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Navigating a Hotel Loan Refinance with CMBS Loans

Updated: Dec 20, 2023

GHC Funding: Navigating the Challenging Terrain of Hotel Loan Refinance

The looming maturity of about $31 billion in CMBS loans backed by hotels by 2024 presents a critical juncture, constituting nearly 30% of the approximately $102 billion securitized hotel loans across the US.


For hotels dependent on business travel and conferences, the scenario spells a daunting phase, with lenders demanding increased capital for refinancing or, in some cases, opting not to entertain refinancing prospects at all.

A significant portion of hotel loans comprises floating-rate packages with three-year terms, amplifying hotel owners' vulnerability to interest rate fluctuations and the perpetual need to refinance their debts.

Particularly, hotels in business districts catering to corporate travelers and conference participants grapple with the challenge of refinancing loans for properties that have witnessed substantial value depreciation amidst the pandemic's aftermath.

While hotels geared towards resurgent leisure travel and tourism showcase signs of recovery, business-oriented hotels continue to bear the brunt of diminished occupancy rates. The rise of remote work has redefined the landscape, ushering in reduced business travel and contributing to the woes of these establishments.


Lenders, who initially extended loan terms or offered forbearance during the pandemic's onset, now exhibit reluctance to provide further financial support owing to the economic uncertainties surrounding these struggling hotels. Reports from the Wall Street Journal highlight lenders' insistence on hotel owners injecting additional capital before considering refinancing, particularly for properties witnessing diminishing values. Some owners receive notifications almost nine months prior to a loan's maturity, stating the lenders' unequivocal stance against extending or refinancing the loan.

Bankruptcy filings among US hotel owners surged in January, with ten filings compared to only two in the same period the previous year, as reported by New Generation Research Inc. Notable recent bankruptcies include two prominent Manhattan hotels: a Holiday Inn in the Financial District and a Crowne Plaza in Times Square.

Nationwide, the hospitality industry's recovery exhibits "sizeable pockets of weakness," as mentioned in a report by Trepp. Newmark's recent findings indicate distress predominantly concentrated in the Midwest. Approximately 40% of delinquent hotel loans across the US originate from hotels in Midwestern states such as Illinois, Indiana, Minnesota, and Ohio.

Amidst rising interest rates, the prices of hedging instruments utilized by floating-rate borrowers to mitigate interest rate volatility have skyrocketed. The average cost of these instruments has surged from $10,000 to hundreds of thousands of dollars per multimillion-dollar loan.

The Midwest exemplifies the fragile lending environment, as illustrated by the challenging scenario faced by the W Chicago City Center, a 400-room hotel in Chicago's main business district. With a $75 million loan maturing in the approaching summer, the hotel owner, Park Hotels & Resorts, defaulted during the pandemic and negotiated an arrangement to service only the loan interest until maturity, culminating in a balloon payment.

Another instance involved the foreclosure on the Hilton Cincinnati Netherland Plaza, which faced a $73 million loan maturity in October 2024. The property's pre-pandemic value of $106 million plummeted to $86 million in 2021, painting a stark picture of the industry's financial strains.


At GHC Funding, we're well-versed in the complex landscape of hotel loan refinance. Contact us to navigate these challenges and explore tailored financial solutions for your hospitality ventures.


Delving into the realm of hospitality property ownership often involves navigating the complexities of acquiring or refinancing loans tailored specifically for hotels or motels.

Understanding the nuances of these commercial mortgages is crucial for borrowers looking to invest, reposition, or revitalize their hospitality ventures. Let’s explore the intricacies of hotel or motel loans and the varied scenarios where such financial solutions are imperative.

At GHC Funding, we define hotel or motel loans as a specialized category of commercial mortgages tailored explicitly to lien specific types of hospitality properties. While encompassing hotels, motels, resorts, bed & breakfasts, and RV parks, these loans serve diverse purposes, including financing a purchase, refinancing existing mortgages, obtaining cash from the property equity, funding new hotel constructions, undertaking rehabilitation or remodeling, and facilitating acquisitions and developments.

The necessity for these loans arises from diverse circumstances encountered by borrowers in the hospitality sector. Whether it's purchasing a hotel property or seeking to refinance an existing mortgage, the reasons are varied and often include capital preservation, supplementing available cash, securing bridge financing until permanent options materialize, positioning the property for enhanced profitability, stabilizing distressed establishments, funding unique and large-scale projects requiring specialized financing arrangements like mezzanine, bridge loans, or joint ventures, refinancing expiring term loans, and other strategic measures to fortify the property's market presence.

Varieties of Hotel Loans

Hospitality projects exhibit a spectrum of dynamics, dictating the specifics considered within hotel loan underwriting guidelines. The types of hotel loans available encompass a wide array, offering tailored financial solutions to diverse borrower needs:

- 90% Loan-to-Value (LTV) for purchases

- Hotel bridge loans up to 65% LTV

- Loans ranging from $100,000 to $100,000,000

- Hotel financing rates spanning 6.08% to 12%

- Nonrecourse and mezzanine loans

- Properties lacking cash flow considerations

- Options for mixed-use properties

- Fully amortized and full documentation loans

- No-doc equity loans

- Private non-bank loans and hard money alternatives

- Conventional permanent financing

- Acquisition and development loans

- Construction loans and remodel/rehab financing

- 100% LTV for expansion and 75% After-Repair-Value (ARV) rehab loans

- No prepayment penalty loans


Bridge Loans for Hotels and Motels

Bridge loans tailored for hotels and motels are a viable alternative offered by private lenders or non-banking entities. These loans promise expeditious funding—within days to a few weeks—at lower LTV ratios, necessitating less documentation compared to traditional bank loans. However, they often entail shorter repayment terms and higher interest rates, typically revolving around 50% to 65% LTV, making them equity-based financing options.

Hotel and Motel Construction Loans

Although relatively less prevalent, construction loans cater to borrowers aiming to erect new hotel or motel establishments. These loans present varying terms contingent upon the borrower's specific scenario, encompassing construction financing options like SBA hotel construction loans, USDA B&I construction loans, bridge loans, or cash-out mortgages for remodeling or rehabilitating distressed hospitality properties. These loans come with durations spanning 12 to 60 months during construction, and other alternatives like construction take-out loans and construction-to-permanent financing.

Lenders of Hotel and Motel Loans

In the landscape of hospitality financing, numerous bank, non-bank, and private lenders proffer diverse funding options tailored explicitly for hotels and motels. A multitude of lenders offer loan programs catering to both flagged and unflagged establishments, addressing the financing needs of varied hotel and motel projects.

Brokers seeking comprehensive lender options can utilize platforms like GHC Funding to identify lenders aligned with the specific requirements of their clients' hotel or motel ventures. All lenders featured on Scotsman Guide’s Lender Search collaborate with mortgage brokers to facilitate funding for their clients, underscoring the broad spectrum of financing avenues available in this sector.


At GHC Funding, we're committed to assisting borrowers in navigating the multifaceted domain of hotel loan refinancing. Contact us to explore tailored financial solutions that meet your unique hospitality investment needs.


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