willing to structure around the sponsor’s business plan.
Maher: Higher interest rates and lender balance sheet restrictions are two primary challenges today. Less deals underwrite based on the higher cost of debt as opposed to the prolonged period just a few years ago, where debt costs were much lower and the price per key to build or buy was lower. Many bank and credit-union lenders have specific guidelines that restrict their ability to make hotel loans. These include hotel concentration limits within their loan portfolio, lending to new relationships and seeking a compensating deposit relationship from the borrower as a requirement of the loan.
Reivitis: From a lender’s perspective, the biggest challenge is bridging the discussion between current cash flow and a realistic pro forma, especially when the asset is still stabilizing or underperforming. In today’s environment, it’s critical to understand how the sponsor plans to get from here to there. Because Access Point is a specialized, hotel-only lender, we lean in and want to hear the details—the operating plan, the market context and how the sponsor intends to execute. That willingness to engage on the nitty-gritty is often what allows us to structure financing that makes sense for both sides.
Are you seeing increased competition among lenders or investors for quality hotel deals?
Bosch: Yes, but it’s a barbell market. Top-tier deals with top-tier sponsors are seeing real competition. Private credit funds, life companies, banks and CMBS conduits are all fighting for the same five-star projects. But outside that narrow band, capital is more selective. A stabilized select-service asset in a solid secondary market that would have had three or four term sheets 24 months ago might see one today—or none if the sponsorship isn’t strong. Meanwhile, that same capital is tripping over itself to finance a luxury resort in Miami or a lifestyle conversion in Nashville with a name-brand operator. The bid-ask spread between what’s getting done easily and what’s requiring real effort has widened significantly. Deal-to-capital-source fit matters more than ever.
Maher: Stabilized hotels with strong sponsorship seeking refinance or acquisition financing can capture a large audience of lenders with competitive loan terms. However, the lender pool for construction and turnaround-type deals shrinks dramatically particularly when seeking lower interest rate debt as opposed to non-bank type financing.
Reivitis: Yes. Spreads have compressed across the board for high-quality, moderate-leverage transactions. There’s no question that good deals attract attention. That said, we continue to see significant opportunity for sponsors to use bridge and stretch-bridge solutions—particularly for transitional assets, situations that require a lot of flexibility or to execute a PIP. These structures remain a critical tool for sponsors to navigate the next 24–36 months while positioning their properties for more stabilized financing solutions.
Which hotel segments are most attractive to your company today—luxury, economy, extended-stay, lifestyle, etc.?
Bosch: Extended-stay leads because lenders love the predictable expense structure, lower FF&E cycles and the fact that NOI holds up in downturns. Lifestyle and select-service in urban and leisure markets work well where there’s brand pricing power or a strong experiential angle. Luxury is attractive, but only in gateway cities or globally recognized destinations where you can underwrite sustained demand. Outside that, it becomes speculative. The segment being passed over is the middle-market full-service segment. Lenders see high operating leverage, F&B risk and labor complexity. Unless the sponsor has a rock-solid operating history and deep convention support, they’re not interested. However, what matters most is how the deal is packaged. A well-positioned deal with a credible operator and compelling story will beat a poorly framed flavor-of-the-month project every time.
Maher: My company primarily finances select-service, extended-stay and, to a lesser extent, full-service hotels. Select-service and extended-stay hotels are plentiful, fairly easy to underwrite and are widely accepted in the lending community. The loan sizes often sought by owners of select-service and extended-stay hotels are within the wheelhouse of many lenders.
Reivitis: We believe there are opportunities across all segments. Every market and asset has its own dynamics, and the key is right-sizing the capital stack to the business plan. In the past year, Access Point has provided capital across all those segments, with a particular focus on midscale and upscale select-service properties, while also stepping into luxury and economy opportunities where we saw strong sponsorship and a compelling story. Our platform’s flexibility—from bridge to mezzanine and preferred equity—allows us to support owners in whichever segment they compete.
What’s the most common mistake you see hotel developers make when seeking funding?
Bosch: Three things. First, coming to market before the deal is ready with no property under contract, soft construction numbers or pro formas that don’t make sense. That creates lender fatigue fast. Second, targeting the wrong capital sources. Chasing 75% LTV when your deal only supports 55%, or pitching a tertiary market project to a lender focused on gateway cities, wastes everyone’s time. Knowing where rates are and which lenders fit your deal matters. Third, starting too late. Financing takes time and rushing it means leaving better terms on the table. The best outcomes come from sponsors who prepare properly, target the right sources and start early.
Maher: Being too early is a common problem when seeking development financing. Understandably, developers want to understand their debt options during their predevelopment stages. However, we’ve often secured loan terms for developers on projects that were too far out from obtaining a building permit only to then lose that lender due to changing market conditions, revisions in the overall deal structure and lender fatigue.
Reivitis: Two things stand out. First, organization—a clear, complete financial package speeds diligence. It may sound simple, but it matters. Second, weighing certainty of execution—in today’s market, sponsors sometimes underestimate the value of working with a lender that can deliver and close on time, rather than chasing the cheapest dollars that may take a year (or never) to secure. At APF, we stress that when you work with us, you get a result. We have seen countless sponsors circle back to us after pursuing deals that fell apart with other capital sources.
