All hotels have to go through property improvement plans sooner or later, and many properties will change flags during the lifetime of a building. Securing the funds to support a renovation or a conversion, however, can be a very different challenge from financing a ground-up development.
From large resorts to boutique urban hotels, here are four stories of renovations and conversions and how their owners secured financing for the projects.
Saddlebrook Resort, Tampa, Fla
In partnership with Amzak Capital Management, Mast Capital secured a $72.5 million loan from Beach Point Capital Management to finance the renovation of the 480-acre Saddlebrook Resort in Tampa, Fla. “We reached out to lenders to initiate the process—in this instance we worked with JLL as our advisor,” said Jordan Kornberg, chief investment officer at Mast Capital. “Given the complexity of the deal, it was important to have well-organized, thoughtful materials that outlined the opportunity and distilled it down for potential lenders.” The team also spent “significant time” educating interested lenders to help them “get their arms around” the business plan and the various components of value, Kornberg recalled.
To determine the budget for the Saddlebrook Resort, Mast and Amzak started with the business plan for what capital the resort needed. “Once we developed the business plan, we established a budget and worked through the design process,” Kornberg said. “As we designed, some of our areas of focus evolved and there was a push and a pull in order to decide how much money to spend in each area.” Ultimately, the parties developed a plan they believed would “optimize the business operations and return on our investment and finalized the budget accordingly.”
Loans for significant renovations are “a bit of a gap” in the market, Kornberg said, since lenders often cannot rely on debt yield but it is also not a pure construction loan.”
Hampton Inn Kailua-Kona Bay, Hawaii
The former Uncle Billy’s Kona Bay Hotel on Hawaii Island (formerly known as Hawaii’s Big Island) is undergoing a renovation with a planned reopening over the summer as the Hampton Inn Kailua-Kona Bay Hotel. Owner Sandy Shapery, through his entity 12th & A Hotel Partners, is set to invest approximately $30 million into the hotel’s renovation in partnership with Carlsbad, Calif.-based Summit Capital.
Shapery worked with Summit to acquire the property in the early 2020s. “We came in as an equity investor,” said John Stueber, president of Summit Capital. Once the deal closed, the partners began discussing how to rebrand the asset. “We thought that this may make a unique Hampton Inn.”
Brands like Hamptons are “typically ground up, new-build construction,” Stueber continued, but the partners—along with Hilton—“found a pathway” to get approval for a conversion, and the first hurdle was cleared. The next hurdle was determining a budget and capital stack, made all the more challenging by the resort’s location on an island and the need to import many of the furniture, fixtures and equipment from the mainland. “It was quite a process to get to a stage where we would understand what the total project costs would be,” Stueber said. “In this particular case, as it was an all-equity transaction on the close, there was significant equity into this project to begin with.”
The property is in an opportunity zone, an economic development tool that lets people invest in “distressed areas” across the United States. This let them track unique capital, Stueber said. “We had a number of conventional banks that had put bids on it, and we got to a point where we're able to select a lender to move forward.”
Stueber noted that converting an independent hotel to a brand can help open proverbial doors to financing. “There's no question that [having a] branded property such as a Hampton Inn in this particular location certainly made the project that much more financeable,” he said. “The pool of construction capital groups is certainly larger as a branded property as opposed to an independent [one].”
The Inn at Celebration, Fla.
Chattanooga, Tenn.-based hotel developer and operator Vision Hospitality Group recently completed a renovation to The Inn at Celebration, Fla., adding it to Marriott’s Autograph Collection.
“We secured the funds needed for the brand-required [PIP] with the lender with whom we financed to purchase the hotel,” said Joel Wineman, vice president of asset management at Vision Hospitality Group. “Dedicated reserve accounts are maintained for each operating hotel to fund future capital improvements. Historically, these reserve funds have been utilized for this purpose at the majority of our properties.”
When financing or refinancing a property, Wineman continued, the timing and cost of any planned PIP are incorporated into the financial analysis to ensure adequate funding is secured. “We prioritize discussions with the existing lender before engaging brokers or specialized [capital expenditure] lenders, as those options typically involve higher debt costs.” The PIP drives most of the budget for the rebranding exercise, he added, but the Vision team also consulted with third-party experts to prioritize spending in building systems that the PIP did not address.
Throughout the renovation and rebranding, the different parties kept in touch with monthly update calls to update schedule and budget progress. “The lender had their own inspection team to check on progress when we submitted draws for reimbursement on the project,” Wineman said. “We collaborate closely with the finance team to establish and negotiate the draw process, including specific dollar thresholds for conditional and unconditional lien waivers.”
Voco The Darwin, Atlanta
IHG’s Voco hotels brand made its Atlanta debut in late 2024 when the former Ponce Hotel reopened as Voco The Darwin following a $19.6 million renovation and rebranding.
“The financial decision for a renovation or rebranding project is primarily driven by the ownership group,” said owner Shyam Patel of Global SCR. “Owners must assess their available capital and determine if additional debt is required.” At the same time, Patel said, owners also need to collaborate with project managers, general contractors, designers and brand representatives to evaluate the financial impact of the renovation. “A key consideration is whether the anticipated revenue increase will justify the cost of the renovation and any associated debt. This process requires a careful balance between investment and expected return.” Patel said the Darwin’s third-party operator, Hospitality Ventures Management Group, played “a pivotal role” in developing and tracking the budget for the renovation and rebranding. “Their expertise provided the necessary financial structure to align renovation costs with projected revenue, ensuring a financially viable outcome.”
Global SCR secured a construction loan to finance the renovation. “The lending team had strict requirements regarding financial reporting, particularly for approving pay applications,” Patel recalled. And while there are many financing options available for hotel renovations, he believes owners must consider how much they are willing to pay for it. “Market conditions and prevailing interest rates directly impact financing options,” he continued. “Depending on the loan size and project type, certain financing structures may be more advantageous than others. Carefully evaluating these options and working with experienced financial advisors helped us secure the most suitable financing arrangement for the project.”
Advice for Owners
“Make sure you have a clear understanding of how the draw funding and reimbursement process works with your prospective lender,” Wineman said. For example, the team should know if the owner will fund the project first and be reimbursed or if funding is already immediately available for use.
“Do as much work upfront to understand existing conditions,” Kornberg said. “Vet the budgets and minimize risk as possible.” The more well-defined the business plan is, the easier the project is to finance and the easier the relationship between lender and borrower, he added. “Once a project is financed, significant changes to the plan typically require a conversation between lender and owner, which makes it harder to control your own destiny as an owner.”
Plan for the soft costs of a grand opening or relaunch of the hotel, Wineman said. “Spend the necessary time and money during due diligence to capture the full scope of the renovation and clearly identify the funding sources to address it.”
Peter Hathaway, principal and managing director at US Realty Consultants, agreed, and outlined what an organized proposal should look like: You have a good plan of what the vision is and very organized projections and a timeline of when things are slated for completion.”
In the renovation budget planning, identify how to handle crew housing for the contractor’s team, Wineman said. This can be complimentary rooms at the hotel or paid reimbursement to the general contractor.
“Choose the right partners—financial consultants, market analysts and project managers—to ensure that every decision is supported by quantitative data,” Patel said. “By leveraging expertise and making informed financial choices, hoteliers can optimize their renovation investments and position their properties for long-term success.”
Capital is always searching for the best operators, the best locations and the best brands, Stueber said. “Having all three of those in your favor certainly is an advantage for you.”
This article was originally published in the February/March edition of Hotel Management magazine. Subscribe here.