Good news for hoteliers: construction financing for new hospitality projects is expected to increase this year, according to The Crittenden Report.
In the landmark publication’s latest article on real estate finance trends, Sara Havlena, Editor-in-Chief of Crittenden Real Estate Magazine and The Crittenden Report, advises that with interest rates expected to remain stable or decrease, more development deals in the hospitality sector – and the real estate industry as a whole – are now likely to pencil based on cash flow (Read: make it through underwriting).
Havlena, who has led Crittenden’s flagship publications since 2011, emphasizes that, among other factors, borrower experience and success in developing similar projects will be critical to accessing capital in today’s market. Here are some of our key takeaways from the article:
Who’s Lending on Hotel Construction Projects in 2024?
Banks, Debt Funds, and Private Money Lenders are expected to be the most active players in hotel development financing in 2024. Though leverage will continue to be at lower levels than in previous years, borrowers can anticipate financing up to 70% LTC for strong projects.
Note: Dixon Link Capital knows which lenders currently have strong appetites for hotel construction projects. Contact us to learn more.
Which Markets Will Lenders Favor for New Hotel Development?
For new hotel projects, lenders will target high-growth and destination markets, primarily in the Southeast and Southwest United States. It is likely that lenders will not have an appetite for projects in high-cost urban cities with ample supply of existing hotels.
What Challenges Remain for Hotel Construction Lending in 2024?
Havlena cites rising construction and insurance costs, as well as difficulty sourcing equity in today’s market, as key hurdles that borrowers and lenders alike will need to overcome.
Overall, industry and lender sentiment towards hospitality projects will continue to improve in the coming year.
Read the full article from The Crittenden Report here. We highly encourage subscribing to Crittenden’s insightful research reports and industry publications!
Financing Hotel Construction Projects in 2024
Are you seeking financing for your hotel development project? Dixon Link Capital is experienced in sourcing competitive loan terms for the hospitality asset class. Submit your financing request or schedule a call with one of our seasoned loan officers today!
