How to Fund a Hotel Acquisition in the UK
Brandon Conway
Business Development Executive · Nov 24, 2026 · 7 min read
Acquiring a hotel in the UK is a multi-dimensional finance challenge. The transaction combines commercial property valuation with hospitality business assessment, brand and franchise considerations, and the operational requirements of a business that never closes. The specialist lenders who focus on hotel finance understand these dynamics; the generalist banks that don't can create significant complications in what should be a straightforward process.
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How hotels are valued for lending purposes
UK hotel valuations use a combination of approaches: the investment method (capitalising stabilised EBITDA at a sector-specific yield), the comparable method (benchmarking against recent hotel transactions in similar markets), and the replacement cost approach for valuation sense-checking. The trading multiple approach using RevPAR (revenue per available room) is also commonly referenced by specialist hotel lenders.
Lenders advance against the lower of purchase price and valuation, typically at 55-65% LTV for well-performing hotels with a track record. Newly acquired or under-performing hotels, or those in need of significant capital expenditure, attract lower LTV. The capital expenditure plan and its projected impact on RevPAR and occupancy is an important part of the lending case.
Brand and franchise considerations in hotel finance
Hotels operating under a franchise agreement with an international brand (Hilton, Marriott, IHG, etc.) benefit from brand recognition and reservations infrastructure, but franchise agreements contain transfer provisions that must be addressed in an acquisition. The incoming buyer typically needs to be approved by the franchisor, and there may be mandatory PIPs (property improvement plans) that create additional capital expenditure obligations.
Lenders take the brand arrangement into account in their assessment. A franchise agreement with a strong global brand adds confidence in the hotel's ongoing trading performance. A brand that is due for renewal or on a short remaining term creates uncertainty. The franchise agreement's terms - particularly the length, renewal provisions, and capital requirements - must be reviewed carefully as part of due diligence.
"Hotel finance rewards sector expertise. The specialist lenders who understand RevPAR and franchise dynamics provide materially better terms than generalist banks attempting to apply standard commercial property criteria."
- Brandon Conway, Business Development Executive
Working capital for hotel operations
Hotels have complex working capital requirements driven by seasonal trading patterns, advance booking liabilities, and large-scale purchasing (food and beverage, linen, cleaning supplies). The seasonal profile of most UK hotels means that finance must be structured to provide working capital headroom during the low season as well as funding during peak periods.
A revolving credit facility sized to the hotel's seasonal working capital swing is often the most efficient structure, supplemented by an invoice finance line if the hotel has significant corporate account business. Comprehensive property insurance is also a lender requirement for any hospitality asset finance.
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Frequently Asked Questions
What is RevPAR and why do hotel lenders use it?
RevPAR (revenue per available room) is the most widely used hotel performance metric: total room revenue divided by total rooms available. Hotel lenders use it to benchmark a hotel's performance against comparable properties and assess sustainable EBITDA.
Can I get hotel finance for a property without an existing brand?
Yes. Independent hotels are financed on their trading history and the operator's business plan. The absence of a brand means the lender assesses the hotel's standalone market position more carefully, but it does not preclude finance.
What is a typical hotel acquisition loan term in the UK?
10-15 years for a stable, well-performing hotel is standard. Shorter-term bridging is used for opportunistic purchases requiring significant work before stabilisation.
The bottom line
Hotel acquisition finance is a sector where specialist knowledge makes a decisive difference to both the process and the outcome. The right lender, the right structure, and specialist advisory support produce better terms and fewer surprises than a generalist approach. Spark Finance works with specialist hospitality finance lenders and has experience in hotel and leisure sector transactions.
Check your eligibilityAbout the author
Brandon Conway
Business Development Executive
Brandon is a Business Development Executive at Spark Finance with extensive experience placing asset finance and business loans for UK SMEs. He works closely with businesses that have been declined by high street banks, finding specialist lenders suited to adverse credit and complex trading profiles.
