Hotel Development Finance
Hotel development finance funds the construction, conversion or major refurbishment of a hotel or aparthotel, advanced against cost and completed value and repaid by refinancing onto a term facility once the asset is trading, or by sale. Senior debt typically reaches 60%–65% of gross development value and 80%–85% of cost, priced from around 8.5% to 12% per annum over 18 to 36 months. Lenders underwrite the operator and the trading forecast as closely as the build — a branded franchise or an experienced management agreement materially improves both gearing and price, because the exit valuation depends on trade rather than bricks.
Criteria and pricing
What lenders on our panel will typically do on this product today.
- Loan to GDV
- 60% – 65% senior
- Loan to cost
- 80% – 85%
- Rate
- ≈ 8.5% – 12% p.a. on the drawn balance
- Term
- 18 – 36 months including a stabilisation period
- Arrangement fee
- 1.5% – 2.5%; exit fee 1%
- Operator
- Brand, franchise or experienced management agreement preferred
- Loan size
- £1m – £40m
- Drawdowns
- Monthly in arrears against monitoring surveyor sign-off
- Exit
- Trading-basis term debt after 12–24 months of trade, or sale
Worked example — 48-key conversion of a listed building
- Acquisition
- £2,100,000
- Conversion and fit-out
- £4,600,000
- Fees, FF&E and contingency
- £850,000
- Total cost
- £7,550,000
- Senior facility at 82% of cost
- £6,191,000
- Gross development value on completion
- £10,400,000
- Loan to GDV
- ≈ 60%
- Exit
- Refinance onto term debt after 18 months of trade
Figures are typical UK market ranges as at 2026 and are indicative only — your terms depend on the asset, the exit and the lender we place the case with.
Who this works for — and who it does not
You are likely to qualify if
- Planning and, where applicable, listed building consent in place
- An operator identified — brand, franchise or management agreement — with a credible trading forecast
- A costed build and FF&E budget validated by a monitoring surveyor
- Developer or sponsor experience in hospitality or complex conversion
- Equity of 15%–20% of total cost
This is the wrong product if
- Schemes with no identified operator and no operating experience
- Seasonal locations where the forecast depends on an unproven occupancy assumption
- Budgets excluding FF&E and pre-opening costs, which are routinely underestimated
- Sites still awaiting planning or listed building consent
What actually happens, and when
- Week 1–2
Trading forecast tested
We stress occupancy, ADR and RevPAR against local comparables, because the exit valuation and therefore the facility depend on that forecast holding.
- Week 2–4
Terms
Heads of terms from lenders with genuine hospitality appetite, which is a much smaller group than general development lenders.
- Week 4–8
Valuation and diligence
Specialist hotel valuation on both completed and trading bases, plus monitoring surveyor and operator review.
- Week 8–14
Legals and first drawdown
Facility documented, security registered, build drawdowns commence.
Frequently asked
Request indicative terms
Four details are all a lender needs to price a case: how much, what secures it, when you need it and how it is repaid. Send those and we come back with realistic terms — or tell you plainly that the case will not place.
Request indicative terms
Tell us the four things every lender asks first. We come back with realistic terms, usually the same working day.