Maranatha Commercial
 
Hospitality/Entertainment
 
   
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Hospitality/Entertainment Properties
A property which derives its income by offering temporary room and board is typically considered a hospitality property. The most favorable financing options are extended to flagged properties, which are hotels or motels that have national or prestigious recognition. All financing options for hospitality properties are based on the history of the operations for existing properties and the area trends for new and repositioned properties as well as the knowledge and experience of the operators and owners.

Once you buy a hotel/motel, you buy the real estate and a 24-hour-a-day 365-day-a-year business. This business requires hard work, and marketing skills to get the rooms filled. The rooms are worthless if they are vacant. The business tends to be seasonal and may be affected immediately by economic downturns and political events, e.g. 9-11.

 

Hotels are characterized as either Full Service or Limited Service:

  • Full Service Hotels can be further divided into Luxury, Upscale, Mid-scale, and Extended Stay hotels.

  • Limited Service Hotels can be further divided into Mid-scale, Economy, Budget and Extended Stay. When considering hotel properties, the property should have a stable operational history. A property with a history of four or less years should be scrutinized. The minimum acceptable occupancy is usually 60%. Lenders also prefer franchise affiliated hotels with franchise agreements extending beyond the term of the proposed loan.

Most Bed and Breakfast properties can only be considered for financing if owner-operated.

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