Hotels and motels

Has there ever been a better time to purchase a hotel? Take advantage of the expertise and relationships at OMJ mortgage to purchase, upgrade, or refinance your hotel today. Every hotel is unique, and at OMJ we have 30 years of experience in hotel acquisitions and finance to get you the best rates and financing terms out there. Our OMJ Commercial Mortgage Specialists can help you fill out the necessary forms quickly and smoothly, and help you shape the best case possible to get the loan you need. Whether it’s a new purchase, a renovation, conversion or resort that’s in your future, OMJ will be there to help you attain that dream. Here are some tips to help you think through the best purchase for your future.

Flagged and unflagged property
A flagged hotel property means it’s part of a national franchise. Think Holiday Inn or Best Western. The attraction of flagged properties for guests is that they can count on the same standards of cleanliness, rooms and layouts, and treatment from coast to coast. The conditions of the rooms are uniform and there’s a certain credibility associated with the franchise name that can guarantee clients.

The flagged property advantage
If you buy into a flagged property, you pay a franchise fee that can range between 5% and 10% of the room’s revenue. Lenders view franchise hotels favorably, since they are well known and established. Lenders may prefer to finance flagged property rather than an unflagged one.
Lenders also consider the revenue of each available room, known as RevPar. RevPar is calculated by multiplying the average daily room rate, or ADR, by the occupancy rate. This figure is a key indicator of performance for any hotel. As you can guess, when RevPar increases, either the room is being rented out more often, or the rate is increasing—both positive signs for lenders.

The RevPar is the most important consideration for hotel lending, even though the hotel may generate revenue other ways. That’s because other ventures within a hotel often cost more to run, lowering net operating income, or NOI. For example, the costs to run a restaurant, compared to a hotel, are generally much higher. This lowers the total sales. As a result, limited service hotels—those that do not include restaurants—are preferred by lenders over full service varieties.

For more information on hotel mortgages and loans contact an OMJ Commercial Mortgage Specialist. To read more about hotels and the kinds of mortgages that might apply to your business venture, check out our blog.