Let’s work together to find a solution
Rely on AVANA Capital to help preserve your wealth and create growth for your business.
It doesn’t get much more cutthroat than the hospitality industry, with hotels slashing prices and making expensive upgrades every few years just to keep up with the competition. Hoteliers absolutely must stay on top of their renovations if they wish to maintain a solid client base. Knowing what to fix and how to do it economically is what’ll be keeping your business in the black.
If you’re thinking about renovating a hotel though, you know how complex the process can be. You’ll be hiring contractors, consulting with suppliers, and determining a budget for each room that keeps the hotel profitable. That’s no easy task, and you’ll most likely need some help to keep everything on track. A knowledgeable hotel lender can guide you through the process; read on to learn how they can extend a helping hand and which lender might be right for you.
Renovating a hotel, even a boutique property with only a few rooms, is bound to be expensive. Depending on the type of business you run, hotel renovation costs anywhere between $2,000 to $20,000 per room. With limited funds to allocate, it’s important to focus on projects with maximum impact. These are a few of the more common costs associated with a hotel renovation.
The most expensive projects encountered during a hotel renovation involve completely revamping the facility. This might include adding more rooms, a swimming pool, or demolishing the lobby to make way for something a little more modern. These renovations are the ones most likely to be noticed by potential customers and are what could bump your property up a star in quality.
Updating a hotel’s decor is the key to success. Paint, artwork, and carpeting set the tone for a hotel’s customer experience. Bright colors and relaxing paintings are perfect for properties brimming with vacationing tourists while darker tones and a modern aesthetic will appeal to business travelers preoccupied with productivity. Additionally, what was in fashion 10 years ago can look horribly outdated today.
Often overlooked in favor of flashier construction projects, soft goods like towels, bedding, and furniture can make all the difference for a hotel’s customer experience. Unfortunately, since these are items that get worn down from daily use, they’re something hotel owners need to replace on a fairly regular schedule.
Knowing when to renovate is just as important as knowing what to renovate. Construction projects are detrimental to the customer experience so they should be scheduled when the fewest of them are around to be bothered by the noise and disturbances. These are a couple of things to keep in mind when scheduling your hotel renovations.
How often you renovate is a function of the cost of renovation vs. the cost of not renovating. Even the most budget-friendly hotel will need the soft goods swapped out every five years or so to stay competitive. Four and five-star hotels need to be renovated more frequently than two or three-star hotels as customers expect more contemporary decor and additional amenities. After three or four years, every year where amenities and decor aren’t updated is a year that the hotel is starting to decline.
In the hospitality industry, timing is everything. Before scheduling a hotel renovation, consult the hotel’s occupancy data. When are most rooms booked? Are there any special events that could interfere with the renovation? Always schedule renovations for when the hotel’s occupancy is lowest. Contractor availability is also highly seasonal, with home and business owners choosing to have work done in the spring and summer when the weather is favorable for construction projects.
All those renovations come with a hefty price tag, and unless the hotel has a substantial rainy day fund, loans are an inevitability. Luckily, there are several options open to hotels financing a hotel renovation.
The Small Business Administration 504 loan is a great tool for hotel renovation and provides $5,000,000 in capital to qualified borrowers. Interest rates are below market value as loans are backed by the full faith and credit of the U.S. government. Hoteliers can use these loans to upgrade facilities and purchase new assets, but cannot be used for working capital. Apply here to learn how AVANA Capital can facilitate your SBA 504 loan.
A favorite amongst small and larger business owners, SBA 7(a) loans are available to businesses with fewer than 500 employees and less than $7,500,000 in annual revenue. These loans max out at $5,000,000 and need to be repaid in 10 years if used as working capital or to purchase equipment, or 20 years if purchasing real estate.
These loans have the fastest turnaround time, usually less than three days. AVANA Capital provides a number of different loan types to hoteliers including SBA 504 loans, bridge loans, and conventional loans with some of the lowest interest rates available. AVANA Capital has helped to grow 41 different hotel brands in all 50 states.
Property Assessed Clean Energy loans are an ideal financing option if your renovations are eco-friendly: efficient air conditioning upgrades, energy-saver lights, solar panel installation, etc. PACE loans usually have lower interest rates than alternative lenders but higher rates than traditional bank loans.
If there’s one constant in the hospitality industry, it’s change. Hoteliers always need to be looking forward, understanding the latest trends, and anticipating the amenities their guests will be demanding in the next few years.
AVANA Capital is here to help by financing a few of the hospitality industry’s most innovative projects. Though sometimes all it takes is some new carpet to keep the good reviews rolling in. We offer fast and reliable financing for hoteliers across the nation. With over 150 years of combined experience, you can trust us to help you secure the funding you need.
Our flexible solutions allow you to preserve working capital while renovating your property. Apply for a loan today and get started renovating your hotel. Connect with an expert to learn more about our loan products.