Introduction

Hotel investments can deliver attractive risk-adjusted returns when structured correctly. However, unlike traditional real estate, hotels are operationally intensive, cyclical, and highly sensitive to management quality and market dynamics.

Esteema Capital Partners provides specialist advisory on hotel acquisitions, disposals, and capital structuring across the UK, Europe, and global markets—combining deep sector expertise with institutional-grade execution.

1. Why Invest in Hotels?

• Steady Income: Daily room sales generate recurring cash flows, often delivering higher yields than office or retail assets.
• Capital Appreciation: Prime locations benefit from long-term value growth.
• Diversification: Exposure to leisure, business travel, and consumer spending cycles.
• Inflation Hedge: Room rates can be repriced frequently.
• Tax Efficiency: Depreciation allowances and sector-specific incentives.

2. Ways to Invest in Hotels

• Direct Ownership:
  Pros: Full control and highest return potential.
  Cons: High capital requirement and active management.
• Fractional / Crowdfunding:
  Pros: Lower entry capital and professional management.
  Cons: Limited liquidity and exit options.
• Hotel REITs:
  Pros: Publicly traded, low capital requirement, high liquidity.
  Cons: Market volatility and limited control.
• Listed Hotel Companies:
  Pros: High liquidity and no operational responsibility.
  Cons: Share price volatility.

3. Hotel Operational & Investment Models

• Direct Ownership: Higher return potential with elevated operational risk.
• OpCo / PropCo Structure:
  PropCo owns the real estate and earns rental income.
  OpCo manages hotel operations and captures operating upside.
• Combined Ownership: Common in distressed or turnaround situations.
• Managed Hotels and Leased Hotels provide professional management or stable, bond-like income.

4. Hotel Contract Types

• Management Contract: Passive ownership with low operational risk.
• Franchise Contract: Active ownership with brand support.
• Owner-Operator: Full control with higher operational risk.

5. Key Operational & Financial Metrics

• Occupancy Rate, ADR, RevPAR.
• EBITDA Margin: 25%–45%
• Cap Rates: 6%–9%
• Target IRR: 7%+
• DSCR: ≥ 1.40x

6. Financing Structures

• Senior Debt (55%–65% LTV)
• Stretch / Whole Loans (up to 75% LTV)
• Mezzanine & Preferred Equity
• Joint Venture Equity
• Private Credit

7. Investment Strategies

• Property: M&E systems, fire safety, EPC, room condition.
• Location: Demand drivers, competitive supply, accessibility.
• Operator / Brand: Contract terms, fees, historical performance.
• Financial & Legal: P&L history, title, seasonality, staff liabilities.

8. Due Diligence Essentials

• Property: M&E systems, fire safety, EPC, room condition.
• Location: Demand drivers, competitive supply, accessibility.
• Operator / Brand: Contract terms, fees, historical performance.
• Financial & Legal: P&L history, title, seasonality, staff liabilities.

9. Key Negotiation Points

• VAT treatment, TUPE liabilities, FF&E inventory
• Brand approvals and PIP requirements
• Capital expenditure responsibilities
• Handover and transition support

10. Red Flags

• Occupancy consistently below 50%
• Significant deferred maintenance
• Excessive OTA dependency
• Weak or unproven operator
• Fire safety or EPC non-compliance

11. Valuation Methodologies

• EBITDA Multiple: Typically 6x–15x depending on segment and location
• Income Capitalisation: NOI ÷ Cap Rate
• Discounted Cash Flow (DCF): 10–15 year forecasts
• Cost Approach: Land value plus construction cost
• Residual Valuation: GDV minus total development cost

12. Exit Strategies

• Stabilise operations and sell
• Create a lease structure and sell on yield
• Rebrand to enhance ADR and exit at higher valuation
• Convert to alternative uses (aparthotel, PBSA, co-living)

Disclaimer

This document is for information purposes only and does not constitute investment advice. Investors should seek independent professional advice before proceeding.

Please Contact Us  for help with

 ‘Global Hotel Capital Funding, Investments or Transactions ‘ 

Esteema Capital Partners
Email: ambrish@esteemacapital.com
Office: ‪+44 (0) 208 464 6430‬
Mobile: ‪+44 (0) 7740 646 777‬
Website: www.esteemacapital.com

Esteema Capital Partners’ Hotel Investment Guide offers a straightforward approach to buying or developing new hotels, covering every stage from land acquisition to eventual exit. Our comprehensive expertise spans the entire process: from capital advisory for new developments, through stabilisation, to exit.

1. Understand the Hotel Development Lifecycle

A hotel development typically goes through these 8 stages:

• Site Identification – Location, planning status, access, demand drivers.
• Market & Feasibility Study – Competitor supply, occupancy, ADR, RevPAR.
• Financial Feasibility – Development cost, funding mix, IRR, ROI.
• Concept & Design – Room mix, brand standard, layout.
• Planning Permission – Council approvals.
• Financing – Senior debt, mezzanine, equity, JV.
• Construction & Fit-Out – Contractor, timeline, FF&E.
• Pre-Opening & Operations – Staff, systems, marketing, soft opening.

2. Key Hotel Asset Types

• Budget / Limited Service — Ibis, Holiday Inn Express
• Midscale — Hampton, Courtyard
• Upscale — Hilton, Marriott
• Luxury — Ritz-Carlton, St. Regis
• Extended Stay / Aparthotel — Adagio, Staybridge
• Resort — Beach, mountain, golf
• Boutique / Lifestyle — Hoxton, Moxy

3. Financial Metrics Developers Must Know

3.1 Operational KPIs:

• Occupancy (%)
• ADR
• RevPAR
• TRevPAR
• GOP / GOPPAR
• NOI / EBITDA

3.2 Investment Metrics:

• Total Development Cost (TDC)
• Cost per Key
• Yield on Cost
• IRR (Unlevered & Levered)
• Equity Multiple
• DSCR

4. Development Cost Structure

Typical UK & Europe hotel development cost split:

• Land — 10–25%
• Construction — 45–55%
• FF&E + OS&E — 8–12%
• Professional Fees — 7–10%
• Finance Cost — 6–12%
• Contingency — 3–6%
• Pre-opening Cost — 1–2%

5. Funding Options for New Hotel Development

Esteema Capital Partner can help you with the low-cost capital and capital structuring advisory services

• Senior Debt
• Mezzanine Debt
• Equity / JV Partner
• Forward Funding / Forward Purchase
• Bridge Loan – Land Acquisition

Please get in touch with us for a discreet discussion & support.

6. Brand vs Independent

Branded Hotel (Franchise/Management)
Pros: Higher occupancy, strong distribution, easier financing.
Cons: Brand fees 8–12%, strict design rules.

Independent Hotel
Pros: Full flexibility, lower fees.
Cons: Needs strong marketing.

7. Key Documents Required (Developer Checklist)

• Site & Legal: Title deeds, site plan, planning history.
• Technical: Architect designs, MEP, cost plan, programme.
• Financial: Feasibility, 10-year P&L, development appraisal.
• Operator / Brand: LOI, HMA/Franchise docs.
• Market Study: Competitor set, STR data.

8. Risk Factors & Mitigations

• Planning Risk – early council meetings
• Construction Risk – fixed-price contract
• Cost Overrun – QS monitoring
• Market Risk – sensitivity analysis
• Funding Risk – early term sheet
• Operator Risk – strong brand

9. Exit Strategies

• Stabilisation & Refinance
• Sale to an institutional buyer
• Forward sale
• Hold as an income asset

10. Summary

Esteema Capital Partners’ guide offers a straightforward approach to developing new hotels, covering every stage from land acquisition to eventual exit. Our comprehensive expertise spans the entire process: from providing capital advisory for new developments, through stabilisation, and ultimately to exit.

Please Contact Us  for help with

 ‘Global Hotel Capital Funding, Investments or Transactions ‘ 

Esteema Capital Partners
Email: ambrish@esteemacapital.com
Office: ‪+44 (0) 208 464 6430‬
Mobile: ‪+44 (0) 7740 646 777‬
Website: www.esteemacapital.com

Please Contact Us  for help with

 ‘Global Hotel Capital Funding, Investments or Transactions ‘ 

Esteema Capital Partners
Email: ambrish@esteemacapital.com
Office: ‪+44 (0) 208 464 6430‬
Mobile: ‪+44 (0) 7740 646 777‬
Website: www.esteemacapital.com

1. PROPERTY DOCUMENTS

• Title deed / Land registry extract (Freehold / Leasehold)
• Site plan and location map
• Building layout, architectural drawings, and floor plans
• Valuation report (RICS or equivalent)
• Building condition / structural report
• CapEx and maintenance summary
• Planning permission / zoning approval
• Fire, safety, and environmental compliance certificates
• FF&E and OS&E asset inventory list
• Energy efficiency certificate (EPC)

2. LEGAL DOCUMENTS

• Company incorporation certificate and memorandum/articles
• Shareholding structure / ownership chart
• Board resolution authorising borrowing
• Loan security documents (if existing)
• Lease agreements (if leasehold or tenant occupied)
• Hotel management / franchise agreement
• Operator performance clause (HMA / FMA / lease)
• Key contracts (maintenance, laundry, housekeeping, etc.)
• Insurances – building, business interruption, liability
• Landlord consent / title opinion (if applicable)

3. FINANCIAL DOCUMENTS

• Last 3 years of audited financial statements (P&L, Balance Sheet, Cashflow)
• Current year management accounts
• Hotel trading summary – Occupancy, ADR, RevPAR, GOP, NOI
• Forward financial projections (3–5 years)
• Cost to complete (for developments or refurbishments)
• Detailed budget with cost breakdown
• Sensitivity analysis / IRR and ROI model
• Existing loan statements and repayment schedule
• Bank statements (6–12 months)
• Tax compliance certificates (VAT, corporation tax)

4. OPERATIONAL DOCUMENTS

• Brand / operator profile (Marriott, Accor, IHG, etc.)
• STR or market benchmarking report
• Sales & marketing plan / demand generators list
• Staff organisational chart & payroll summary
• Hotel licenses – alcohol, music, food hygiene, tourism
• Customer review / reputation data (TripAdvisor, Google, etc.)
• IT systems summary (PMS, POS, booking engines)
• Service contracts (utility, broadband, waste, etc.)

5. DEVELOPMENT / CONSTRUCTION DOCUMENTS

• Development appraisal / cost plan
• Quantity surveyor report
• Construction contract & contractor credentials
• Building warranties (NHBC, Build-Zone, etc.)
• Site insurance policy
• Program of works & completion timeline
• Planning Section 106 or CIL obligations
• Certificates of compliance (building regs, fire safety)

6. CORPORATE & SPONSOR INFORMATION

• Borrower / Sponsor CV and track record
• List of past projects and experience
• Asset & liability statement (personal & corporate)
• Proof of equity contribution
• Business plan / investment memorandum
• Company organisational chart
• Shareholders’ agreement (if JV)
• Group guarantee or parent support letter

7. ADDITIONAL (FOR LENDER/INVESTOR REVIEW)

• Independent valuation & feasibility report
• Environmental / flood / risk report
• Photographs and video walkthrough
• Exit strategy – refinance, sale, or hold plan
• Draft Heads of Terms (if equity or JV)
• Broker / advisor summary sheet

Please Contact Us  for help with

 ‘Global Hotel Capital Funding, Investments or Transactions ‘ 

Esteema Capital Partners
Email: ambrish@esteemacapital.com
Office: ‪+44 (0) 208 464 6430‬
Mobile: ‪+44 (0) 7740 646 777‬
Website: www.esteemacapital.com

Esteema Capital Partners is a London-based, FCA-regulated multi-family office specialising in ‘Hospitality Investments &  Transactions‘ across the UK & Globally.

We are recognised for our deep expertise, strong institutional relationships, and a long-standing reputation for delivering confidential, seamless, and strategic hotel transactions.

Our Expertise – Hotel Acquisitions & Sales

Our clients include privately managed hotel funds, institutional investors, family offices, REITs, and private capital groups seeking high-quality hospitality assets across key markets.

We actively support clients in both acquisitions and disposals, ensuring professional execution and access to exclusive off-market opportunities.

Acquisition Expertise:

• Off-market sourcing of 3–5 star hotels (flagged or independent)
• Single assets and portfolios up to £250M+
• Income-producing, value-add, and repositioning opportunities
• Forward purchase and development of hotel projects
• Distressed and special-situation transactions
• Comprehensive underwriting, valuation, and due diligence support
• Access to pre-approved bank debt facilities (up to 65% LTV)

We act with full discretion, ensuring investors receive carefully screened opportunities that match their investment mandate, risk appetite, and return objectives.

Our Expertise – Hotel Sales

Esteema Capital Partners also represents hotel owners, developers, and operators in discreet and strategic sales transactions.

• Sales Capabilities:
• Discreet sales of branded independent hotels
• Off-market seller representation for confidential and faster execution
• Targeted introductions to cash-ready global investors
• Strategic valuation, operator assessment, and exit planning
• Management of due diligence, negotiations, and completion
• Access to a global network of active hotel buyers and funds

Please be assured that every transaction is managed with professionalism, confidentiality, and precision, while protecting brand and operational sensitivities.

Please Contact Us for help with 

‘Hotel Capital Funding, Investments & Transactions’

Esteema Capital Partners
Email: ambrish@esteemacapital.com
Office: ‪+44 (0) 208 464 6430‬
Mobile: ‪+44 (0) 7740 646 777‬
Website: www.esteemacapital.com

How much can I borrow?

This depends on several key factors, including your experience, business performance, security value, affordability, and the strength of your business plan. However, if all criteria are strong, some lenders can offer up to 100% financing.

• Esteema Capital Partners can help you structure the most suitable and competitive financing solution.

Can I borrow with an adverse credit report?

Yes. Funding is still possible even with past credit challenges. We assess your overall circumstances, reasons for the adverse credit, and current financial standing.

• Esteema Capital Partners can guide you to lenders who are flexible with CCJs, arrears, or historic issues.

I am a first-time investor. Can I get hotel finance?

Yes. First-time buyers can still secure hotel finance. We support you with a strong business plan, projections, and lender preparation.

• Esteema Capital Partners can help you prepare a lender-ready project report,  even if you have no prior hotel experience.

I have never built a hotel before. Can I get finance for a new-build hotel?

Yes. Development finance is achievable even with no direct construction history. Lenders look at the contractor, cost plan, risk management, and sponsor strength.

• Esteema Capital Partners can help you prepare the development appraisal, contractor pack, and complete funding structure.

Can I get finance for a closed hotel with no trading history?

Yes. Lenders do finance closed, non-operational, repossessed, or distressed hotels. Approval depends on the turnaround strategy and the capex requirement.

• Esteema Capital Partners can help you build the projection model and repositioning plan required for lender approval.

Can I get hotel finance with no historical accounts AND no experience?

Yes. With the proper structure, this is possible.

• Esteema Capital Partners can help you match with lenders who support new entrants to the sector.

Can I finance a part-built or incomplete hotel project?

Yes. Stalled construction and repossessed sites can be refinanced or newly funded.

• Esteema Capital Partners can help you secure debt, mezzanine, equity, or JV solutions for such assets.

Can I get finance for an apartment hotel, leisure resort, or mixed-use hospitality asset?

Yes. These are fundable depending on seasonality, location demand, and operator model.

• Esteema Capital Partners can help you structure the right funding model suitable for your asset type.

What if the property needs refurbishment or repositioning?

Lenders regularly support value-add and refurbishment projects.

• Esteema Capital Partners can help you prepare a lender-ready value-add proposal and model.

What if I have a limited deposit or equity?

There are multiple solutions, such as additional security, JV equity partners, mezzanine equity, or vendor support.

• Esteema Capital Partners can help you arrange both debt and equity to complete your capital stack.

Please Contact Us for help with 

‘Hotel Capital Funding, Investments & Transactions’

Esteema Capital Partners
Email: ambrish@esteemacapital.com
Office: ‪+44 (0) 208 464 6430‬
Mobile: ‪+44 (0) 7740 646 777‬
Website: www.esteemacapital.com