# Matthews Hotel Markets: full text > Generated from the same data modules as /sitemap.xml and /llms.txt. Covers every page on this site backed by a plain-text data module: the answer clusters, the calculators, the glossary, and the Matthews Hotel Index methodology. Each entry carries its own last-updated date, its direct answer, its FAQ and its sources, so a model can cite a specific dated claim rather than the site in general. Two pages are deliberately not extracted verbatim because they are hand-written JSX rather than data: https://matthewshotelmarkets.com/about and https://matthewshotelmarkets.com/rates. Read those directly; /rates also publishes https://matthewshotelmarkets.com/rates.json and https://matthewshotelmarkets.com/rates.csv. ## How does hotel financing work, and what does it cost right now? ### How does hotel financing work, and what does it cost right now? URL: https://matthewshotelmarkets.com/hotel-financing Last updated: 2026-09-18 Hotel loans are sized by cash flow, not by price. A lender starts with trailing twelve-month NOI, applies a debt service coverage test and a debt yield floor, then lends whatever is smaller. Loan-to-value is the third test, not the first. Fixed-rate quotes start from the 10-year Treasury, which was 4.94 percent on September 17, 2026.[1] Key takeaways: - Three tests size a hotel loan: DSCR, debt yield, and LTV. The lowest number wins. - Hotels price wider than apartments or industrial because the revenue reprices nightly. - Five lender types compete for hotel debt and they do not want the same deal. - A franchise comfort letter is a closing condition on almost every branded hotel loan. - Bring a trailing twelve-month P&L, a STAR report and a PIP status letter to the first call. #### How do lenders decide how much they will lend on a hotel? A hotel lender runs three sizing tests against the same trailing twelve-month NOI and lends against whichever produces the smallest number. The debt service coverage ratio (DSCR) test divides NOI by the proposed loan's annual debt service and requires the result to clear a minimum the lender sets. The debt yield test divides NOI by the loan amount directly, against a floor; it ignores rate and amortization entirely, which is why it can bind even when DSCR looks comfortable. Loan-to-value caps the loan against an appraised or purchase value. Each lender sets its own thresholds, and no conventional lender type publishes them, so our rate sheet marks them not yet published rather than guess.[4] Get your lender's tests in writing. None of the three tests is a formality. A lender runs all three and lends the lowest number, because that is the number every test in the package agrees the asset can carry. Amortization schedule matters here too: a 25-year schedule produces a smaller annual payment than a 20-year schedule on the same rate, which raises DSCR and can move which test binds. Ask a lender which test is binding on your deal before you negotiate rate, because moving the rate half a point does nothing if debt yield, not DSCR, is the constraint. #### What does a hotel loan cost in September 2026? Hotel loan pricing is quoted as an index plus a spread, and the spread on hotels runs wider than on apartments or industrial property. Fixed-rate hotel quotes track the 5- or 10-year Treasury; floating quotes track SOFR.[1][2] The spread over that index is set by five things, in the order we see lenders weigh them: the sponsor's experience and liquidity, the franchise flag and its market position, whether a PIP is open or funded, the market itself, and finally the loan structure. A hotel with an experienced sponsor, a top-performing flag, a funded PIP and no near-term renovation prices tighter than an identical building with a first-time buyer and an open PIP notice, even at the same leverage. Matthews Hotel Markets' September 2026 rate sheet puts the 10-year Treasury at 4.94% as of September 17, 2026 and the SBA 7(a) maximum allowable rate at 10.00%, which is SBA's 3.00% cap over the 7.00% Prime in effect since September 17, 2026.[3][6] It marks the conventional spread over that index as not yet published, because we do not print a spread until three independent lenders quote the same structure in a month.[4] The sheet shows what is and is not published, which is the part most rate sheets leave out. See the full breakout by lender type on `/hotel-financing/hotel-loan-rates`. #### Who actually lends on hotels? Five lender types compete for hotel debt, and each one wants a different deal, not the same deal at a different price. Banks and credit unions want a relationship and will usually ask for recourse. Life insurance companies want the lowest leverage and the longest, most stabilized hold, in exchange for the lowest rate. CMBS conduits want stabilized cash flow they can pool and sell, sized to a debt yield floor, non-recourse with standard carve-outs. SBA lenders want an owner-operator inside the program's caps. Debt funds and bridge lenders want a transition story: a PIP in progress, a ramp after a brand change, or a maturity that cannot yet refinance permanently. The full comparison, with typical leverage and minimum loan size by type, is on `/hotel-financing/hotel-lenders-by-type`. Recourse is covered on `/hotel-financing/non-recourse-loans`, interest-only structures on `/hotel-financing/interest-only-loans`, ground-up projects on `/hotel-financing/construction-loans`, reflags on `/hotel-financing/brand-conversion-financing`, and extended-stay hotels on `/hotel-financing/extended-stay-financing`. #### What do I need before a lender will quote me? A lender wants a trailing twelve-month P&L, a STAR report, and a PIP status letter before it will give you a real number, not an indication. The document package that actually moves a quote from an indication to a term sheet is a trailing twelve-month profit and loss statement, a STAR report showing occupancy, ADR and RevPAR against the competitive set, the franchise agreement and any PIP letter, and a personal financial statement from the sponsor. Lenders also want recent capital expenditure history, because a NOI that was bought by deferring maintenance is not the same NOI as one that was earned. The full checklist, with realistic lead times for each document, is on `/hotel-financing/loan-requirements`. #### Can a hotel with weak occupancy still get financed? Yes, but a lender underwrites the trend and the cause, not just the trailing number. A hotel running below its competitive set on occupancy is not automatically unfinanceable. What matters is whether the shortfall is temporary (a renovation disruption, a market supply wave that is being absorbed, a brand transition mid-completion) or structural (a declining submarket, an aging property losing share to newer supply). A lender that believes the shortfall is temporary will often underwrite to a near-term stabilized number instead of the trailing twelve, particularly in a bridge or debt fund structure. One that believes it is structural will size conservatively to the trailing number or decline. #### What fees should I expect beyond the rate? Origination points, third-party reports, and legal costs sit on top of the quoted rate, and all but the third-party reports are negotiable. Origination is typically quoted in points on the loan amount, and it is one of the more negotiable line items in a hotel loan, particularly when a lender is competing for the deal. Third-party costs, appraisal, property condition assessment, environmental report and, on a franchised property, the franchise's own transfer and application fees, are not generally negotiable and should be budgeted up front. Legal fees run both ways: the lender's counsel is typically a borrower cost. None of these figures belongs on this page as a flat number without a date, because they move with the lending environment; see the current rate sheet for what is quoting this month. #### What is the smallest hotel loan a lender will do? Minimum loan size is a quiet filter that rules out entire lender types before rate ever comes up. SBA's 7(a) program terms set a $5 million maximum and list no minimum loan size, so SBA lenders go smaller than any other type.[3] CMBS conduits and life insurance companies generally prefer larger loans, because the fixed cost of underwriting and, for CMBS, pooling a small loan does not pencil against the fee. Banks sit in between and will size to a relationship even on a smaller loan. If your loan need is small, the practical lender universe narrows to banks, credit unions, SBA, and some debt funds before you ever discuss rate. `/hotel-financing/lenders-under-5-million` compares the small-balance options, including the USDA guarantee for rural hotels. Table: Hotel loan sizing tests, September 2026 Test | What it measures | Typical threshold | What it constrains DSCR | NOI divided by annual debt service | Set by the lender; not published by any conventional lender type[4] | Payment, so it caps loan size at a given rate Debt yield | NOI divided by loan amount | Set by the lender; not published[4] | Loan size directly, independent of rate LTV | Loan divided by appraised value | Set by the lender; SBA 504 allows up to 85% of project cost on a hotel[4][5] | Loan size at a given valuation Amortization | Schedule used to compute payment | Varies by lender; SBA 7(a) allows up to 25 years on real estate[3] | Payment, so it moves DSCR First-party data point: Matthews Hotel Markets' September 2026 rate sheet puts the 10-year Treasury, the index a fixed-rate select-service quote is struck against, at 4.94% as of September 17, 2026. It marks the conventional spread over that index as not yet published, because we do not print a spread until three independent lenders quote the same structure in a month.[4] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: 95-key select-service hotel, Texas secondary market): This property is hypothetical. Stabilized NOI is $1.60M. The lender quotes 25-year amortization and a 1.35x DSCR test. Maximum annual debt service equals $1.60M divided by 1.35, or $1,185,185. At a 7.25 percent rate over 25 years, each $1M of loan carries about $86,800 a year of debt service, so the DSCR test supports a loan of $1,185,185 divided by $86,800 per $1M, or $13.65M. The debt yield test at 10 percent divides $1.60M by 0.10, supporting $16.0M. The LTV test at 60 percent of a $20.0M value supports $12.0M. The LTV test is the binding constraint here, so the loan is $12.0M, not $13.65M and not $16.0M. Change the rate to 8.00 percent and the DSCR number falls to roughly $12.8M, and the two tests nearly converge. That is the whole exercise: find which test binds, then work on that one. FAQ: - Q: What DSCR do hotel lenders require in 2026? A: Each lender sets its own minimum, and no conventional lender type publishes one, so there is no honest single number to quote. Ask the lender for its test in writing. Life companies generally want more cushion in exchange for lower leverage. - Q: Is debt yield or DSCR the harder test on a hotel loan? A: It depends on the rate environment. When rates are high relative to NOI, debt yield often binds first because it ignores rate and amortization. When rates are low, DSCR usually binds. Ask your lender which test is constraining your specific loan. - Q: What loan-to-value can I get on a hotel today? A: It depends on the lender and the asset. SBA 504 allows up to 85 percent of project cost on a hotel. Conventional lenders do not publish a ceiling. At the same NOI, leverage is lower than in 2021 because the payment on each dollar is higher. - Q: Do hotel loans have prepayment penalties? A: Almost always. Bank loans typically use a declining step-down penalty. CMBS loans use defeasance or yield maintenance, both of which are expensive in the first years of the loan. Ask for the exact schedule before you sign. - Q: How long does it take to close a hotel loan? A: Plan on a few months from a complete application package to funding. SBA loans can take longer because of the guaranty process. Bridge loans can close faster when the asset and sponsor are already known to the lender. - Q: Do I need a personal guarantee on a hotel loan? A: Most bank and SBA hotel loans carry a personal guarantee. Non-recourse structures are available through CMBS and life companies, generally at larger loan sizes and lower leverage. - Q: What is a franchise comfort letter and why does the lender want one? A: A comfort letter is the franchisor's agreement to let the lender step into the franchise agreement if it forecloses, so the flag survives a change of ownership. Almost every branded hotel loan requires one as a closing condition, and the franchisor sets the timeline, so request it early. Sources: - [1] Daily Treasury Par Yield Curve Rates (U.S. Department of the Treasury, accessed 2026-09-18): https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve - [2] Secured Overnight Financing Rate (SOFR) (Federal Reserve Bank of New York, accessed 2026-09-18): https://www.newyorkfed.org/markets/reference-rates/sofr - [3] 7(a) loan program: terms, conditions, and eligibility (U.S. Small Business Administration, accessed 2026-09-18): https://www.sba.gov/sba-lenders/#7a-terms - [4] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates - [5] SOP 50 10 8, Lender and Development Company Loan Programs (effective June 1, 2025), Section C, Ch. 1: debenture limits (p. 350) and Limited or Special Purpose Property, which lists hotels (pp. 354-355) (U.S. Small Business Administration, accessed 2026-09-18): https://legacy.sba.gov/document/sop-50-10-lender-development-company-loan-programs - [6] BNY Increases Prime Lending Rate to 7.00% (The Bank of New York Mellon Corporation, via PR Newswire, accessed 2026-09-18): https://www.prnewswire.com/news-releases/bny-increases-prime-lending-rate-to-7-00-302881066.html ### Can I use a 1031 exchange to buy or sell a hotel? URL: https://matthewshotelmarkets.com/hotel-financing/1031-exchange-hotels Last updated: 2026-09-17 Yes, for the real property. Section 1031 covers like-kind real property held for investment or business use, so an apartment building can exchange into a hotel.[2] The 45-day identification and 180-day closing clocks start at the sale closing.[3] Personal property, including FF&E, stopped qualifying after the 2017 tax law.[1] Engage a qualified intermediary before closing, not after. Key takeaways: - Like-kind is broad for real property. Apartment to hotel works; hotel to retail works.[4] - FF&E is personal property and has not qualified for 1031 treatment since the 2017 Tax Cuts and Jobs Act.[1] - The 45-day and 180-day clocks run from the closing of the sale and do not extend for weekends or holidays.[3] - The qualified intermediary must be in place before the sale closes. If you touch the proceeds, the exchange is dead.[3] - A reverse exchange lets you buy first, under an IRS safe harbor, but it is more expensive and more complex.[6] #### Does a hotel qualify for a 1031 exchange? Yes. A hotel held for investment or business use is like-kind real property under Section 1031, the same broad category that covers apartments, offices, retail and industrial. Section 1031's like-kind standard for real property is intentionally broad: nearly any real property held for productive use in a trade or business or for investment qualifies as like-kind to nearly any other such property.[1][4] Whether real estate is improved or unimproved does not matter under the regulations.[4] This is why an apartment building, an office building, or raw land can all exchange into a hotel, and why a hotel can exchange into any of those in return. What matters is the holding purpose, investment or business use, not the specific property type on either side of the trade. #### Can I exchange from another property type into a hotel? Yes. Any real property held for investment or business use can exchange into a hotel, provided the hotel itself will also be held for investment or business use. The seller's intent on the replacement property matters as much as the relinquished property's history. A hotel purchased with the intent to operate as a business or hold as an investment satisfies the requirement. A hotel purchased with the intent to flip quickly for resale is more vulnerable to an IRS challenge, because real property held primarily for sale does not qualify, regardless of which property type it replaced.[2] #### How do the 45-day and 180-day rules work? The 45-day identification period and the 180-day exchange period both start on the day the relinquished property's sale closes, and neither extends for weekends, holidays, or a slow hotel search.[3] The identification period requires the taxpayer to formally identify potential replacement properties, generally up to three regardless of value or more under the 200 percent rule, within 45 calendar days of the relinquished property's closing.[3] The exchange period requires the replacement property to close within 180 calendar days of that same date, or by the taxpayer's tax filing due date including extensions, if earlier.[2][3] Both deadlines are calendar days, not business days. The IRS postpones them only under published relief for federally declared disasters and similar events, not for an ordinary difficult search.[7] #### What about the FF&E in a hotel deal? Furniture, fixtures and equipment are personal property, and personal property has not qualified for 1031 exchange treatment since the Tax Cuts and Jobs Act of 2017 limited the section to real property only.[1] Before 2018, some hotel transactions allocated a portion of the exchange to personal property under the prior rules. That option no longer exists.[1][5] A hotel exchange today covers the real property only: land, building, and structural components. FF&E, and any other personal property included in a hotel sale, is treated as a separate, taxable disposition, and the purchase agreement should allocate value between real property and personal property clearly so both sides know what is, and is not, part of the exchange. #### Do I need a qualified intermediary? Yes, and the qualified intermediary must be engaged and in place before the relinquished property's sale closes, not after. A qualified intermediary holds the sale proceeds so the taxpayer never takes actual or constructive receipt of the funds, which is the central requirement that makes a deferred exchange work under the tax code.[3] If the taxpayer gets unrestricted access to the proceeds before receiving the replacement property, the regulations treat the transaction as a sale, not an exchange.[3] Selecting and engaging the intermediary is a pre-closing task, and it should happen well before the relinquished property goes under contract, not after the closing date is already set. #### What is a reverse 1031 exchange? A reverse exchange lets a buyer acquire the replacement hotel before selling the relinquished property, using a parking arrangement under an IRS safe harbor, at meaningfully higher cost and complexity than a standard forward exchange. Under the safe harbor in Revenue Procedure 2000-37, an exchange accommodation titleholder holds title to either the replacement or the relinquished property temporarily, so the taxpayer is never simultaneously holding both without an intermediary structure in place.[6] This lets a buyer move fast on a hotel it does not want to lose, without waiting for its own sale to close first. The added legal structure, financing complexity, since the parked property often cannot be financed on the same terms as a direct purchase, and carrying costs make a reverse exchange notably more expensive than a standard forward exchange, and it should be evaluated with a CPA and a qualified intermediary before committing. #### Should I line the exchange up before I list my hotel? Yes. The 45-day clock is unusually tight for a hotel purchase, and the underwriting work should start before the relinquished property is even under contract. Underwriting a replacement hotel requires a trailing twelve-month P&L, a STAR report, a PIP status letter, and a franchise application, and franchise approval runs on the brand's timeline, not yours. Owners who wait until their sale closes to start looking at replacement hotels risk missing the 45-day window or being forced into a weaker replacement property under deadline pressure. The work needs to start while the relinquished property is still being marketed. Buy-side representation for the replacement search is covered on `/services/acquisition-advisory`. Table: 1031 exchange clocks and requirements on a hotel deal Item | Rule | Starts when | What breaks it Identification period | 45 calendar days[3] | Closing of the relinquished property | Missing the deadline; no extension outside declared-disaster relief[7] Exchange period | 180 calendar days, or the tax filing due date if earlier[2] | Same closing | Closing late Qualified intermediary | Required; must be engaged pre-closing[3] | Before the sale closes | Taking constructive receipt of proceeds Property type | Like-kind real property, investment or business use[2] | n/a | Property held primarily for resale FF&E | Does not qualify since the 2017 tax law[1] | n/a | Treating it as real property Reverse exchange | Allowed under Rev. Proc. 2000-37 safe harbor[6] | Parking arrangement | Holding title yourself during the parking period First-party data point: The Matthews Hotel Index for Q1 2026 gives the cap-rate bands we use to identify replacement hotels inside a 45-day window. Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: the 45-day clock on a real timeline): Hypothetical. An owner closes the sale of an apartment building on March 3 and wants a hotel as the replacement. Day 0 is March 3, the sale closes and proceeds go to the qualified intermediary. Day 45 is April 17, the identification deadline, allowing up to three properties, or more under the 200 percent rule. Day 180 is August 30, the closing deadline. Forty-five days is short for a hotel. Underwriting a hotel means a T-12, a STAR report, a PIP status letter, and a franchise application, and the brand controls the timing of that last one. Owners who wait until the sale closes to start looking risk missing it. The work starts before the relinquished property goes under contract. FAQ: - Q: Can I 1031 exchange into a hotel? A: Yes. A hotel held for investment or business use is like-kind real property under Section 1031, and any other real property held the same way can exchange into it. - Q: Does hotel FF&E qualify for a 1031 exchange? A: No. Furniture, fixtures and equipment are personal property, and personal property has not qualified for 1031 treatment since the 2017 Tax Cuts and Jobs Act. - Q: How long do I have to identify a replacement hotel? A: 45 calendar days from the closing of the relinquished property, with no extension for weekends, holidays, or a slow search. Up to three properties can be identified regardless of value, or more under the 200 percent rule. - Q: Can I exchange from an apartment building into a hotel? A: Yes. Both are like-kind real property held for investment or business use, which is the standard Section 1031 requires, regardless of the specific property type on either side. - Q: What is a qualified intermediary? A: A qualified intermediary holds the sale proceeds so the taxpayer never takes actual or constructive receipt of them, which is required for a deferred exchange to qualify. Engage one before the sale closes. - Q: Can I buy the hotel before I sell with a reverse exchange? A: Yes, under the IRS safe harbor in Revenue Procedure 2000-37, using a parking arrangement. It is more expensive and more complex than a standard forward exchange. - Q: Do I need to line up the exchange before I list my hotel? A: You should start underwriting replacement hotels before your sale even closes. The 45-day identification window is tight, and franchise approval runs on the brand's timeline, not yours. Sources: - [1] Like-kind exchanges, real estate tax tips (Internal Revenue Service, accessed 2026-09-18): https://www.irs.gov/businesses/small-businesses-self-employed/like-kind-exchanges-real-estate-tax-tips - [2] 26 U.S.C. Section 1031 (Legal Information Institute, Cornell Law School, accessed 2026-09-18): https://www.law.cornell.edu/uscode/text/26/1031 - [3] 26 CFR 1.1031(k)-1, Treatment of deferred exchanges (Legal Information Institute, Cornell Law School, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/26/1.1031(k)-1 - [4] 26 CFR 1.1031(a)-1, Property held for productive use in trade or business or for investment (Legal Information Institute, Cornell Law School, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/26/1.1031(a)-1 - [5] Instructions for Form 8824, Like-Kind Exchanges (Internal Revenue Service, accessed 2026-09-18): https://www.irs.gov/instructions/i8824 - [6] Revenue Procedure 2000-37, reverse exchange safe harbor (Internal Revenue Service, accessed 2026-09-18): https://www.irs.gov/pub/irs-drop/rp-00-37.pdf - [7] Revenue Procedure 2018-58, postponement of time-sensitive acts, including Section 1031 deadlines (Internal Revenue Service, accessed 2026-09-18): https://www.irs.gov/pub/irs-drop/rp-18-58.pdf ### How do I finance converting my hotel to a new brand? URL: https://matthewshotelmarkets.com/hotel-financing/brand-conversion-financing Last updated: 2026-09-18 Most owners fund a conversion with a renovation or bridge loan plus cash, sometimes offset by franchisor key money that arrives after opening. Hilton's disclosure document for Spark, a conversion-only brand, issued March 30, 2026, estimates $3,251,531 to $5,906,193 to convert a 100-room hotel, before real estate.[1] Leaving the old flag early can cost 60 months of royalties on top.[2] Key takeaways: - A conversion budget has four parts: the new brand's fees, the renovation and FF&E, the cost of leaving the old flag, and cash to carry the hotel through the disruption. - Hilton's 2026 Spark FDD puts a 100-room conversion at about $32,500 to $59,100 per room before real estate, and tells owners to assume a contingency of at least 10 percent of renovation cost.[1] - Exit damages are a formula, not a negotiation starting point. Hilton's 2026 Hampton agreement sets them at the hotel's average monthly royalty times 60 for most of the term.[2] - Key money is not a loan and not free. Hilton calls its incentive a contingent liability that burns off evenly over the franchise term and becomes repayable on termination or transfer.[2] - Your existing lender has to approve the flag change, and the new lender will want a comfort letter from the new franchisor. Start both conversations before you sign the franchise application. #### What does a brand conversion actually cost? The only honest public numbers are the franchisors' own, and Hilton's 2026 estimate for converting a 100-room hotel to Spark is $3.25 million to $5.91 million before real estate. Spark by Hilton is offered for conversion projects only, so its Item 7 table is a pure conversion budget. For a 100-room hotel in good condition, Hilton estimates $1,300,000 to $2,800,000 for construction and renovation, $900,000 to $1,200,000 for furniture, fixtures and equipment, $36,000 to $60,000 for signage, a $75,000 franchise application fee and a $10,000 fee to prepare the property improvement plan. The total is $3,251,531 to $5,906,193, which is about $32,500 to $59,100 per room. It excludes real estate, market studies, insurance and interest.[1] Three lines in that table matter to a lender. Contingency is $130,000 to $280,000, and Hilton tells owners to assume at least 10 percent of renovation cost. Additional funds for the first three months of operation are $300,000 to $500,000. And Hilton says it cannot estimate pre-conversion costs for any specific existing hotel, because there are too many variables.[1] Other brands cost more to enter. Hilton's 2026 Hampton document sets the application fee for a new development or conversion at $100,000 plus $400 for each room over 150, with the same $10,000 PIP fee.[2] Hampton's Item 7 estimates new construction, not conversion, so the scope of a Hampton conversion comes from the PIP itself. For how PIP scopes and per-room budgets work, see `/hotel-financing/pip-and-renovation-loans` and `/glossary/pip`. #### What does it cost to leave my current flag? If you terminate early, the franchise agreement's liquidated damages clause sets the price, and under Hilton's 2026 Hampton agreement that is usually 60 months of royalties. Hilton's 2026 Hampton FDD lays the formula out by period. If the agreement ends after the second anniversary of opening and before the final 60 months of the term, damages are the hotel's average monthly royalty fees multiplied by 60. In the final 60 months, the multiplier is the number of months remaining. The average is taken over the 24 months before termination, and the royalty is 6 percent of gross rooms revenue.[2] That makes timing the biggest variable in a conversion budget. A reflag at natural expiration owes nothing under this formula. A reflag five years early owes five years of royalties. Every franchisor's agreement is different, so read your own, and ask whether the damages are owed if you convert to another brand in the same family. Lenders care because liquidated damages are a use of funds with no collateral value. A bank will usually want that line covered by equity. #### What loans pay for a conversion? A bank renovation loan, a bridge loan that also refinances the existing mortgage, or an SBA loan, depending on size, the hotel's current cash flow and how much the conversion disrupts it. A bank loan fits when the hotel already covers its debt and the conversion is a moderate renovation. The capital rules help here: improvements to an existing income-producing property are excluded from the high volatility commercial real estate category when the property's cash flow supports its debt service and expenses under the bank's permanent-loan criteria.[3] Banks do not publish their terms, and our rate sheet marks them not yet published.[4] A bridge loan fits when the conversion is deep enough to interrupt cash flow, or when the existing loan has to be paid off to allow it. The bridge lender underwrites the stabilized NOI under the new flag, holds back the renovation budget and funds it in draws, and expects to be refinanced once the hotel has a trailing record. Bridge debt floats over SOFR, which was 3.85 percent for September 17, 2026.[4] See `/hotel-financing/bridge-loans`. SBA works for smaller projects. A 7(a) loan caps at $5 million, and the portion that improves real property can run 25 years plus the period needed to complete the improvements.[5] A 504 project can include the renovation of existing buildings, with a fixed-rate debenture that priced at 6.54 percent for 25 years on September 10, 2026.[6][4] If the new brand meets the FTC definition of a franchise, it must be on the SBA Franchise Directory for the loan to be eligible.[7] Buying a hotel and converting it in one transaction uses the same three tools, with the purchase price and the conversion budget in one sources-and-uses table. Lenders size that loan to total cost, not to the purchase price alone. #### What is key money, and does it reduce what I need to borrow? Key money is a franchisor incentive paid after the hotel opens under the new flag, so it repays debt or equity afterward; it does not fund the renovation. Hilton's 2026 Hampton FDD describes its version precisely. An incentive is a financial contribution to assist with the development or conversion of the hotel, offered at Hilton's sole discretion. The owner and its principals sign a development incentive note. The money is disbursed within 30 days after the hotel opens with Hilton's consent, provided the PIP is complete and the application fee is paid.[2] The FDD says an incentive is not a loan, it is a contingent liability. It does not have to be repaid unless the franchise terminates before the end of the term or a transfer occurs. The repayable amount falls by an equal share each year, one twentieth a year on a 20-year term, and bears no interest unless it comes due and is not paid, when it accrues at 1.5 percent per month or the highest rate allowed by law.[2] Hilton adds that it generally does not offer other financing, though in rare cases it may offer a mezzanine loan or a guaranty.[2] Two financing consequences follow. Your lender will treat the note as an obligation of the principals and will want it disclosed. And a buyer of the hotel either assumes the note with the franchisor's consent or you repay the unamortized balance at closing, so key money taken today is a deduction from sale proceeds for years. #### Will my lender let me change the flag? Almost every hotel loan requires lender consent to terminate or replace the franchise agreement, so the lender is a party to the decision whether or not it funds the work. A branded hotel loan is underwritten to the flag. Changing it without consent is typically a default, and under a non-recourse loan an unpermitted franchise change can sit close to the carve-out list; see `/hotel-financing/non-recourse-loans`. A CMBS servicer will process the request under the loan documents, which takes time and fees; `/hotel-financing/cmbs-loans` explains who decides. The new lender, or the existing one, will also want a comfort letter from the new franchisor, which lets the lender step into the franchise agreement after a foreclosure. Hilton's 2026 Hampton FDD lists a $3,500 processing fee for a lender comfort letter.[2] Order it when you apply for the franchise, not the week before closing. #### How long does a conversion take, and what should I line up first? Hilton tells Spark applicants to expect about 6 to 18 months for conversion work, depending on the condition of the hotel, with deadlines written into the franchise agreement. That is the franchisor's own estimate, for its own conversion brand, so treat it as a planning range.[1] The start and completion dates are set project by project in the PIP and the franchise agreement, and Hilton charges a $10,000 fee for an extension.[2] A loan that funds in draws has to be closed before the first deadline, which means the loan process and the franchise application run in parallel. The order that works: get the PIP scope and a contractor's price, confirm the exit cost and date under the old agreement, ask the current lender what it will consent to, then take the full sources-and-uses budget to lenders. Whether the conversion is worth doing is a valuation question, not a financing one. The test is whether the NOI gain under the new flag, capitalized, exceeds the all-in cost; `/hotel-financing/refinance-or-sell` walks through the same comparison for an owner deciding whether to invest or exit. Table: What a hotel brand conversion budget contains, and what usually funds each line Budget line | Public figure | What usually funds it New franchise application fee | Spark $75,000; Hampton $100,000 plus $400 per room over 150[1][2] | Equity, due with the application PIP preparation fee | $10,000 at both brands[1][2] | Equity Renovation and leasehold improvements | Spark, 100 rooms: $1,300,000 to $2,800,000[1] | Loan proceeds, funded in draws Furniture, fixtures and equipment | Spark, 100 rooms: $900,000 to $1,200,000[1] | Loan proceeds or FF&E reserve Signage and systems | Spark signage $36,000 to $60,000; computer systems $38,595 to $92,895[1] | Loan proceeds Contingency | At least 10% of renovation cost[1] | Loan holdback plus equity Operating funds, first three months | Spark: $300,000 to $500,000[1] | Equity or working-capital portion of an SBA 7(a) loan Liquidated damages to the old franchisor | Hampton formula: average monthly royalty times 60 for most of the term[2] | Equity; lenders rarely fund it Franchisor incentive (key money) | Paid within 30 days after opening; repayable balance falls evenly over the term[2] | Arrives after the work; pays down debt or returns equity First-party data point: Matthews Hotel Markets' September 2026 rate sheet indexes its Bridge and debt fund row, the row most conversions are financed from, to SOFR at 3.85% for September 17, 2026, and notes that a bridge loan almost always requires a purchased rate cap. The spread is marked not yet published.[4] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: reflagging a 100-room hotel five years before the old agreement expires): Hypothetical. A 100-room hotel earns $3,200,000 a year in rooms revenue under a franchise agreement that uses the liquidated damages formula in Hilton's 2026 Hampton FDD, with more than 60 months left on the term. The owner plans a conversion with a $4,500,000 budget, inside the $3,251,531 to $5,906,193 range Hilton publishes for a 100-room Spark conversion.[1] The budget, the revenue and the incentive below are assumptions for the arithmetic. Exit cost. The royalty is 6 percent of rooms revenue: $3,200,000 times 0.06 divided by 12 equals $16,000 a month. Multiplied by 60, liquidated damages are $960,000.[2] All-in cost. $4,500,000 plus $960,000 equals $5,460,000, or $54,600 per room. The exit cost is 17.6 percent of the total, and it buys nothing a lender can take as collateral. Financing. The conversion budget alone would fit under the $5,000,000 SBA 7(a) cap with $500,000 of room.[5] Any existing mortgage to refinance would not, so this owner is looking at a bank or bridge loan for the $4,500,000 and equity for the $960,000. Key money. Suppose the new franchisor offers a $500,000 incentive on a 20-year term. It arrives within 30 days after opening, so it repays part of the loan; it cannot fund the work. The repayable amount falls by $25,000 a year. If the owner sells after 6 years and the buyer does not assume the note, $500,000 times 14 divided by 20, or $350,000, comes out of sale proceeds.[2] Waiting until the last 60 months of the old agreement shrinks the $960,000 by $16,000 for every month closer to expiration. FAQ: - Q: What's it cost to convert a hotel from one brand to another? A: Hilton's 2026 FDD for Spark, a conversion-only brand, estimates $3,251,531 to $5,906,193 for a 100-room hotel, about $32,500 to $59,100 per room, before real estate. Add any liquidated damages owed to the old franchisor. Other brands publish their own figures. - Q: My franchise agreement is ending and I want to reflag. How do I pay for the conversion? A: At expiration there are usually no exit damages, so the budget is fees, renovation, FF&E and carry. A bank renovation loan works if the hotel covers its debt today. A bridge loan works if the conversion interrupts cash flow. SBA 7(a) or 504 works on smaller projects. - Q: What is key money, and do I have to pay it back? A: It is a franchisor incentive paid after the hotel opens under the new flag. Hilton's 2026 Hampton FDD calls it a contingent liability, not a loan. The repayable amount falls evenly each year and comes due if the franchise terminates early or the hotel is transferred. - Q: Will my lender let me change my hotel's flag? A: You need its consent under almost every hotel loan. Bring the new franchise approval, the PIP budget and the funding plan. A bank decides case by case. A CMBS servicer follows the loan documents. Changing flags without consent is typically a default. - Q: Can I finance the PIP together with the purchase when I buy a hotel to convert? A: Yes. Lenders size an acquisition with a conversion to total cost, meaning price plus the conversion budget, and fund the renovation in draws. Bridge lenders and SBA lenders both do this. Permanent lenders such as CMBS generally want the work finished first. - Q: How long does a hotel conversion take? A: Hilton's 2026 Spark FDD says it generally anticipates conversion projects to take about 6 to 18 months, depending on the condition of the existing hotel. That is the franchisor's estimate. Your deadlines are written into the franchise agreement and the PIP. - Q: What are liquidated damages on a hotel franchise agreement? A: A formula payment for ending the agreement early. Under Hilton's 2026 Hampton agreement it is the hotel's average monthly royalty times 60 for most of the term, and the months remaining in the last 60. Read your own agreement, because formulas differ. - Q: Is it worth converting my hotel to a different brand? A: Only if the NOI gain under the new flag, capitalized at a realistic cap rate, exceeds the all-in cost including exit damages and lost revenue during the work. We do not publish a typical RevPAR lift, because no public primary source supports one. Sources: - [1] 2026 US Spark by Hilton Franchise Disclosure Document (issued March 30, 2026): Item 1, Item 7 (100-room conversion, pp. 33-34) and Item 11 (conversion timing, p. 60) (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2026/03/2026-US-FDD-Spark.pdf - [2] 2026 US Hampton Franchise Disclosure Document (issued March 30, 2026): Item 5 initial fees (pp. 15-16), Item 6 comfort letter fee and liquidated damages (pp. 25-26, 31), Item 10 financing and incentives (pp. 44-45) (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2026/03/2026-US-FDD-Hampton.pdf - [3] 12 CFR 217.2, Definitions: HVCRE exposure, exclusion for improvements to existing income-producing property (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/12/217.2 - [4] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates - [5] 7(a) loan program: terms, conditions, and eligibility (U.S. Small Business Administration, accessed 2026-09-18): https://www.sba.gov/sba-lenders/#7a-terms - [6] 504 loans (U.S. Small Business Administration, accessed 2026-09-18): https://www.sba.gov/loans/504-loans/ - [7] SOP 50 10 8, Lender and Development Company Loan Programs (effective June 1, 2025), Section A, Ch. 1: the SBA Franchise Directory (pp. 31-32) (U.S. Small Business Administration, accessed 2026-09-18): https://legacy.sba.gov/document/sop-50-10-lender-development-company-loan-programs ### What is a bridge loan and when should a hotel owner use one? URL: https://matthewshotelmarkets.com/hotel-financing/bridge-loans Last updated: 2026-09-18 A bridge loan is short-term floating-rate debt, usually interest-only, used when the hotel is not yet financeable by a permanent lender. It buys time for a PIP, a ramp-up, or a repositioning. It floats over SOFR, which was 3.85 percent for September 17, 2026, and usually requires a purchased rate cap.[1] Identify the exit before you sign, not after. Key takeaways: - Bridge debt is priced over SOFR and floats, so lenders usually require a rate cap as a condition of closing. - The three real use cases: an in-progress PIP, a ramp after a brand change, and a maturity you cannot refinance yet. - Interest-only preserves cash flow during the transition, which is the point. - Extension options are cheap to buy at closing and expensive to buy later. - If you cannot name the takeout lender at closing, you do not have a bridge plan. #### What makes a loan a bridge loan? A bridge loan is short-term, floating-rate, interest-only debt that finances a hotel through a transition a permanent lender is not yet willing to underwrite. Where permanent debt underwrites the trailing twelve-month NOI as it stands today, a bridge lender is willing to underwrite a stabilized, forward-looking NOI, on the condition that the loan term is short enough, and the rate high enough, to compensate for that added risk. Bridge loans run for a short term, often with extension options, are priced over SOFR rather than the Treasury, and are usually interest-only so the borrower's cash flow is not squeezed while the property is mid-transition. #### When does a hotel actually need one? Three situations call for a bridge loan: a PIP still in progress, a ramp-up after a brand conversion, and a maturity a permanent lender will not yet refinance. A hotel with an unfinished, brand-mandated renovation cannot show a permanent lender the stabilized NOI the renovation is expected to produce, so a bridge loan finances the gap between today's NOI and the pro forma. A hotel recently converted to a new flag has not yet built the trailing operating history a permanent lender wants, and a bridge loan carries it through that ramp. A hotel approaching maturity with NOI that does not yet support a permanent refinance, but is expected to recover, uses a bridge loan to buy the time for that recovery to show up in the numbers. Outside these three situations, permanent debt is almost always the better and cheaper choice. #### What does a hotel bridge loan cost? Bridge debt costs more than permanent debt in both rate and required upfront purchases, and that premium is the price of the flexibility and the underwriting risk the lender is taking. Matthews Hotel Markets' September 2026 rate sheet puts SOFR, the index a hotel bridge loan floats over, at 3.85% for September 17, 2026.[1] It marks the bridge spread and the cap strike as not yet published: nobody publishes either one, and we do not print a number we have not seen quoted by three independent lenders in a month.[2] Ask a bridge lender for both in writing. Beyond the spread itself, bridge loans typically carry an origination fee, an exit fee if the loan is repaid before a set date, and the cost of the rate cap covered below. None of these are exotic; they are the standard cost structure of short-term floating debt, and they should be modeled into the total cost of the bridge period, not just the quoted spread. #### What is a rate cap and how much is it? A rate cap is a purchased derivative that caps the borrower's floating rate at a set strike, and hotel bridge lenders usually require one as a closing condition. Because a bridge loan floats with SOFR, the lender requires the borrower to buy a rate cap so that a sharp rate increase does not push the loan's debt service above what the property can support during the bridge term. The cap's cost depends on the strike level, the notional amount, and the term, and it is a live, quoted cost, not a fixed percentage that holds across the market. Budget for it as a real, sometimes significant, line item at closing, and get a quote before you assume the bridge structure pencils. #### How do I get out of it? The exit is a permanent take-out loan, a sale, or an extension, and the lender expects to see which one you are planning before the bridge closes, not after. A credible bridge plan names the intended exit at closing: a specific permanent lender type and rough terms once the PIP or ramp is complete, or a sale timeline if that is the plan instead. Lenders who write bridge loans without a clear exit path in view are taking on risk they generally price for, which shows up as a wider spread or a shorter term. The clearest, cheapest bridge loans are the ones where the takeout is essentially pre-underwritten before the bridge even funds. #### What happens if my business plan slips? A slipping business plan is the central risk of bridge financing, and the honest response is to model the downside case before you close, not after the numbers come in short. If a renovation runs long, or the stabilized NOI comes in below the pro forma, the bridge loan's maturity can arrive before the permanent takeout is ready to fund at the size needed. Extension options, negotiated at closing, are the standard cushion for this risk, and they are meaningfully cheaper to buy up front than to negotiate under pressure near maturity. The worked example below shows exactly how much the bridge outcome depends on the stabilized number actually showing up. #### Bridge or an extension from my current lender? An extension from your existing lender is usually simpler and often cheaper than a new bridge loan, when the current lender is willing to offer one at all. An extension avoids a new closing, new third-party reports, and a new lender relationship, and it fits well when the shortfall is a matter of months, not years. A bridge loan from a new lender makes more sense when the current lender is unwilling to extend, when future funding for a PIP is needed and the current lender cannot provide it, or when the timeline to stabilization is long enough that a purpose-built bridge structure is worth the added complexity of a new closing. Table: Bridge debt versus permanent debt for a hotel Category | Bridge | Permanent Rate | SOFR plus a spread, floating | Fixed Term | Short, often with extension options | Longer, fixed for the term Amortization | Usually interest only | Amortizing, sometimes with an interest-only period Requires | Usually a purchased rate cap | No cap on a fixed rate Funds capex | Yes, usually a future-funding facility | Rarely Prepayment | Usually lighter than permanent debt; watch the exit fee | Step-down penalty, or defeasance or yield maintenance on CMBS Underwritten to | Stabilized pro forma NOI | Trailing twelve-month NOI First-party data point: Matthews Hotel Markets' September 2026 rate sheet puts SOFR, the index a hotel bridge loan floats over, at 3.85% for September 17, 2026.[1] It marks the bridge spread and the cap strike as not yet published, because nobody publishes them and we will not print a number we have not seen quoted three times in a month.[2] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: bridging a $3.0M PIP): Hypothetical. A 104-key hotel with a $3.0M brand-mandated PIP. Current NOI $1.35M. Stabilized pro forma NOI after the renovation is $1.95M. A permanent lender sizes against the trailing NOI of $1.35M at a 1.40x test: maximum debt service $964,286, supporting a loan of about $11.1M at a 25-year schedule and 7.25 percent. A bridge lender instead sizes against the stabilized $1.95M, funds the $3.0M PIP through a future-funding facility, and lends $16.5M total, interest only. The bridge provides $5.4M more and funds the renovation. It also costs more every month and floats. The deal only works if the stabilized $1.95M shows up. Write down what happens if it comes in at $1.65M instead, before you close. FAQ: - Q: What is a typical hotel bridge loan rate? A: It is quoted as SOFR plus a spread, and both the spread and the cap cost move with the market. Our September 2026 rate sheet publishes SOFR but not a bridge spread, because nobody publishes one. Get both in writing. - Q: How long is a hotel bridge loan? A: Short, and usually shorter than permanent debt, often with extension options negotiated at closing. The term should match how long the PIP, ramp, or maturity gap actually needs, not a default assumption. - Q: Do I need a rate cap on a bridge loan? A: Usually. Because bridge debt floats with SOFR, lenders typically require a purchased rate cap as a closing condition, protecting the property's debt service against a sharp rate increase during the bridge term. - Q: Can a bridge loan fund my PIP? A: Yes. A bridge loan with a future-funding facility is a common route for a large PIP. It draws capital as the renovation progresses rather than funding the full amount at closing. - Q: Is a hotel bridge loan recourse? A: It varies by lender. Some bridge lenders require full or partial recourse; others offer non-recourse with standard carve-outs, generally at lower leverage or with a stronger sponsor. - Q: What happens at the end of a bridge loan? A: The loan is repaid through a permanent refinance, a sale, or an extension. The exit should be identified before the bridge closes, not decided under pressure near maturity. - Q: Can I extend a hotel bridge loan? A: Often, if extension options were negotiated at closing. Extensions bought up front are typically far cheaper than negotiating one after the business plan has already slipped. Sources: - [1] Secured Overnight Financing Rate (SOFR) (Federal Reserve Bank of New York, accessed 2026-09-18): https://www.newyorkfed.org/markets/reference-rates/sofr - [2] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates ### What is a CMBS loan and how does it work for hotels? URL: https://matthewshotelmarkets.com/hotel-financing/cmbs-loans Last updated: 2026-09-17 A CMBS loan is a fixed-rate hotel loan originated to be pooled and sold as bonds. It is non-recourse with standard carve-outs, often has interest-only periods, and is sized to a debt yield floor. Its fixed rate starts from Treasuries; the 10-year was 4.94 percent on September 17, 2026.[1] You get non-recourse and give up flexibility, because the servicer follows the documents. Key takeaways: - CMBS is non-recourse with carve-outs. It is not no-recourse. - Debt yield, not LTV, is usually the binding constraint on a hotel CMBS loan. - Prepayment is through defeasance or yield maintenance, both of which are expensive early. - Once the loan closes, your counterparty is a servicer, not the originator. - Limited-service hotels are financeable in CMBS, but small loans often do not fit a pool efficiently. #### What makes a loan a CMBS loan? A CMBS loan is originated by a lender specifically to be pooled with other commercial mortgages and sold to bond investors, which shapes every term in the loan documents. Because the loan is designed to be securitized, its terms are standardized to fit rating agency and bond-investor expectations: fixed rate, a defined term, a fixed amortization schedule (or interest-only), and tightly defined default and transfer provisions. The originating lender typically sells the loan into a pool shortly after closing, at which point a master servicer administers routine servicing and a special servicer takes over only if the loan defaults or approaches default. This structure is why a CMBS loan behaves differently after closing than a portfolio loan held by a bank. #### How is a hotel CMBS loan sized? Debt yield is usually the binding test on a hotel CMBS loan, more often than LTV or DSCR. Debt yield divides NOI by the loan amount and ignores rate and amortization entirely, which makes it a conservative floor that CMBS conduits lean on heavily for hospitality, given how quickly hotel NOI can move relative to a leased asset. In our experience, conduits set a higher debt yield floor for hotels than for leased property types. LTV and DSCR are still run, but debt yield frequently produces the smallest, and therefore binding, number. The worked example below shows how the binding test can shift with a single appraisal change. #### What does non-recourse actually mean here? Non-recourse in a CMBS loan means the lender's remedy in a standard default is limited to the property, except for a defined list of bad acts, the carve-outs, that trigger personal liability. Standard carve-outs, often called bad-boy carve-outs, typically cover fraud, waste, environmental liability, unauthorized transfers, and bankruptcy filings made in bad faith. A sponsor who operates honestly and does not trigger a carve-out event has no personal exposure beyond the equity in the deal. A sponsor who commits fraud or improperly transfers the property loses that protection entirely. Non-recourse is real protection, but it is conditional protection, not a blank exemption from personal liability. #### What does it cost to pay off a CMBS loan early? Early prepayment on a CMBS loan runs through defeasance or yield maintenance, and both are structured to make the bondholders whole, not to be cheap. Defeasance replaces the mortgaged property as collateral with a portfolio of government securities that replicates the loan's remaining cash flows, which the borrower purchases and pledges to the trust; the cost scales with how far current rates have moved from the loan's coupon and how much term remains. Yield maintenance instead charges a calculated penalty designed to compensate the lender for the lost interest. Both mechanisms are most expensive in the early years of the loan and become cheaper as the loan approaches its maturity or open period. Either way, a CMBS loan should be underwritten as a loan the borrower intends to hold through its term, not one meant to be refinanced early. #### Who do I talk to after closing? A master servicer handles routine administration for the life of a performing CMBS loan; a special servicer takes over only if the loan defaults or is at imminent risk of default. The master servicer collects payments, manages escrows, and processes routine requests, but generally has limited authority to modify loan terms. If the loan defaults, or the borrower demonstrates imminent default, the file transfers to a special servicer, whose fiduciary duty runs to the bondholders as a pool, not to the individual borrower. This is the single biggest mental adjustment a first-time CMBS borrower needs to make: there is no relationship banker to call when something goes wrong. Transfers are not rare. Trepp put the lodging CMBS delinquency rate at 5.35 percent in July 2026,[2] and the lodging special servicing rate at 8.63 percent the same month.[3] The full mechanics of that stage are on `/hotel-financing/loan-workouts`. #### Can a limited-service hotel get CMBS financing? Yes, limited-service and select-service hotels are common CMBS collateral, but the loan needs to be large enough to carry the fixed cost of pooling. On a small loan, the fixed costs of CMBS origination, rating agency review, and pooling do not scale down well against the fee available on a small loan, which pushes smaller limited-service transactions toward banks, SBA, or debt funds instead. On a larger loan, a well-performing limited-service hotel with a strong comp-set position and an experienced sponsor is straightforward CMBS collateral. #### When is CMBS the wrong choice for a hotel? CMBS is the wrong choice when a near-term sale, a major renovation, or any need for loan flexibility is likely during the term, because the defeasance or yield-maintenance cost and the servicer relationship both work against flexibility. A hotel with a PIP still in progress, an owner considering a sale inside the next few years, or a business plan that depends on renegotiating terms mid-loan is generally better matched to a bank loan or a bridge structure, both covered on `/hotel-financing/hotel-lenders-by-type` and `/hotel-financing/bridge-loans`. CMBS rewards certainty: a stabilized asset, a sponsor planning to hold through the term, and no need to touch the loan again until maturity. Table: Hotel CMBS versus a bank loan Category | CMBS | Bank Recourse | Non-recourse with bad-boy carve-outs | Usually full or partial recourse Rate | Fixed for the term | Fixed for a shorter term, or floating Term | Longer fixed term | Often shorter, with a rate reset or maturity sooner Amortization | Long schedule, often IO for part of the term | Often a shorter schedule Sizing driver | Debt yield floor | DSCR and the relationship Prepayment | Defeasance or yield maintenance | Declining step-down, sometimes open After closing | Master servicer, then special servicer if it defaults | The banker who closed it Best fit | Stabilized, non-recourse needed, no near-term sale | Flexibility needed, PIP or repositioning ahead First-party data point: Matthews Hotel Markets' September 2026 rate sheet puts the 10-year Treasury, the index a fixed-rate CMBS quote is struck against, at 4.94% as of September 17, 2026, and marks the CMBS spread itself as not yet published. We do not print a spread until three independent lenders quote the same structure in a month.[4] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: why the debt yield floor binds): Hypothetical. 120-key limited-service hotel. NOI $2.10M. Appraised value $26.0M. The LTV test at 65 percent supports $16.90M. The debt yield floor at 10.5 percent divides $2.10M by 0.105, supporting $20.00M. The DSCR test at 1.40x, with 30-year amortization at 7.10 percent (an annual constant of about $80,640 per $1M), gives a maximum debt service of $2.10M divided by 1.40, or $1.50M, which supports a loan of $18.60M. The LTV test binds at $16.90M. Now assume the appraisal comes in at $30.0M instead: the LTV test moves to $19.50M and the DSCR test at $18.60M becomes the constraint. Which test binds changes with a single appraisal. Ask the lender which one is binding before you negotiate anything else. FAQ: - Q: Is a CMBS hotel loan non-recourse? A: Yes, subject to standard carve-outs for fraud, waste, environmental liability, unauthorized transfers, and bad-faith bankruptcy filings. A sponsor who avoids those triggers has no personal liability beyond the property. - Q: What is the minimum loan size for hotel CMBS? A: There is no published minimum. In practice, small loans often do not fit a pool, because the fixed costs of pooling and rating agency review do not scale down with the loan's fee. - Q: What is defeasance and what does it cost? A: Defeasance replaces the property with government securities that replicate the loan's remaining payments. Cost depends on how far rates have moved from the loan's coupon and how much term is left; it is most expensive early in the loan. - Q: Can I get interest-only on a hotel CMBS loan? A: Often, for part of the term, particularly on well-leveraged stabilized deals. Availability and length vary by lender and by the current lending environment; get the terms in writing. - Q: What is debt yield and why does CMBS use it? A: Debt yield divides NOI by loan amount and ignores rate and amortization. CMBS conduits favor it for hotels because it is a conservative floor that does not get distorted by a low rate or a long amortization schedule. - Q: What's the hotel CMBS delinquency rate right now? A: Trepp put the lodging CMBS delinquency rate at 5.35 percent for July 2026, up 13 basis points on the month, as reported by MBA NewsLink. Trepp updates it monthly, so check the latest release before relying on it. - Q: What happens if my CMBS hotel loan goes to special servicing? A: The file transfers from the master servicer to a special servicer, whose duty runs to bondholders, not to you. Full detail on what a special servicer can and cannot do is on the loan workouts page. - Q: Can I sell the hotel with the CMBS loan in place? A: Only through an assumption, if the buyer qualifies and the loan documents permit it, or by paying the loan off through defeasance or yield maintenance at sale. Either path adds cost and time to a transaction; plan for it before you go to market. Sources: - [1] Daily Treasury Par Yield Curve Rates (U.S. Department of the Treasury, accessed 2026-09-18): https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve - [2] Trepp: CMBS Delinquency Rate Up 51 Basis Points in July (MBA NewsLink, citing Trepp, accessed 2026-09-18): https://newslink.mba.org/mba-newslinks/2026/august/mba-newslink-thursday-august-6-2026/trepp-cmbs-delinquency-rate-up-51-basis-points-in-july/ - [3] CMBS Special Servicing Rate Falls as Office, Lodging Recover (CRE Daily, citing Trepp, accessed 2026-09-18): https://www.credaily.com/briefs/cmbs-special-servicing-rate-falls-as-office-lodging-recover/ - [4] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates ### How do I finance hotel construction in 2026? URL: https://matthewshotelmarkets.com/hotel-financing/construction-loans Last updated: 2026-09-18 Most ground-up hotels are financed with a bank construction loan that funds in draws, then refinanced into permanent debt after opening. Federal guidelines cap a bank's construction loan at 80 percent of value,[1] and bank capital rules favor projects with at least 15 percent borrower equity.[2] Private lodging construction ran at a $23.3 billion annual rate in July 2026, down 9.9 percent from July 2025.[3] Key takeaways: - A construction loan is sized to cost, funded in draws, and interest-only while you build. The permanent loan that replaces it is sized to cash flow. - Federal real estate lending guidelines set a supervisory ceiling of 80 percent loan-to-value on commercial construction and 65 percent on raw land.[1] Banks set their own limits under that ceiling and do not publish them. - If the borrower has less than 15 percent of the as-completed value in the deal as cash or land, the bank must hold capital against the loan at a 150 percent risk weight instead of 100 percent.[2][4] That is why lenders ask for real equity. - SBA 7(a) can fund construction and then amortize for up to 25 years after it. SBA 504 is permanent takeout money, so a bank still carries the build.[5][6] - In the Federal Reserve's July 2026 survey, a significant net share of banks said construction lending standards sit at the tighter end of their range since 2005.[7] #### Who actually makes hotel construction loans? Banks make most of them, SBA lenders cover the smaller owner-operator projects, and debt funds fill the gap when a bank will not reach the leverage the project needs. A ground-up hotel has no cash flow, so the lender types that size to trailing NOI, CMBS and life companies, are not construction lenders. That leaves three groups. Local and regional banks fund most select-service builds, usually for a sponsor they already know, with a personal guaranty. SBA lenders use the 7(a) program for projects that fit inside its $5 million loan cap, or pair a bank loan with a 504 debenture that arrives after completion.[5][6] Debt funds lend on larger or more complicated projects at a higher cost. Our rate sheet carries a Construction row indexed to Prime or SOFR. The spread on that row is marked not yet published, because no construction lender publishes one and we do not print a spread until three independent lenders quote the same structure in a month.[8] For how each lender type behaves once the hotel is open, see `/hotel-financing/hotel-lenders-by-type`. #### How much equity do I need to build a hotel? There is no published minimum, but two federal rules explain why banks want meaningful cash or land equity in a hotel project before the first draw. The first rule is the interagency real estate lending guidelines. They tell every bank to set internal loan-to-value limits no higher than the supervisory limits: 65 percent for raw land, 75 percent for land development, and 80 percent for commercial construction. A bank can exceed those limits only within a capped bucket, and its exceptions on commercial property cannot total more than 30 percent of its capital.[1] The guidelines also require the bank's policy to set minimum hard equity, limits on interest reserves, and requirements for guarantor support.[1] The second rule is the capital treatment of high volatility commercial real estate, or HVCRE. A hotel construction loan escapes that label if the loan-to-value is inside the supervisory limit and the borrower has contributed capital of at least 15 percent of the appraised as-completed value, in cash, unencumbered marketable assets, paid development costs, or land. The capital has to stay in the project until the loan is reclassified.[2] An HVCRE loan carries a 150 percent risk weight, against 100 percent for an ordinary corporate exposure.[4] A loan that costs the bank half again as much capital gets priced higher or declined. These are floors that come from regulation. The equity your lender actually asks for is a credit decision, it is usually higher on a hotel than the floor, and it is not published. Get it in writing. #### How is a construction loan different from a permanent hotel loan? A construction loan is sized to the budget, funds a piece at a time, and charges interest only on what has been drawn; a permanent loan is sized to NOI and funds once. The budget is the underwriting. The lender reviews the general contract, the franchise approval, a feasibility study, and a line-by-line budget that includes an interest reserve, which is loan money set aside to pay the loan's own interest until the hotel can. Each month the borrower submits a draw request, an inspector confirms the work is in place, and the lender funds that draw. Equity almost always goes in first. The sponsor typically signs two guaranties on a bank construction loan: repayment, and completion, which is a promise to finish the building and cover cost overruns. Better structures let the repayment guaranty fall away or shrink once the hotel opens and reaches an agreed coverage level. The table below sets the two loan types side by side. #### Can I use an SBA loan to build a hotel? Yes. SBA 7(a) can finance construction directly, and SBA 504 can take out a bank's construction loan with a fixed-rate debenture after the hotel is finished. A 7(a) loan caps at $5 million. The portion used to build or improve real estate can run 25 years plus the additional period needed to complete construction.[5] With Prime at 7.00 percent since September 17, 2026, the maximum variable rate on a 7(a) loan over $350,000 is 10.00 percent.[8][9] SBA's regulation requires a 100 percent payment and performance bond and builder's risk insurance on 7(a) construction unless SBA waives it.[10] The current SOP applies that to construction components over $350,000 and waives the bonds when the lender hires a third-party construction management firm that controls disbursements.[6] SBA does not allow balloon payments on 7(a) loans.[6] The 504 program is permanent or take-out financing. An interim lender, usually the same bank that holds the first lien, funds construction, and the debenture sale repays the interim loan after the project is complete.[6] For a hotel the debenture is capped at $5 million and at 35 percent of project cost, and the borrower puts in at least 15 percent.[6] On a larger project the $5 million cap binds first, as the worked example shows. The 25-year debenture priced at 6.54 percent on September 10, 2026.[8] See `/hotel-financing/sba-7a-vs-504` for the full comparison. #### What does it cost to build a branded select-service hotel? Hilton's 2026 franchise disclosure documents put a new 89-room Hampton Inn at $17.0 million to $24.7 million and a new 107-suite Home2 Suites at $18.1 million to $26.6 million, both before land. Those are the franchisor's own Item 7 estimates, issued March 30, 2026. The Hampton Inn range is $17,043,739 to $24,732,532 for 89 rooms, which works out to about $191,500 to $277,900 per room, excluding real property.[11] The Home2 Suites range is $18,075,688 to $26,550,592 for 107 suites, or about $168,900 to $248,100 per suite, excluding real property.[12] Land, financing costs and interest during construction sit on top. An FDD estimate is a planning range, not a bid. Your lender will underwrite the general contractor's number, test it against an independent cost review, and add a contingency line. Hilton requires a new-development franchisee to start construction within 15 months of application approval, so the loan has to be ready when the franchise clock is running.[11] #### Are banks making hotel construction loans right now? Yes, selectively. Standards stopped tightening in 2026, but they remain tight by historical measure and developer demand is soft. The Federal Reserve's July 2026 Senior Loan Officer Opinion Survey, released August 3, 2026, reported that standards for construction and land development loans were basically unchanged over the second quarter, while a moderate net share of banks saw weaker demand for those loans. Asked where standards sit relative to their range since 2005, a significant net share of banks put construction loans at the tighter end, though fewer banks said so than in July 2025.[7] The building data agrees. The Census Bureau put private lodging construction at a seasonally adjusted annual rate of $23.3 billion in July 2026, down 9.9 percent from $25.9 billion in July 2025.[3] Less new supply is a reason some lenders like the hotels that do get built. It also means a construction request competes for a small allocation, so the sponsor's track record and liquidity carry most of the decision. #### What happens when construction is finished? The construction loan has to be replaced or converted, and the exit is underwritten before the first draw, not after the ribbon cutting. There are three common exits. A construction-to-permanent loan converts to an amortizing loan with the same bank once the hotel opens. A bridge loan carries the hotel through its ramp until trailing NOI supports permanent debt; see `/hotel-financing/bridge-loans`. Or the owner refinances straight into permanent debt once the hotel has a stabilized trailing twelve months; see `/hotel-financing/refinance` and `/hotel-financing/loan-requirements` for what that lender will test. Build the timeline backward from the construction loan's maturity. A new hotel needs time to ramp, the permanent lender needs a trailing period to underwrite, and the closing itself takes months. Extension options on the construction loan are worth negotiating up front for that reason. Table: Hotel construction loan versus permanent hotel loan Feature | Construction loan | Permanent loan Sized to | Project cost and as-completed value. Supervisory ceiling of 80% loan-to-value at banks[1] | Trailing NOI through DSCR, debt yield and LTV tests Funding | Monthly draws against inspected work, equity in first | One funding at closing Payments during the term | Interest only on the drawn balance, usually paid from an interest reserve in the budget | Principal and interest, sometimes after an interest-only period Rate | Floating over Prime or SOFR; spread not published[8] | Fixed over Treasuries or floating, by lender type Guaranties | Repayment and completion guaranties are standard at banks | Recourse at banks and SBA; non-recourse with carve-outs at CMBS and life companies Lender's main risk | The hotel is not finished on budget, or opens into a weak market | NOI falls below debt service Exit or conversion | Converts to permanent, or is refinanced by bridge, SBA 504 debenture or permanent debt[6] | Refinance or sale at maturity First-party data point: Matthews Hotel Markets' September 2026 rate sheet indexes its Construction row to Prime or SOFR, with Prime at 7.00% effective September 17, 2026 and SOFR at 3.85% for the same date. It marks the construction spread as not yet published, because no lender publishes one and we do not print a spread until three independent lenders quote the same structure in a month.[8] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: 89-room select-service hotel, $21.0M all-in cost): Hypothetical. Total project cost is $21.0M including land, inside the range Hilton's 2026 FDD gives for an 89-room Hampton Inn once land is added.[11] The appraised as-completed value is $24.0M. The loan-to-cost, the spread and the draw pattern below are assumptions for the arithmetic, not quotes. Bank path. A bank offers 65 percent of cost: $21.0M times 0.65 equals a $13.65M loan, so equity is $7.35M, or 35 percent of cost. The supervisory ceiling is 80 percent of $24.0M, or $19.2M, and this loan is 56.9 percent of value, well inside it.[1] The HVCRE capital test needs 15 percent of $24.0M, or $3.6M, of contributed capital; $7.35M clears it, so the bank holds the loan at the ordinary risk weight.[2][4] Interest reserve. Assume an 18-month build, an average drawn balance of 55 percent of the loan, and a rate of 8.00 percent, which is the 7.00 percent Prime plus an assumed 1.00 percent. $13.65M times 0.55 times 8.00 percent times 1.5 years equals about $900,900. That reserve is a budget line inside the $21.0M, and it is why a rate move during construction is a cost overrun risk. SBA 504 path. The bank first lien is 50 percent, or $10.5M. A hotel debenture could be 35 percent, but it is capped at $5.0M, which is 23.8 percent of this project. Equity is the remainder: $5.5M, or 26.2 percent. The cap starts to bind once project cost passes $5.0M divided by 0.35, or about $14.3M.[6] The 504 path needs $1.85M less equity than the bank path here, and the bank still has to fund the debenture's share during construction as the interim lender. FAQ: - Q: How much do I have to put down to build a hotel? A: No lender publishes a minimum. Federal guidelines cap bank construction loans at 80 percent of value, and bank capital rules favor borrowers with at least 15 percent of as-completed value in cash or land. SBA 504 requires at least 15 percent on a hotel. Expect to be asked for more. - Q: I already own the land. Does that count as my equity? A: Usually yes. The bank capital rule counts contributed land toward the 15 percent test, and SBA 504 accepts land that is part of the project as the borrower's contribution. The lender decides the value it will credit, so ask before you rely on an appraisal. - Q: Can I get an SBA loan to build a new hotel? A: Yes. SBA 7(a) can fund construction up to its $5 million cap and then amortize for up to 25 years. SBA 504 takes out the construction lender with a fixed-rate debenture, capped at $5 million for a hotel, after the building is complete. - Q: Is a hotel construction loan recourse? A: At a bank or SBA lender, yes. Expect a repayment guaranty and a completion guaranty. Some structures reduce or release the repayment guaranty after the hotel opens and reaches an agreed coverage level. Non-recourse construction debt exists at debt funds, at lower leverage and higher cost. - Q: What interest rate should I expect on a hotel construction loan in 2026? A: A floating rate over Prime or SOFR. Prime has been 7.00 percent since September 17, 2026. No lender publishes its construction spread, so our rate sheet does not print one. The SBA 7(a) maximum on loans over $350,000 is 10.00 percent. - Q: What is an interest reserve? A: It is a line in the construction budget, funded by the loan, that pays the loan's interest while the hotel has no income. It is sized from the draw schedule and an assumed rate, so a longer build or a higher rate uses it up faster. - Q: How long does a hotel construction loan last? A: Long enough to build and begin the ramp, usually with extension options. SBA 7(a) is different: it runs up to 25 years plus the construction period, so there is no separate refinance. Match the term to a realistic opening date and permanent-loan timeline. - Q: Do I need the franchise approved before I apply for a construction loan? A: In practice, yes for a branded hotel. The lender underwrites the flag, the prototype cost and the franchise term. Hilton's 2026 Hampton FDD requires construction to start within 15 months of application approval, so line up the loan and the franchise together. Sources: - [1] 12 CFR Part 34, Subpart D, Appendix A: Interagency Guidelines for Real Estate Lending Policies (supervisory loan-to-value limits) (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/12/appendix-A_to_subpart_D_of_part_34 - [2] 12 CFR 217.2, Definitions: high volatility commercial real estate (HVCRE) exposure (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/12/217.2 - [3] Monthly Construction Spending, July 2026 (release CB26-140, September 1, 2026), Table 1, private lodging (U.S. Census Bureau, accessed 2026-09-18): https://www.census.gov/construction/c30/pdf/release.pdf - [4] 12 CFR 217.32, General risk weights: corporate exposures (f) and HVCRE exposures (j) (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/12/217.32 - [5] 7(a) loan program: terms, conditions, and eligibility (U.S. Small Business Administration, accessed 2026-09-18): https://www.sba.gov/sba-lenders/#7a-terms - [6] SOP 50 10 8, Lender and Development Company Loan Programs (effective June 1, 2025): amortization and balloons (p. 125), 7(a) construction loan provisions (pp. 311-312), 504 interim financing (pp. 332-333), debenture limits (p. 350), hotels as Limited or Special Purpose Property (pp. 354-355) (U.S. Small Business Administration, accessed 2026-09-18): https://legacy.sba.gov/document/sop-50-10-lender-development-company-loan-programs - [7] The July 2026 Senior Loan Officer Opinion Survey on Bank Lending Practices (released August 3, 2026) (Board of Governors of the Federal Reserve System, accessed 2026-09-18): https://www.federalreserve.gov/data/sloos/sloos-202607.htm - [8] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates - [9] BNY Increases Prime Lending Rate to 7.00% (The Bank of New York Mellon Corporation, via PR Newswire, accessed 2026-09-18): https://www.prnewswire.com/news-releases/bny-increases-prime-lending-rate-to-7-00-302881066.html - [10] 13 CFR 120.200, What bonding requirements exist during construction? (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/13/120.200 - [11] 2026 US Hampton Franchise Disclosure Document (issued March 30, 2026), Item 5 notes and Item 7 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2026/03/2026-US-FDD-Hampton.pdf - [12] 2026 US Home2 Suites Franchise Disclosure Document (issued March 30, 2026), Item 7 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2026/03/2026-US-FDD-Home2.pdf ### How is extended-stay hotel financing different? URL: https://matthewshotelmarkets.com/hotel-financing/extended-stay-financing Last updated: 2026-09-18 Lenders size an extended-stay hotel with the same DSCR, debt yield and LTV tests as any hotel, but length of stay changes eligibility and risk. SBA finances a hotel only if more than 50 percent of prior-year revenue came from guests staying 30 days or less.[1] Hilton's 2026 Home2 Suites disclosure shows 78.0 percent occupancy in 2025, with 42 percent of room nights from stays of five nights or more.[2] Key takeaways: - The sizing tests do not change. What changes is how a lender reads the guest mix, the expense model and whether the property is still a hotel. - SBA's 30-day rule is the hard line. More than 50 percent of prior-year revenue has to come from stays of 30 days or less, or the property is an ineligible passive business.[1] - Public brand data shows the occupancy advantage. Choice Hotels reported 69.1 percent occupancy for its extended-stay brands in 2025, against 54.9 percent for its midscale and upper midscale brands.[3] - The rate is lower and the stay is longer. That trade supports a leaner staffing model, and it concentrates revenue in fewer guests and employers. - A brand-standard extended-stay hotel is nowhere near the 30-day line. Home2 Suites stays of five nights or more averaged 11.9 nights in 2025.[2] #### Do lenders treat an extended-stay hotel differently from a regular hotel? They run the same three sizing tests, then ask three extra questions: how long guests stay, who they are, and whether the property still operates as a hotel. An extended-stay loan is sized the way `/hotel-financing/loan-requirements` describes: DSCR, debt yield and loan-to-value against trailing twelve-month NOI, with the smallest result winning. No conventional lender publishes its thresholds for either product, so our rate sheet does not print them.[4] The extra questions are about durability. Longer stays mean fewer check-ins per occupied room, less frequent housekeeping, and steadier midweek occupancy. They also mean a larger share of revenue can sit with a handful of accounts: a construction crew, a hospital's traveling nurses, an insurer housing displaced families. A lender will ask for the length-of-stay report and the top accounts, and will want to know what happens to occupancy when the largest project in town ends. #### Can I get an SBA loan for an extended-stay hotel? Yes, if more than 50 percent of the business's prior-year revenue came from transients who stay 30 days or less at a time. SBA treats businesses that mainly rent real estate as passive and ineligible, and it says apartment buildings are not eligible. Its SOP then carves out hotels, motels, RV parks, marinas and campgrounds, on one condition: more than 50 percent of the business's revenue for the prior year is derived from transients who stay for 30 days or less at a time, and the business complies with zoning and other legal requirements. For a start-up, the projections have to show the same thing.[1] That is a revenue test, not a room-count test and not a brand test. An economy extended-stay property that has drifted into monthly rentals can fail it while carrying a hotel flag and a hotel license. If the property passes, the ordinary program terms apply: a $5 million 7(a) cap, up to 25 years on real estate,[5] and the 504 structure described on `/hotel-financing/sba-7a-vs-504`. USDA's Business and Industry guarantee also lists hotels and motels as eligible tourist facilities in rural areas.[6] Pull the length-of-stay revenue split before you apply. The lender will, and it is better to know on which side of the line the trailing year falls. #### What do the public numbers say about extended-stay performance? Extended-stay brands run higher occupancy at a lower rate than their transient siblings, in both Hilton's and Choice's public filings. Hilton's 2026 franchise disclosure documents report 2025 results for comparable US hotels. Home2 Suites, across 561 comparable hotels, averaged 78.0 percent occupancy, a $144.47 room rate and $112.63 RevPAR.[2] Hampton, across 1,893 comparable hotels, averaged 71.0 percent occupancy, $149.08 and $105.90.[7] Seven points more occupancy at a slightly lower rate produced about 6 percent more RevPAR. Choice Hotels' 10-K for 2025 shows the same shape further down the chain scale. Its extended-stay brands, WoodSpring Suites, Everhome Suites, MainStay Suites and Suburban Studios, ran 69.1 percent occupancy at a $66.10 average daily rate, for RevPAR of $45.67. Its midscale and upper midscale brands ran 54.9 percent at $99.21, for $54.50.[3] Higher occupancy did not mean higher RevPAR there, which is why a lender looks at margin and not only at the top line. Hilton defines an extended stay as five or more consecutive nights. By that definition Home2 Suites had about 7.1 million extended-stay nights in 2025, about 42 percent of all room nights, and those stays averaged 11.9 nights.[2] Franchisor figures are averages for hotels already in the system. They are not a projection for yours. #### Why is the expense model different? Fewer arrivals and less frequent housekeeping lower the labor needed per occupied room, and that is the core of the extended-stay margin argument. The operating standards are public. Choice describes weekly housekeeping at Everhome Suites and MainStay Suites and bi-weekly housekeeping at WoodSpring Suites and Suburban Studios, alongside in-room kitchens and 24/7 guest laundry.[3] Hilton notes that a Home2 Suites hotel has limited meeting space and limited food and beverage.[2] Fees differ a little too: Hilton's 2026 documents put the monthly program fee at 3.5 percent of gross rooms revenue for Home2 Suites and 4 percent for Hampton, on top of a 6 percent royalty for both.[2][7] We do not publish an expense ratio for the segment, because the public sources that would support one are subscriber data. A lender will build its own from your trailing P&L. It will also add back what long stays cost: kitchens and appliances wear faster, so expect the FF&E reserve and the property condition report to get a careful read. #### What happens to occupancy tax on long stays? In many states a guest who stays 30 days or more stops being taxed as a hotel guest, which changes the tax line and signals how the state views the stay. Texas is a clear example. The state hotel tax rate is 6 percent, and guests who occupy a room for 30 or more consecutive days with no payment interruption are considered permanent residents and are exempt.[8] Rules differ by state and city, so check your own. This matters to financing in two ways. First, the exemption report is an independent record of how much of your revenue comes from 30-day stays, and SBA's SOP lists transient occupancy tax records among the third-party records a lender may use to verify a seller's financial data in certain acquisitions.[1] Second, a property that has become mostly monthly housing can raise zoning and licensing questions that a lender's counsel will ask about. #### Which lenders fit an extended-stay hotel? The same five lender types as any hotel, with the fit decided by flag, guest mix and size more than by the extended-stay label. A branded upper-midscale or midscale extended-stay hotel with a transient-heavy mix is ordinary bank, SBA and CMBS business. An unbranded or economy property with a high share of monthly guests narrows the field to local banks and credit unions that know the owner, and to bridge lenders if there is a repositioning plan. Compare the types on `/hotel-financing/hotel-lenders-by-type`. New construction is an active part of this segment, because the prototypes are small and the staffing model is lean. Hilton's 2026 estimate for a new 107-suite Home2 Suites is $18,075,688 to $26,550,592 before land.[2] See `/hotel-financing/construction-loans` for how that gets financed. Table: Extended-stay versus transient select-service hotels: public 2025 figures and what lenders do with them Item | Extended-stay | Transient | What a lender does with it Hilton, 2025 occupancy | Home2 Suites 78.0%[2] | Hampton 71.0%[7] | Tests whether your hotel beats or trails its own flag's average Hilton, 2025 room rate and RevPAR | $144.47 and $112.63[2] | $149.08 and $105.90[7] | Underwrites your trailing numbers, not the brand's Choice, 2025 occupancy, ADR, RevPAR | 69.1%, $66.10, $45.67[3] | Midscale and upper midscale: 54.9%, $99.21, $54.50[3] | Looks past occupancy to margin Housekeeping standard | Weekly or bi-weekly at Choice's extended-stay brands[3] | Set by each brand's standards; not stated in the filings cited here | Expects lower rooms labor per occupied room, and checks it in the P&L SBA eligibility | Only if more than 50% of prior-year revenue is from stays of 30 days or less[1] | Same rule; rarely in question | Asks for the length-of-stay revenue split Expense ratio | Not published here; subscriber data | Not published here; subscriber data | Builds it from your trailing twelve-month P&L DSCR test, leverage and spread | Set by the lender; not published[4] | Set by the lender; not published[4] | Same three sizing tests for both First-party data point: Matthews Hotel Markets' September 2026 rate sheet does not carry a separate extended-stay row. It prices hotel debt by lender type, with the SBA 7(a) maximum at 10.00% on the 7.00% Prime in effect since September 17, 2026, and it marks conventional DSCR floors, leverage and spreads as not yet published for every hotel type, extended-stay included.[4] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: the SBA 30-day revenue test on two extended-stay hotels): Hypothetical. Two 96-suite economy extended-stay hotels each earned $2,400,000 of revenue last year. The test is SBA's: more than 50 percent of prior-year revenue from transients who stay 30 days or less.[1] Hotel A earned $1,300,000 from guests whose stays ran longer than 30 days. That is 54.2 percent of revenue, so the transient share is 45.8 percent. Hotel A fails. It is ineligible for SBA 7(a) and 504 no matter how strong its NOI is, and the buyer needs a conventional bank or credit union loan. Hotel B earned $900,000 from stays longer than 30 days, or 37.5 percent. The transient share is 62.5 percent. Hotel B passes and can be financed under either SBA program if it meets the other rules. Same building, same revenue, different lender universe. For scale, a 45-night stay at $60 a night is $2,700 of revenue, and in Texas the 6 percent state hotel tax on it, $162, is not owed once the guest qualifies as a permanent resident.[8] The tax exemption report and the SBA test are measuring the same guests. FAQ: - Q: Can I get an SBA loan to buy an extended-stay hotel? A: Yes, if more than 50 percent of the hotel's revenue for the prior year came from guests who stayed 30 days or less at a time. If most revenue comes from longer stays, SBA treats the property as ineligible passive real estate. - Q: I'm buying a WoodSpring Suites. Will a bank finance it like a regular hotel? A: It will use the same DSCR, debt yield and LTV tests. It will also ask for the length-of-stay mix and the largest accounts, because long stays concentrate revenue. A branded property with a mostly transient mix is ordinary hotel business for banks and SBA lenders. - Q: Do lenders prefer extended-stay hotels? A: Many like the occupancy profile. Choice Hotels reported 69.1 percent occupancy for its extended-stay brands in 2025 against 54.9 percent for midscale and upper midscale. No lender publishes a separate extended-stay DSCR floor, leverage limit or spread, so the preference shows up in quotes, not in a posted number. - Q: Is an extended-stay hotel a hotel or an apartment building to a lender? A: A hotel, as long as it operates like one: nightly or weekly rates, hotel licensing, occupancy tax collected on short stays. SBA draws its line at revenue from stays over 30 days. Past that line the property starts to look like housing, and the lender list changes. - Q: My hotel has a lot of monthly guests. Does that hurt my refinance? A: It can narrow the lender list. It rules out SBA if long stays produce half or more of revenue, and it prompts zoning and licensing questions. It can help with coverage if those guests are stable. Bring the length-of-stay revenue report to the first conversation. - Q: How long do extended-stay guests actually stay? A: At Hilton's Home2 Suites in 2025, stays of five nights or more averaged 11.9 nights and made up about 42 percent of room nights, according to the 2026 franchise disclosure document. Economy extended-stay properties can run much longer, which is where the 30-day questions begin. - Q: Do guests who stay over 30 days pay hotel occupancy tax? A: It depends on the state. In Texas, a guest who stays 30 or more consecutive days with no payment interruption is a permanent resident and is exempt from the 6 percent state hotel tax. Check your state and city rules. - Q: What does it cost to build an extended-stay hotel? A: Hilton's 2026 franchise disclosure document estimates $18,075,688 to $26,550,592 for a new 107-suite Home2 Suites, excluding land. That is about $168,900 to $248,100 per suite. It is a planning range from the franchisor, not a contractor's bid. Sources: - [1] SOP 50 10 8, Lender and Development Company Loan Programs (effective June 1, 2025), Section A, Ch. 1, passive businesses: hotels and the 30-day transient revenue test (pp. 19-20); third-party verification of seller financial data (p. 91) (U.S. Small Business Administration, accessed 2026-09-18): https://legacy.sba.gov/document/sop-50-10-lender-development-company-loan-programs - [2] 2026 US Home2 Suites Franchise Disclosure Document (issued March 30, 2026), Items 1, 6, 7 and 19 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2026/03/2026-US-FDD-Home2.pdf - [3] Choice Hotels International, Inc. Form 10-K for fiscal year 2025: brand descriptions and US operating statistics by chain scale (U.S. Securities and Exchange Commission, EDGAR, accessed 2026-09-18): https://www.sec.gov/Archives/edgar/data/1046311/000104631126000008/chh-20251231.htm - [4] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates - [5] 7(a) loan program: terms, conditions, and eligibility (U.S. Small Business Administration, accessed 2026-09-18): https://www.sba.gov/sba-lenders/#7a-terms - [6] 7 CFR 5001.105, Eligible projects: tourist and recreation facilities, including hotels and motels (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/7/5001.105 - [7] 2026 US Hampton Franchise Disclosure Document (issued March 30, 2026), Items 6 and 19 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2026/03/2026-US-FDD-Hampton.pdf - [8] Hotel Occupancy Tax Exemptions (Publication 96-224) (Texas Comptroller of Public Accounts, accessed 2026-09-18): https://comptroller.texas.gov/taxes/publications/96-224.php ### Hotel financing questions, answered URL: https://matthewshotelmarkets.com/hotel-financing/faq Last updated: 2026-09-18 This page collects the short questions that do not need their own page. SBA's 7(a) program lists no minimum loan size and caps loans at $5 million.[1] Origination is typically quoted in points on the loan amount. A franchise comfort letter is a closing condition on most branded hotel loans. The 10-year Treasury was 4.94 percent on September 17, 2026.[2] Key takeaways: - Every answer here is 100 words or fewer, and links to the page that goes deeper. - Minimum loan size is the filter most owners do not know exists. - Points are negotiable; the index and the spread usually are not. - Comfort letters run on the franchisor's timeline, so request them early. - Leverage in 2026 is lower than 2021 at the same NOI, because the rate is higher. #### How small a hotel loan can I get? SBA's 7(a) program lists no minimum loan size, so SBA lenders go smallest; CMBS and life insurance companies generally prefer larger loans.[1] Banks and credit unions size flexibly around a relationship, sometimes below the SBA floor for the right sponsor. Full comparison of minimums by lender type is on `/hotel-financing/hotel-lenders-by-type`. #### What fees and points should I expect? Origination is typically quoted in points on the loan amount, and it is one of the more negotiable line items in a hotel loan. Third-party costs, appraisal, property condition assessment, and environmental report, are not generally negotiable. The index and spread that set the rate itself are largely a market quote, not a negotiating line item the way points can be. See `/hotel-financing/hotel-loan-rates` for the full pricing structure. #### What is a franchise comfort letter? A comfort letter is the franchisor's agreement to let a lender step into the franchise agreement if it forecloses, protecting the flag through a change of ownership. It is a standard closing condition on almost every branded hotel loan, and the franchisor sets the timeline, so request it early rather than late in the process. More detail is on `/hotel-financing/loan-requirements`. #### Can I qualify with weak occupancy? Yes, if the lender believes the shortfall is temporary and can see a credible trend back toward the comp set, rather than a structural decline. A lender reviewing a soft trailing number weighs the cause and the trend as much as the number itself. Full discussion of how lenders treat weak occupancy is on `/hotel-financing/loan-requirements`. #### Will I have to sign personally? Most bank and SBA hotel loans carry a personal guarantee, and SBA rules generally require one from anyone owning 20 percent or more; non-recourse structures are available through CMBS and life companies, generally at larger loan sizes.[3] The recourse question is often the fastest way to narrow the realistic lender list for a given deal; see `/hotel-financing/hotel-lenders-by-type` for which types offer non-recourse. #### What amortization is standard? SBA 7(a) allows up to 25 years on real estate; conventional lenders set their own schedules, and CMBS loans often include an interest-only period.[1] Amortization schedule directly affects the annual payment on a given loan amount and rate, which in turn affects the DSCR test. The full comparison by lender type is on `/hotel-financing/hotel-loan-rates`. #### Why is my leverage lower than it was in 2021? At the same NOI, a higher rate produces a higher annual payment per dollar borrowed, which means the same debt service coverage test supports a smaller loan today than it did in 2021. This is arithmetic, not a change in lender appetite for hospitality. The worked example below shows the exact mechanism with real numbers, and the full refinance implications are on `/hotel-financing/refinance`. Table: Quick reference: hotel loan basics, September 2026 Question | Short answer | Deeper page Minimum loan size | SBA 7(a): no listed minimum, $5M maximum[1]; CMBS and life co prefer larger loans | /hotel-financing/hotel-lenders-by-type Origination | Quoted in points on loan amount; negotiable | /hotel-financing/how-debt-placement-works Comfort letter | Required on most branded hotel loans; request early | /hotel-financing/loan-requirements Amortization | Up to 25 years on SBA 7(a) real estate[1]; others vary by lender | /hotel-financing/hotel-loan-rates Personal guarantee | Standard on bank and SBA; not on CMBS or life co | /hotel-financing/hotel-lenders-by-type Leverage vs. 2021 | Lower at the same NOI, because the payment is higher | /hotel-financing/refinance First-party data point: Matthews Hotel Markets' September 2026 rate sheet marks points and working leverage as not yet published for every lender type except SBA, where SBA rules cap a hotel 504 structure at 85% of project cost. What it does publish: the 10-year Treasury at 4.94% on September 17, 2026 and the 7(a) maximum allowable rate at 10.00%, with Prime at 7.00% since September 17, 2026.[4][5] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: why the same hotel borrows less in 2026 than in 2021): Hypothetical. The same hotel, the same $1.60M of NOI, the same 1.35x test and 25-year schedule. Only the rate changes. At 4.00 percent in 2021, the annual constant per $1M is about $63,400. Maximum debt service of $1,185,185 supports a loan of $18.69M. At 7.25 percent in 2026, the annual constant per $1M rises to about $86,800. The same maximum debt service supports a loan of $13.65M. The hotel did not change. The loan fell $5.04M, 27 percent. This single comparison explains most of what owners are experiencing at maturity right now. FAQ: - Q: What is the smallest hotel loan a lender will make? A: SBA's 7(a) program lists no minimum loan size, so SBA lenders go smallest. CMBS and life insurance companies generally prefer larger loans. Banks size flexibly around a relationship. - Q: How many points will I pay on a hotel loan? A: It varies by lender and deal, and points are one of the more negotiable line items in a hotel loan. Lenders do not publish them, and our rate sheet marks them not yet published. Get the figure in writing. - Q: What is a franchise comfort letter? A: The franchisor's agreement to let a lender step into the franchise agreement if it forecloses, protecting the flag through a change of ownership. It is a standard closing condition, so request it early. - Q: Can I finance a hotel running 50 percent occupancy? A: Possibly, if the lender believes the shortfall is temporary and identifiable, such as a renovation or new supply still being absorbed, rather than a structural decline against the comp set. - Q: Is a personal guarantee always required? A: No. It is standard on most bank and SBA loans. Non-recourse structures are available through CMBS and life insurance companies, generally at larger loan sizes. - Q: What is standard amortization on a hotel loan? A: SBA 7(a) allows up to 25 years on real estate. Conventional lenders set their own schedules, and CMBS loans often include an interest-only period for part of the term. - Q: Why can I borrow less than I could in 2021? A: At the same NOI, a higher rate produces a higher annual payment per dollar borrowed, so the same coverage test supports a smaller loan. It is a function of rate, not a change in lender appetite. - Q: Do hotel lenders require an FF&E reserve? A: Usually, commonly funded at closing and replenished annually as a percentage of revenue. It funds ongoing furniture, fixtures and equipment replacement and is a standard loan covenant. Sources: - [1] 7(a) loan program: terms, conditions, and eligibility (U.S. Small Business Administration, accessed 2026-09-18): https://www.sba.gov/sba-lenders/#7a-terms - [2] Daily Treasury Par Yield Curve Rates (U.S. Department of the Treasury, accessed 2026-09-18): https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve - [3] 13 CFR 120.160, Loan conditions (guarantees) (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/13/120.160 - [4] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates - [5] BNY Increases Prime Lending Rate to 7.00% (The Bank of New York Mellon Corporation, via PR Newswire, accessed 2026-09-18): https://www.prnewswire.com/news-releases/bny-increases-prime-lending-rate-to-7-00-302881066.html ### Who are the biggest hotel lenders, and which type fits my deal? URL: https://matthewshotelmarkets.com/hotel-financing/hotel-lenders-by-type Last updated: 2026-09-18 Five lender types compete for hotel debt in September 2026 and they want different deals. Banks want a relationship and recourse. Life companies want stabilized, low-leverage, long-term. CMBS wants non-recourse at higher leverage. SBA wants owner-operators under program caps. Debt funds want transition. Matching the asset to the type is most of the work. Key takeaways: - There is no single best hotel lender. There is a best lender for your specific asset and business plan. - Recourse is the fastest way to narrow the list. If you will not sign, banks and SBA mostly drop out. - Life companies offer the lowest rates and the least leverage. That trade is the whole product. - Debt funds are the only type that will lend against a business plan instead of a trailing twelve. - Minimum loan size is the quiet filter. On a small loan, CMBS and life companies usually are not options. #### What are the five types of hotel lender? Banks and credit unions, life insurance companies, CMBS conduits, SBA lenders, and debt funds each compete for hotel debt, and each one wants a structurally different deal. Banks and credit unions lend against a relationship, often with deposits or other business tied to the loan, and generally want recourse. Life insurance companies deploy long-duration insurance liabilities into long-term, low-leverage, stabilized real estate debt, and their product is defined by that low-leverage, low-rate trade. CMBS conduits originate to securitize and sell, want stabilized cash flow they can pool, and are typically non-recourse with standard carve-outs. SBA lenders serve owner-operators inside the government-guaranteed programs' caps and eligibility rules: $5 million for a 7(a) loan and $5 million for a 504 debenture on a hotel.[1][2][4] Debt funds and bridge lenders serve transition situations that the other four types are not built to underwrite. #### Which ones do non-recourse? CMBS and debt funds typically offer non-recourse with standard carve-outs; banks and SBA typically require a personal guarantee. Life insurance companies also generally lend non-recourse, but at their characteristically lower leverage and higher borrower quality bar. A sponsor who will not sign personally has, in practice, already narrowed the realistic lender universe to CMBS, life companies, and certain debt funds, each of which comes with its own leverage and asset-quality trade-offs in exchange for that non-recourse structure. #### Who has the lowest rate, and what do they want in return? Life insurance companies typically offer the lowest rate on a hotel loan, in exchange for the lowest leverage and the strictest asset-quality and stabilization requirements. Matthews Hotel Markets' September 2026 rate sheet shows what each lender type will actually put in writing. For SBA that is a lot: a 7(a) maximum allowable rate of 10.00%, which is SBA's 3.00% cap[1] over the 7.00% Prime in effect since September 17, 2026,[5][6] and a 504 hotel structure capped at 85% of project cost under SBA rules. For banks, life companies, CMBS conduits and debt funds it is the index only, the 10-year Treasury at 4.94% on September 17, 2026 and SOFR at 3.85% for September 17, 2026,[7] with the spread and the working leverage ceiling both marked not yet published.[3] The trade is structural, not just a market quirk: a life company is matching a long-duration liability to a long-duration, low-risk asset, which only works on the most stabilized, best-located hotels at conservative leverage. A borrower chasing the lowest rate without meeting that bar will not find it available, regardless of the quoted spread. #### Who will lend on an independent hotel? Banks, debt funds, and, within program limits, SBA lenders will finance an independent, unflagged hotel; CMBS and life companies generally prefer the demand-generation and brand-standard assurance a franchise provides. An independent hotel is financeable, but the lender leans more heavily on the sponsor's own operating track record and the specific market's demand fundamentals, because there is no franchise system's reservation channel and brand standards behind the asset. This generally narrows the realistic lender list and can mean somewhat more conservative leverage than an otherwise-identical branded hotel would receive. #### Who is fastest to close? Banks and debt funds are generally fastest to close, particularly with an existing relationship or a sponsor already known to the lender; CMBS and SBA typically take longer because of pooling and guaranty processes. A bank that already knows the sponsor and the asset can move quickly because much of the underwriting groundwork is already in place. CMBS timelines are set by the need to fit the loan into a pooling and securitization process on a schedule the borrower does not control. SBA timelines are set by the government guaranty process on top of ordinary underwriting. Speed should be weighed against rate and leverage, not treated as the deciding factor alone. #### What is the minimum loan size for each? SBA will go smallest, because the 7(a) program lists no minimum loan size; banks will size to a relationship even on a smaller loan; CMBS and life companies generally prefer larger loans.[1] This minimum-size filter operates before rate ever enters the conversation. An owner with a small loan need should expect the realistic lender universe to be banks, credit unions, SBA, and some debt funds, not CMBS or life companies, regardless of how strong the asset otherwise looks. #### How do I pick? Match the lender type to the business plan first, recourse tolerance and hold period second, and rate last, because rate only matters among the lender types that actually fit the deal. The worked example below runs one hotel through three lender types and shows how the same asset produces meaningfully different proceeds, structure, and prepayment cost depending on which type is selected, with the right answer depending on the sponsor's actual hold period, not a generic ranking of lender types. Table: Hotel lender types compared, September 2026 Lender type | Typical leverage | Recourse | Typical minimum | Wants Bank / credit union | Set by the bank; not published | Usually recourse | Flexible, sized to the relationship | Relationship, deposits, a sponsor they know Life insurance company | Lowest of the five; not published | Non-recourse | Larger loans only | Stabilized, well-located, long term, low leverage CMBS conduit | Higher than a life company; sized to a debt yield floor | Non-recourse with carve-outs | Larger loans; pooling costs are fixed | Stabilized cash flow, no near-term sale SBA 7(a) / 504 | Up to 85% of project cost on a hotel under 504[3][4] | Personal guarantee required | No listed 7(a) minimum; $5M 7(a) maximum[1] | Owner-operator, within program caps Debt fund / bridge | Highest; sized to the business plan, often against cost | Non-recourse with carve-outs | Varies by fund | A transition story: PIP, ramp, reposition First-party data point: Matthews Hotel Markets' September 2026 rate sheet publishes what each lender type will put in writing. For SBA that is a lot: a 7(a) maximum allowable rate of 10.00% at the 7.00% Prime in effect since September 17, 2026, and a 504 hotel structure capped at 85% of project cost. For banks, life companies, CMBS and debt funds it is the index only.[3] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: the same hotel, three lender types): Hypothetical. 110-key stabilized Hampton Inn, NOI $1.90M, value $23.5M, sponsor has hotel experience and will not sign recourse. A life company at 55 percent LTV supports $12.93M, the lowest rate, 10-year fixed, non-recourse. A CMBS conduit at 65 percent LTV supports $15.28M, a wider rate, 10-year fixed, non-recourse with carve-outs, and defeasance on prepayment. A bank at 65 percent LTV also supports $15.28M, but requires recourse, which the sponsor has already ruled out. The choice is $2.35M of extra proceeds against a wider coupon and a painful prepayment. If the hold is 10 years, CMBS fits. If a sale is possible in year four, the life company loan is cheaper to exit even though it is smaller. The prepayment term decides this, not the rate. FAQ: - Q: Who lends on hotels? A: Five lender types compete for hotel debt: banks and credit unions, life insurance companies, CMBS conduits, SBA lenders, and debt funds. Each wants a structurally different deal, not just a different price. - Q: Do life insurance companies lend on hotels? A: Yes, on stabilized, well-located hotels at conservative leverage, typically the lowest rate available in exchange for the lowest leverage and strictest asset-quality bar of the five lender types. - Q: Which hotel lenders offer non-recourse? A: CMBS conduits, life insurance companies, and many debt funds offer non-recourse structures with standard carve-outs. Banks and SBA lenders generally require a personal guarantee. - Q: What is the minimum hotel loan size? A: SBA's 7(a) program lists no minimum loan size, so SBA goes smallest. CMBS and life insurance companies generally prefer larger loans. Banks size flexibly around an existing relationship. - Q: Who lends on independent hotels? A: Banks, debt funds, and SBA lenders within program limits will finance independent, unflagged hotels. CMBS and life companies generally prefer the demand assurance a franchise brand provides. - Q: Which hotel lender is fastest? A: Banks and debt funds are generally fastest, particularly with an existing sponsor relationship. CMBS and SBA typically take longer because of pooling and government guaranty processes. - Q: Can I get a hotel loan without a personal guarantee? A: Yes, through CMBS, life insurance companies, or certain debt funds, generally at lower leverage or with a stronger sponsor and asset profile than a recourse loan would require. Sources: - [1] 7(a) loan program: terms, conditions, and eligibility (U.S. Small Business Administration, accessed 2026-09-18): https://www.sba.gov/sba-lenders/#7a-terms - [2] 504 loans (U.S. Small Business Administration, accessed 2026-09-18): https://www.sba.gov/loans/504-loans/ - [3] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates - [4] SOP 50 10 8, Lender and Development Company Loan Programs (effective June 1, 2025), Section C, Ch. 1: debenture limits (p. 350) and Limited or Special Purpose Property, which lists hotels (pp. 354-355) (U.S. Small Business Administration, accessed 2026-09-18): https://legacy.sba.gov/document/sop-50-10-lender-development-company-loan-programs - [5] BNY Increases Prime Lending Rate to 7.00% (The Bank of New York Mellon Corporation, via PR Newswire, accessed 2026-09-18): https://www.prnewswire.com/news-releases/bny-increases-prime-lending-rate-to-7-00-302881066.html - [6] PNC Bank, N.A. Changes Prime Rate (PNC Bank, N.A., via PR Newswire, accessed 2026-09-18): https://www.prnewswire.com/news-releases/pnc-bank-na-changes-prime-rate-302881163.html - [7] Secured Overnight Financing Rate (SOFR) (Federal Reserve Bank of New York, accessed 2026-09-18): https://www.newyorkfed.org/markets/reference-rates/sofr ### What are current hotel loan interest rates? URL: https://matthewshotelmarkets.com/hotel-financing/hotel-loan-rates Last updated: 2026-09-18 Hotel loan rates are quoted as a spread over an index, not as a flat number. Fixed-rate quotes track the 5- and 10-year Treasury; floating quotes track SOFR. On September 17, 2026, the 10-year Treasury was 4.94 percent.[1] In our experience, hotels price wider than apartments or industrial, because hotel revenue reprices every night. Key takeaways: - A hotel rate is an index plus a spread. Ask for both, not the headline number. - Fixed quotes key off the 5- or 10-year Treasury; floating quotes key off SOFR. - In our experience, hotels carry a wider spread than leased property types. - The spread is driven by the sponsor, the flag, the PIP status and the market, in that order. - In our worked example, a 50 basis point rate move cuts DSCR-sized proceeds by about 4 percent. #### What index is my hotel loan priced off? Fixed-rate hotel loans price off the Treasury curve; floating-rate hotel loans price off SOFR. A fixed-rate quote, whether from a bank, a life insurance company, or a CMBS conduit, starts with the Treasury of a matching maturity: the 5-year Treasury for a 5-year loan, the 10-year for a 10-year loan.[1] A floating-rate quote, typical of a bank line, a bridge loan, or a debt fund, starts with SOFR and resets periodically.[2] Neither index is the borrower's rate. The lender adds a spread to the index to arrive at the coupon, and that spread is where the real underwriting happens. #### What spread should I expect over that index? The spread on a hotel loan is set primarily by the sponsor and the asset, and it moves month to month with the broader lending environment. Matthews Hotel Markets' September 2026 rate sheet publishes 9 of its 49 priced cells and marks the other 40 as not yet published. The spread over the index is one of the cells we do not publish: no lender type prints one, and we will not print one until three independent lenders quote the same structure in a month. What the sheet does publish is the index every quote is struck against, the 10-year Treasury at 4.94% on September 17, 2026 and SOFR at 3.85% for September 17, 2026,[2] plus the SBA rows, where the maximum allowable 7(a) rate is 10.00% at the 7.00% Prime in effect since September 17.[5][6] Spreads are not static. They widen when lenders pull back from hospitality generally, and they tighten when capital is competing for a limited number of financeable deals. A spread quoted in July is not necessarily the spread available in September, which is why any specific number on this page needs a date attached, not a memory. #### Why do hotels price wider than apartments or industrial? A hotel's revenue reprices nightly, which makes its cash flow more volatile than a lease-backed property, and lenders price that volatility into the spread. Apartment and industrial leases fix rent for months or years at a time. A hotel's effective lease term is one night. That means hotel NOI can move faster, in either direction, than NOI on a leased asset, and a lender underwriting a hotel is underwriting operating risk on top of real estate risk. The wider spread is the price of that volatility. It is not a penalty for the asset class; it is a structural feature of how hotel revenue is produced. #### Does my brand change my rate? The flag matters, but mostly through what it signals about demand and comp-set performance, not as a rate discount by name. A top-performing brand in a strong comp-set position, evidenced by a STAR report showing RevPAR index above 100, supports a lender's underwriting more than the brand name alone. An independent or soft-branded hotel is financeable, but the lender leans more heavily on the sponsor's operating track record and the market fundamentals, because there is no franchise system standing behind demand generation. The practical effect is that a strong operator in a well-known brand at a well-performing property gets the tightest spread on the desk, and the flag by itself is one input among several, not a lookup table. #### Fixed or floating: which one for a hotel? Fixed fits a stabilized hold; floating fits a transition, and the choice should follow the business plan, not the headline rate. A stabilized hotel with no near-term capital plan generally fits fixed-rate permanent debt, because it removes rate risk for the term. A hotel mid-PIP, mid-ramp after a brand conversion, or approaching a near-term sale generally fits floating-rate bridge debt, because the shorter horizon and the need for future funding do not pair well with a 10-year fixed structure and its prepayment penalty. Comparing only the headline rate between the two, without matching the structure to the plan, is the most common rate-shopping mistake on the desk. #### What term and amortization come with each rate? Term and amortization vary meaningfully by lender type and change the payment on an identical rate. Banks and credit unions often write shorter terms with rate resets. Life insurance companies and CMBS write longer fixed terms, and CMBS often includes an interest-only period. SBA 7(a) can amortize fully out to 25 years on real estate,[3] and the SBA 504 debenture is fixed for 10, 20 or 25 years.[4] Debt funds and bridge lenders are usually interest-only for a short term. The full comparison by lender type is below. #### How much does a rate move change my loan amount? In the worked example below, a 50 basis point move in rate changes DSCR-sized proceeds by about 4 percent on an identical property, with nothing about the hotel itself changing. This is the most underappreciated number in hotel financing conversations. Because DSCR is a fixed multiple of a fixed NOI, the annual debt service the loan can support does not change with rate, but the amount of loan that fixed debt service will buy does. A higher rate means a higher annual constant per dollar borrowed, so the same maximum debt service buys less loan. The worked example below shows this with real numbers. Table: Hotel loan pricing structure by lender type, September 2026 Lender type | Index | Typical term | Typical amortization | Rate type Bank / credit union | SOFR or bank cost of funds | Shorter, often with rate resets | Set by the bank | Fixed or floating Life insurance company | 10-year Treasury | Long, fixed | Long schedule | Fixed CMBS | Swap or Treasury | Long, fixed | Long schedule, often IO first | Fixed SBA 7(a) | Prime | Up to 25 years on real estate[3] | Fully amortizing | Variable, fixed available[3] SBA 504 (debenture) | Debenture pricing, above the 10-year Treasury[4] | 10, 20 or 25 years[4] | Fully amortizing | Fixed Debt fund / bridge | SOFR | Short, often with extensions | Interest only | Floating with a cap First-party data point: Matthews Hotel Markets' September 2026 rate sheet publishes 9 of its 49 priced cells and marks the other 40 as not yet published. The published ones are the SBA rows: a 7(a) maximum allowable rate of 10.00% at the 7.00% Prime in effect since September 17, 2026, and a 504 hotel structure capped at 85% of project cost.[5] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: how 50 basis points moves the loan): Hypothetical property. NOI $1.60M, 25-year amortization, 1.35x DSCR test. At 7.25 percent, the annual constant per $1M of loan is about $86,800, and maximum debt service of $1,185,185 supports a loan of $13.65M. At 7.75 percent, the annual constant per $1M rises to about $90,600, and the same maximum debt service supports a loan of $13.08M. Fifty basis points cost $570,000 of proceeds, about 4.2 percent of the loan. Nothing about the hotel changed. That is why the rate conversation and the proceeds conversation are the same conversation. FAQ: - Q: What is a typical hotel loan rate in September 2026? A: It is quoted as an index plus a spread, not a single number. Fixed loans track the Treasury; floating loans track SOFR. Our September 2026 rate sheet publishes the index values but not conventional spreads, so get the spread in writing. - Q: Is a hotel loan rate fixed or floating? A: Both exist. Permanent loans for stabilized hotels are usually fixed. Bridge loans for transitional hotels are usually floating over SOFR and require a purchased rate cap. - Q: What is the spread over SOFR on a hotel bridge loan? A: It varies by sponsor, asset and market and moves with the lending environment. Nobody publishes it, and our rate sheet marks it not yet published. Get the spread and the cap cost in writing from the lender. - Q: Do Hampton Inn or Holiday Inn Express loans price better than an independent hotel? A: A strong brand in a strong comp-set position helps, mainly by supporting the demand story. An independent hotel with a strong operator and strong market fundamentals can price competitively; the brand name alone is not a rate lookup table. - Q: How often do hotel loan rates change? A: Fixed quotes move with the Treasury daily and with lender spread appetite over weeks to months. Floating quotes reset with SOFR on the schedule set in the loan documents. - Q: Does a rate lock cost anything on a hotel loan? A: It can. Some lenders charge a rate lock deposit or fee, refundable at closing, forfeited if the deal does not close. Ask for the lock terms in writing before you rely on a quoted rate. - Q: Why is my hotel quote wider than my friend's apartment quote? A: Hotel revenue reprices nightly, which makes cash flow more volatile than a lease-backed property like an apartment. Lenders price that volatility into a wider spread. It reflects the asset class, not your specific deal. Sources: - [1] Daily Treasury Par Yield Curve Rates (U.S. Department of the Treasury, accessed 2026-09-18): https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve - [2] Secured Overnight Financing Rate (SOFR) (Federal Reserve Bank of New York, accessed 2026-09-18): https://www.newyorkfed.org/markets/reference-rates/sofr - [3] 7(a) loan program: terms, conditions, and eligibility (U.S. Small Business Administration, accessed 2026-09-18): https://www.sba.gov/sba-lenders/#7a-terms - [4] 504 loans (U.S. Small Business Administration, accessed 2026-09-18): https://www.sba.gov/loans/504-loans/ - [5] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates - [6] BNY Increases Prime Lending Rate to 7.00% (The Bank of New York Mellon Corporation, via PR Newswire, accessed 2026-09-18): https://www.prnewswire.com/news-releases/bny-increases-prime-lending-rate-to-7-00-302881066.html ### How does hotel debt placement actually work? URL: https://matthewshotelmarkets.com/hotel-financing/how-debt-placement-works Last updated: 2026-09-18 Debt placement is a competitive process, not an introduction. The broker packages the asset, takes it to the lenders most likely to want it, collects term sheets against a common deadline, and normalizes them. It costs a fee, usually a percentage of the loan, and pays for itself when the gap between quotes beats the fee. Fixed quotes start from the 10-year Treasury, 4.94 percent on September 17, 2026.[1] Key takeaways: - Going direct to one bank gets you one quote and no way to know if it is good. - The value is comparability: same package, same deadline, quotes normalized to the same terms. - A fee is paid at closing, quoted as a percentage of loan amount. Ask for it in writing up front. - The right lender list is short and specific, not every lender in the market. - Budget a few months from complete package to funding on a straightforward hotel loan. #### What does a debt placement broker actually do? A debt placement broker packages the deal once, sends it to a curated list of lenders on a common timeline, and normalizes the term sheets that come back so an owner is comparing apples to apples. The package includes the trailing financials, STAR report, franchise documentation, and a written summary of the business plan, all assembled the way the target lenders expect to see it. Rather than each lender receiving a slightly different, informally assembled set of materials, every lender in the process sees the same package, on the same deadline, which is what makes the resulting quotes genuinely comparable rather than apples to oranges. #### How is the lender list built? The list is built from the specific deal's profile, leverage target, recourse tolerance, hold period, and business plan, matched against which lender types and which specific institutions are actually active in that combination today. A short, well-targeted list of lenders who are actually likely to want the specific deal produces a stronger competitive process than a long list that includes lenders who will decline or come back with an uncompetitive quote. This targeting is where a broker's ongoing market contact matters most: knowing which lender types are currently aggressive on hospitality, which are pulling back, and which specific institutions have appetite for the asset's leverage and structure this month, not last year. #### How do I compare term sheets that are not alike? Term sheets rarely arrive in identical form, and normalizing them to the same rate basis, term, amortization, and fee structure is the step that turns five different documents into one real comparison. A quote at a lower headline rate but a shorter interest-only period, a higher origination fee, or a tighter prepayment structure is not automatically the better loan. Normalizing every quote to an all-in effective cost, over the same assumed hold period, is the only way to compare them honestly. This is mechanical work, but it is work that is easy to get wrong under time pressure without a consistent framework applied to every quote. #### What does debt placement cost? A placement fee is typically quoted as a percentage of the loan amount, paid at closing, and it is a negotiable line item, not a fixed industry rate. Matthews Hotel Markets' September 2026 rate sheet marks the spread between lender types as not yet published, and that is exactly the point: the gap a placement process captures is not a number anyone prints, which is why an owner cannot look it up and decide on their own whether the process is worth the fee. What the sheet does publish is the index every quote is struck against, the 10-year Treasury at 4.94% on September 17, 2026 and SOFR at 3.85% for September 17, 2026.[1][2][3] The fee should be agreed in writing before the process starts, not negotiated after term sheets are in hand, and an owner should ask directly what the fee is and whether it is contingent on closing. #### When should I just call my bank? Calling your existing bank directly makes sense on a smaller loan with a strong existing relationship, where the relationship itself is likely to produce a competitive quote without a formal process. The honest answer is that a placement process is not always worth running. When the loan is small, the relationship is strong, and the expected spread between the best available quote and the relationship quote is modest, the broker fee can exceed the value captured. The worked example below shows exactly where that line sits with real numbers. #### How long does the process take? In our experience, a straightforward hotel debt placement takes a few months from a complete application package to funding, and term sheets come back within a few weeks of the package going out. That timeline assumes the trailing financials, STAR report and PIP status are ready before the process starts; the full document checklist and realistic lead times for each item are on `/hotel-financing/loan-requirements`. Anything missing when the process begins adds directly to the total timeline. #### What do I need to start? The same core package every hotel lender wants: a trailing twelve-month P&L, a STAR report, the franchise agreement and any PIP status, and a summary of the business plan and sponsor. Starting a placement process without this package assembled produces a slower, weaker process, because lenders either decline to quote on an incomplete picture or come back with soft, heavily caveated indications rather than real term sheets. Assembling the package before approaching lenders, rather than during, is the single highest-leverage step an owner controls directly. For representation on the placement itself, see `/services/capital-markets`. Table: Going direct versus running a placement process Category | Direct to one lender | Placement process Quotes received | One | Several, from a targeted list Package prepared | Whatever you send | Standardized, with the questions pre-answered Comparability | None | Quotes normalized to the same term and structure Negotiating position | Take it or leave it | Competitive tension Cost | No broker fee | Fee at closing, percentage of loan Time to term sheets | Depends on the lender | A few weeks from a complete package Best fit | Small loan, strong existing relationship | Anything where the spread between quotes exceeds the fee First-party data point: Matthews Hotel Markets' September 2026 rate sheet marks the spread between lender types as not yet published, and that is the point: the number a placement process captures is not a number anyone prints. The sheet does publish the index every quote is struck against, the 10-year Treasury at 4.94% on September 17, 2026 and SOFR at 3.85% for September 17, 2026.[2][3] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: does the fee pay for itself?): Hypothetical. A $12.0M hotel loan. A placement process returns six term sheets. The best rate is 7.10 percent; the one the owner would have taken from their existing bank is 7.55 percent. The rate difference is 45 basis points. Annual interest saved is $12.0M times 0.45 percent, or $54,000. Over a 5-year term, that is $270,000. A placement fee at 0.75 percent of $12.0M is $90,000. The process nets $180,000 over the term in this hypothetical, before considering that the best quote also came with a year of interest-only. Run the same math with a 10 basis point spread and the fee does not pay for itself. Both outcomes happen. Ask for the spread history before you engage anyone, including us. FAQ: - Q: What does a hotel debt placement broker do? A: Packages the deal once, presents it to a curated list of lenders on a common deadline, collects term sheets, and normalizes them to the same basis so they can be compared honestly. - Q: How much does hotel debt placement cost? A: Typically a percentage of the loan amount, paid at closing, and negotiable. Get the fee in writing before the process starts, not after term sheets arrive. - Q: Do I need a broker to get a hotel loan? A: Not always. A small loan with a strong existing bank relationship can be worth calling direct. A broker earns its fee when running a competitive process is likely to beat the relationship quote by more than the fee costs. - Q: How many lenders will see my deal? A: A well-run process returns several term sheets from a targeted lender list, not every lender in the market. A shorter, well-matched list usually beats a long, unfocused one. - Q: How long does hotel debt placement take? A: In our experience, a few months from a complete application package to funding, with term sheets back within a few weeks of the package going out. Anything missing from the package adds time. - Q: Who pays the placement fee, me or the lender? A: The borrower generally pays the placement fee at closing, quoted as a percentage of the loan amount. Confirm the fee structure in writing before starting the process. - Q: What documents do I need to start a placement process? A: A trailing twelve-month P&L, a STAR report, the franchise agreement and PIP status, and a summary of the business plan and sponsor. The full checklist with lead times is on the loan requirements page. Sources: - [1] Daily Treasury Par Yield Curve Rates (U.S. Department of the Treasury, accessed 2026-09-18): https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve - [2] Secured Overnight Financing Rate (SOFR) (Federal Reserve Bank of New York, accessed 2026-09-18): https://www.newyorkfed.org/markets/reference-rates/sofr - [3] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates ### Can I get an interest-only hotel loan? URL: https://matthewshotelmarkets.com/hotel-financing/interest-only-loans Last updated: 2026-09-18 Yes, from some lenders. Bridge and construction loans are usually interest-only, and CMBS conduits often grant it: in one conduit pool marketed in February 2026, 67.3 percent of the balance was interest-only to maturity and another 10.1 percent had a partial interest-only period.[1] SBA 7(a) loans must fully amortize with no balloon,[2] and bank regulators require limits on non-amortizing loans.[3] Key takeaways: - Interest-only lowers the payment. It does not lower the debt, so the full balance is still there at maturity. - Who offers it: bridge lenders and construction lenders as a matter of course, CMBS and life companies for stronger loans, banks for short periods. - Who does not: SBA does not allow balloon payments on 7(a) loans, and USDA guaranteed loans must amortize, with any interest-only period ending within three years.[2][4] - Interest-only raises DSCR but leaves debt yield and LTV untouched. If debt yield is your binding test, interest-only will not get you more proceeds. - On a $10 million loan at 7.00 percent, interest-only saves about $148,000 a year against a 25-year schedule, and skips about $2.1 million of principal paydown over ten years. #### Which hotel lenders offer interest-only? Transitional lenders offer it by default, securitized and insurance lenders offer it to stronger loans, and banks offer it sparingly. Bridge and debt fund loans are usually interest-only for the whole term, because the hotel is in transition and the business plan needs the cash; see `/hotel-financing/bridge-loans`. Construction loans charge interest only on the drawn balance while the hotel is built; see `/hotel-financing/construction-loans`. CMBS is where a stabilized hotel is most likely to find interest-only on permanent debt. Conduit pool disclosures are public, and one shows the scale. The Benchmark 2026-B42 pool, marketed February 18, 2026, held 62 loans totaling $729,201,713 across property types. By balance, 67.3 percent was interest-only for the full term, 10.1 percent was interest-only and then amortizing, and 16.5 percent amortized from the start. The pool's weighted average loan-to-value was 50.1 percent and its underwritten debt service coverage was 2.57 times.[1] That is one pool and only 1.8 percent of it was hospitality, so it shows what conduits will do for low-leverage loans, not what a hotel should expect. `/hotel-financing/cmbs-loans` covers the hotel-specific terms. Banks sit under a rule. The interagency real estate lending guidelines require each bank's loan policy to include standards for the acceptability of, and limits on, non-amortizing loans.[3] In practice that means a bank may give a year or two of interest-only during a renovation or a ramp, then amortize. No lender publishes its interest-only policy as a number, and our rate sheet does not print one.[5] #### Are SBA or USDA hotel loans ever interest-only? Only briefly. Both programs require the loan to pay itself off, so interest-only is limited to an early period such as construction. SBA's SOP is direct: SBA does not allow balloon payments, and a fixed-rate loan must use a payment that fully amortizes it by maturity. The lender may adjust the amortization schedule to meet the cash flow needs of the business, and the note terms must state any interest-only payment period.[2] A 7(a) loan can run 25 years on real estate plus the period needed to complete construction or improvements, which is where an interest-only stretch usually sits.[6] The 504 debenture is fully amortizing over 10, 20 or 25 years.[5] USDA's guaranteed loan regulation is more specific. Balloon maturities are not allowed. If the note provides an interest-only period, the first full payment of principal and interest must begin no more than three years from the date of the note.[4] For a small hotel, then, the trade is clear. Government-guaranteed debt gives long amortization and no refinance risk. It does not give years of interest-only. #### How much does interest-only lower the payment? On a $10 million loan at 7.00 percent, interest-only is $700,000 a year, against about $848,000 on a 25-year amortization schedule. The rate in that comparison is an assumption for the arithmetic, not a quote. Interest-only is simply the balance times the rate: $10,000,000 times 7.00 percent equals $700,000 a year, or $58,333 a month. A 25-year amortizing payment at the same rate is $70,678 a month, or $848,135 a year. The difference is $148,135 a year. The saving shrinks as amortization lengthens and as rates rise, because at higher rates more of an amortizing payment is interest anyway. The 10-year Treasury, the index a fixed-rate quote is struck against, was 4.94 percent on September 17, 2026.[5][7] Run your own numbers with `/tools/dscr-calculator`. #### Does interest-only help me qualify for a bigger loan? It helps on the DSCR test and does nothing on the debt yield and LTV tests, so it depends on which test is binding. DSCR divides NOI by annual debt service, so a smaller payment produces a higher ratio. Debt yield divides NOI by the loan amount and ignores the payment entirely. Loan-to-value ignores it too. `/hotel-financing/loan-requirements` explains how lenders run all three and lend the smallest result. Lenders know this. Some underwrite DSCR on an amortizing payment even when the loan is interest-only, precisely so the structure cannot inflate proceeds. Ask which payment the lender's coverage test uses. If the answer is the amortizing payment, interest-only changes your cash flow and nothing else. #### What is the catch? The balloon. Every dollar of principal you did not pay is still owed at maturity, and the refinance has to cover it. On the same $10 million loan, ten years of 25-year amortization pays the balance down to about $7,863,000. The interest-only borrower still owes $10,000,000. If rates or values have moved against the hotel by then, that $2.1 million gap is the difference between a routine refinance and a cash-in one. `/hotel-financing/loan-maturities-2026-2027` describes what that looks like for loans coming due now, and `/hotel-financing/loan-workouts` covers what happens when a maturity cannot be met. A partial interest-only period has its own cliff. When it ends, the payment steps up to the amortizing amount, about 21 percent higher in this example, with no change in the hotel's income. Budget for the step before it arrives. #### When does interest-only make sense for a hotel? When the cash it frees has a better use than paying down the loan, and the exit does not depend on amortization. Three cases are common. A renovation or PIP period, when cash flow dips and then recovers; see `/hotel-financing/pip-and-renovation-loans`. A short hold, where the owner plans to sell before amortization would have mattered much. And a low-leverage loan, where the balloon is comfortably refinanceable even at a lower value. It makes less sense on a high-leverage loan held to maturity in a flat market, because amortization is the only thing reducing refinance risk there. If a lender offers a choice, compare the two structures over your actual hold period, including the balance you will owe at the end; `/hotel-financing/how-debt-placement-works` explains how to compare quotes on an all-in basis. Table: Interest-only availability by hotel lender type, September 2026 Lender type | Interest-only? | Rule or evidence | Balloon at maturity? Bridge and debt fund | Usually, for the full term | Rate sheet describes the row as floating-rate and short-term[5] | Yes Construction | Yes, on the drawn balance during the build | Interest usually paid from a budgeted reserve | Yes, unless the loan converts to permanent CMBS conduit | Often, full-term or partial, for stronger loans | One February 2026 pool: 67.3% full-term and 10.1% partial by balance[1] | Yes Life company | Sometimes, at low leverage | Not published | Usually Bank and credit union | Short periods, case by case | Policy must set limits on non-amortizing loans[3] | Often, when the term is shorter than the amortization SBA 7(a) | Only a stated early period, such as construction | No balloon payments; must fully amortize by maturity[2] | No USDA B&I guarantee | Up to three years from the note date | 7 CFR 5001.402[4] | No First-party data point: Matthews Hotel Markets' September 2026 rate sheet puts the 10-year Treasury at 4.94% and SOFR at 3.85% as of September 17, 2026, and describes both SBA programs as fully amortizing. It publishes no interest-only terms for conventional lenders, because none of them publishes any.[5] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: a $10.0M hotel loan, interest-only versus 25-year amortization): Hypothetical. Loan amount $10,000,000, rate 7.00 percent, NOI $1,200,000. The rate and the coverage test are assumptions for the arithmetic. Payment. Interest-only: $10,000,000 times 7.00 percent equals $700,000 a year. Amortizing over 25 years: $70,678 a month, or $848,135 a year. Interest-only saves $148,135 a year. A three-year interest-only period followed by amortization saves about $444,400 of cash in total. Coverage. DSCR is $1,200,000 divided by $700,000, or 1.71 times, on the interest-only payment. It is $1,200,000 divided by $848,135, or 1.41 times, on the amortizing payment. Same hotel, same loan, same risk of default at maturity. Proceeds. At an assumed 1.35 times test, interest-only sizing would support $1,200,000 divided by 1.35 divided by 7.00 percent, or about $12.70M. Amortizing sizing supports about $10.48M. But the debt yield on $12.70M is only 9.45 percent, against 11.45 percent on $10.48M. A lender with a debt yield floor between those two numbers lends the smaller amount no matter how the payment is structured. Balance. After five years the amortizing loan owes about $9,116,000. After ten years it owes about $7,863,000. The interest-only loan owes $10,000,000 at both dates. The ten-year difference is about $2,137,000, against about $1,481,000 of payments saved over the same ten years. FAQ: - Q: Can I get interest-only on a hotel CMBS loan? A: Often, if leverage is low and coverage is strong. In one conduit pool marketed in February 2026, 67.3 percent of the balance was interest-only for the full term and 10.1 percent had a partial period. Hotels were a small share of that pool, so expect closer scrutiny. - Q: Are SBA hotel loans ever interest-only? A: Only for a stated early period, typically during construction or renovation. SBA's SOP says balloon payments are not allowed and the loan must fully amortize by maturity. The 504 debenture is fully amortizing over 10, 20 or 25 years. - Q: How much lower is an interest-only payment on a $10 million hotel loan? A: At an assumed 7.00 percent, interest-only is $700,000 a year. A 25-year amortizing payment is about $848,000 a year. The difference is about $148,000 a year, or roughly $12,300 a month. - Q: Does interest-only help my DSCR on a hotel refinance? A: It raises the DSCR calculated on the actual payment. Some lenders test coverage on an amortizing payment anyway, and debt yield and LTV ignore the payment entirely. Ask the lender which payment its test uses before counting on extra proceeds. - Q: My hotel loan has three years of interest-only left. What happens when it ends? A: The payment steps up to the amortizing amount, based on the schedule in your note. On a 7.00 percent loan with 25-year amortization the step is about 21 percent. Put the higher payment in your budget now, and check coverage covenants against it. - Q: Is an interest-only loan riskier? A: It carries more refinance risk, because the full balance comes due at maturity. After ten years, a 25-year amortizing loan at 7.00 percent has paid off about 21 percent of its balance. An interest-only loan has paid off none. - Q: Do banks offer interest-only on hotel loans? A: Sometimes, for a year or two around a renovation, a ramp-up or a seasonal business. Federal guidelines require every bank's loan policy to set limits on non-amortizing loans, so long interest-only periods on permanent bank debt are uncommon. - Q: Can I get an interest-only USDA loan for a rural hotel? A: For a limited time. Under 7 CFR 5001.402, if a guaranteed loan has an interest-only period, the first full principal and interest payment must start within three years of the note date. Balloon maturities are not allowed. Sources: - [1] Benchmark 2026-B42 Mortgage Trust, free writing prospectus: new issue announcement, February 18, 2026 (pool balance, amortization types, property types) (U.S. Securities and Exchange Commission, EDGAR, accessed 2026-09-18): https://www.sec.gov/Archives/edgar/data/2110410/000153949726000696/n5676_x6-newissue.htm - [2] SOP 50 10 8, Lender and Development Company Loan Programs (effective June 1, 2025), Section B: amortization, no balloon payments (p. 125); note terms and interest-only payment periods (p. 316) (U.S. Small Business Administration, accessed 2026-09-18): https://legacy.sba.gov/document/sop-50-10-lender-development-company-loan-programs - [3] 12 CFR Part 34, Subpart D, Appendix A: Interagency Guidelines for Real Estate Lending Policies (standards for and limits on non-amortizing loans) (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/12/appendix-A_to_subpart_D_of_part_34 - [4] 7 CFR 5001.402, Term length, loan schedule, and repayment (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/7/5001.402 - [5] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates - [6] 7(a) loan program: terms, conditions, and eligibility (U.S. Small Business Administration, accessed 2026-09-18): https://www.sba.gov/sba-lenders/#7a-terms - [7] Daily Treasury Par Yield Curve Rates (U.S. Department of the Treasury, accessed 2026-09-18): https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve ### Who lends on hotels under $5 million? URL: https://matthewshotelmarkets.com/hotel-financing/lenders-under-5-million Last updated: 2026-09-18 Four groups make most hotel loans under $5 million: SBA 7(a) lenders, banks paired with an SBA 504 debenture, community banks and credit unions lending conventionally, and rural lenders using the USDA Business and Industry guarantee. A 7(a) loan caps at $5 million.[1] For fiscal 2026 USDA guarantees 85 percent of a B&I loan under $5 million.[2] Prime has been 7.00 percent since September 17, 2026.[3] Key takeaways: - Small hotel loans are relationship and program loans. CMBS conduits and life companies mostly work above this size, so expect recourse. - SBA 7(a): one loan up to $5 million, guaranteed up to 75 percent above $150,000, up to 25 years on real estate, no balloon.[1][4] - SBA 504: a bank first lien, a fixed-rate debenture up to $5 million on a hotel, and at least 15 percent from the borrower.[5][4] The 25-year debenture priced at 6.54 percent on September 10, 2026.[3] - USDA B&I: hotels and motels are named as eligible in the regulation, in areas outside cities of more than 50,000 people, with terms up to 40 years and no balloon.[6][7][8] - A bank's legal lending limit is 15 percent of its capital and surplus per borrower.[9] A small bank can run out of room on one hotel. #### Why is the lender list different under $5 million? The fixed cost of underwriting and securitizing a hotel loan pushes capital-markets lenders toward bigger loans, which leaves small loans to banks, credit unions and government-guaranteed programs. A public example shows the scale conduits work at. The Benchmark 2026-B42 CMBS pool, marketed in February 2026, held 62 loans totaling $729,201,713, an average of about $11.8 million per loan, and hospitality was 1.8 percent of the pool.[10] A $3 million motel loan is not what that machine is built for. Our rate sheet calls conventional bank and credit union debt the most common source of hotel debt under $15 million.[3] Under $5 million the SBA programs join it, because the 7(a) loan cap and the 504 hotel debenture cap both sit at $5 million.[1][4] Nearly all of this debt is recourse. If that is a problem, read `/hotel-financing/non-recourse-loans` before you shop. #### How does SBA 7(a) work for a small hotel? It is one loan from one lender, up to $5 million, with a federal guaranty that lets the bank lend longer and at higher leverage than it would alone. SBA guarantees up to 75 percent of a 7(a) loan above $150,000. A loan that finances real estate can run up to 25 years, and proceeds can cover the purchase, equipment, working capital and a change of ownership.[1] SBA does not allow balloon payments, so the loan fully amortizes.[4] The maximum variable rate on loans over $350,000 is the base rate plus 3.0 percent, which is 10.00 percent on the 7.00 percent Prime in effect since September 17, 2026.[1][3] SBA publishes a maximum loan size and no minimum.[1] Two conditions catch hotel buyers. Holders of at least 20 percent of the business generally must personally guarantee the loan.[11] And the hotel has to be a hotel: more than 50 percent of prior-year revenue must come from guests who stay 30 days or less.[4] `/hotel-financing/extended-stay-financing` covers that test. #### When is SBA 504 the better small-hotel loan? When the purchase is mostly real estate and you want part of the debt fixed for up to 25 years. A 504 project has three pieces: a bank first lien, a debenture-funded second lien from a Certified Development Company, and the borrower's contribution. SBA's SOP lists hotels, motels and other lodging as Limited or Special Purpose Property, so the borrower contributes at least 15 percent, or 20 percent if the business is also two years old or less.[5][4] The debenture on a hotel caps at $5 million.[4] It cannot fund working capital.[12] The debenture rate is published monthly. The 25-year debenture priced at 6.54 percent on September 10, 2026, fees included.[3] The bank prices its first lien separately. `/hotel-financing/sba-7a-vs-504` runs the two programs side by side on the same purchase. #### Can I get a USDA loan for a hotel? Yes, if the hotel is in an eligible rural area. The Business and Industry program guarantees a bank's loan, and its regulation names hotels and motels as eligible projects. The OneRD guaranteed loan regulation lists tourist and recreation facilities, including hotels, motels and bed and breakfast establishments, among eligible B&I projects.[6] Rural means an area outside a city or town of more than 50,000 inhabitants and outside the urbanized area next to one, based on the latest decennial census.[7] USDA maintains an eligibility map, and your lender will check the address. The program limit is $25 million per borrower, far above this page's range.[13] For fiscal 2026, a B&I loan under $5 million receives an 85 percent guarantee, with an initial guarantee fee of 3.0 percent and a periodic retention fee of 0.55 percent; loans from $5 million to $25 million receive 80 percent. Those rates took effect October 1, 2025.[2] Terms can run up to 40 years, limited to the useful life of the assets, balloon maturities are not allowed, and any interest-only period ends within three years of the note date.[8] Not every bank is a B&I lender, and the guarantee adds a federal agency review. It is worth the effort for a rural hotel that is too large or too real-estate-heavy for 7(a), or where a longer amortization makes the coverage test work. #### Do community banks and credit unions make hotel loans? Yes, and for a small hotel they are often the fastest and most flexible option, within two legal limits worth knowing. The first is the legal lending limit. A national bank's total loans to one borrower may not exceed 15 percent of its capital and surplus, plus another 10 percent if that excess is fully secured by readily marketable collateral, which a hotel is not.[9] State-chartered banks follow their own state limits. When a banker says a loan is too big for the bank, this is usually what it means, and the fix is a participation with another bank or a larger lender. The second applies to credit unions. A federally insured credit union's member business loans are capped in aggregate at 1.75 times its net worth.[14] A credit union near that cap may like your hotel and still decline it. Ask early. Neither type publishes its DSCR floor, leverage limit or spread, so our rate sheet marks those cells not yet published.[3] Expect a personal guaranty, a shorter fixed period than the amortization, and a deposit relationship. #### How do I choose among them? Start with what the hotel and the buyer qualify for, then weigh down payment, rate structure and speed. If you are an owner-operator buying your first hotel, start with 7(a): it is one loan, it can include working capital, and the lender's policy sets the down payment instead of a regulatory minimum. If the deal is mostly real estate and you want a fixed rate, price 504. If the hotel is rural, ask a B&I lender what a 40-year maximum term does to coverage. If you have a banking relationship, liquidity and want speed and light prepayment terms, a conventional bank or credit union loan is often simplest. Whichever path you take, the lender will size the loan the way `/hotel-financing/loan-requirements` describes, and the documents are the same. A renovation or brand change on top of the purchase changes the answer; see `/hotel-financing/pip-and-renovation-loans`. Table: Small-balance hotel loan options and their published limits, September 2026 Option | Published size limit | Government guaranty | Longest term | Published rate fact | Key condition SBA 7(a) | $5 million loan maximum; no published minimum[1] | Up to 75% above $150,000[1] | 25 years on real estate, no balloon[1][4] | Maximum 10.00% variable on loans over $350,000[3] | Personal guaranty from 20% owners; 30-day transient revenue test[11][4] SBA 504 | $5 million debenture on a hotel; bank first lien sized by the bank[4] | SBA backs the debenture that funds the second lien | 10, 20 or 25 year debenture[12] | 25-year debenture 6.54%, priced September 10, 2026[3] | Borrower contributes at least 15% on a hotel; no working capital[5][12] USDA B&I guarantee | $25 million per borrower[13] | 85% under $5 million for fiscal 2026[2] | Up to 40 years, no balloon[8] | Rate set by the lender; 3.0% guarantee fee and 0.55% retention fee[2] | Rural area: outside cities of more than 50,000[7] Community or regional bank | Legal limit of 15% of the bank's capital and surplus per borrower[9] | None | Set by the bank; not published | Not published[3] | Relationship and personal guaranty Credit union | Aggregate business loans capped at 1.75 times net worth[14] | None | Set by the credit union; not published | Not published[3] | Membership; room under the business loan cap First-party data point: Matthews Hotel Markets' September 2026 rate sheet shows the two published small-balance benchmarks: a 10.00% maximum allowable rate on SBA 7(a) loans over $350,000, which is the 7.00% Prime effective September 17, 2026 plus SBA's 3.00% cap, and 6.54% on the 25-year SBA 504 debenture priced September 10, 2026. It marks conventional bank and credit union spreads as not yet published.[3] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: a $4.2M purchase of a 48-key rural hotel, four ways): Hypothetical. A 48-key hotel in a town of 9,000 people sells for $4,200,000. The loan-to-price figures for 7(a), B&I and the bank are assumptions for the arithmetic, not quotes or program rules. SBA 7(a) at an assumed 85 percent of price: a $3,570,000 loan and $630,000 down. SBA guarantees 75 percent, or $2,677,500, and the lender holds $892,500 of unguaranteed exposure.[1] SBA 504 at the hotel minimums: bank first lien 50 percent, $2,100,000; debenture 35 percent, $1,470,000; borrower 15 percent, $630,000.[5][4] The down payment matches the 7(a) case here, and $1,470,000 of the debt is fixed for up to 25 years. USDA B&I at an assumed 80 percent of price: a $3,360,000 loan and $840,000 down. The fiscal 2026 guarantee is 85 percent, or $2,856,000. The initial guarantee fee is 3.0 percent of the guaranteed amount, $85,680, and the periodic retention fee is 0.55 percent of the guaranteed share of the outstanding balance, about $15,708 at the starting balance.[2][15] Conventional bank at the same $3,360,000: under the 15 percent lending limit, the bank needs at least $22,400,000 of capital and surplus to hold this loan alone.[9] A bank with $30,000,000 of capital and surplus has a $4,500,000 limit, so this one borrower would use most of it. Four structures, down payments from $630,000 to $840,000, and the right one depends on the rate structure, fees and speed you need. FAQ: - Q: What's the minimum loan size hotel lenders will do? A: It depends on the lender type. SBA publishes a $5 million maximum for 7(a) and no minimum, so SBA lenders and community banks go smallest. CMBS conduits and life companies generally prefer larger loans. One 2026 conduit pool averaged about $11.8 million per loan. - Q: I'm buying a 40-room motel for $2.8 million. Who will finance it? A: Most likely an SBA 7(a) lender, a bank paired with an SBA 504 debenture, or a community bank or credit union that knows you. If the motel is outside a city of more than 50,000 people, a USDA B&I lender is a fourth option. - Q: Can I get a USDA loan for a hotel in a small town? A: Yes. The USDA Business and Industry regulation names hotels and motels as eligible projects in rural areas. A bank makes the loan and USDA guarantees 85 percent of it for fiscal 2026 if the loan is under $5 million. - Q: Do credit unions make hotel loans? A: Many do. A federally insured credit union's total member business loans are capped at 1.75 times its net worth, so appetite depends on how much room it has left. You also need to qualify for membership. - Q: My bank says my hotel loan is too big for them. What does that mean? A: Usually the legal lending limit. A national bank cannot lend one borrower more than 15 percent of its capital and surplus on a loan like this. The bank can sell a participation to another bank, or you can move to a larger lender. - Q: How much do I need to put down on a small hotel? A: SBA 504 requires at least 15 percent on a hotel, or 20 percent for a business two years old or less. SBA 7(a), USDA B&I and conventional lenders set equity by their own credit policy and do not publish it. Get the requirement in writing. - Q: Are small hotel loans always recourse? A: Nearly always. SBA rules generally require a personal guaranty from every owner of 20 percent or more, and banks and credit unions ask for one by policy. Non-recourse lenders mostly work at larger loan sizes. - Q: Is there a balloon payment on an SBA or USDA hotel loan? A: No. SBA does not allow balloon payments on 7(a) loans, and the USDA regulation says balloon maturities are not allowed on guaranteed loans. Conventional bank loans often do have a balloon, because the fixed period is shorter than the amortization. Sources: - [1] 7(a) loan program: terms, conditions, and eligibility (U.S. Small Business Administration, accessed 2026-09-18): https://www.sba.gov/sba-lenders/#7a-terms - [2] OneRD Annual Notice of Guarantee Fee Rates, Periodic Retention Fee Rates, Loan Guarantee Percentage and Fee for Issuance of the Loan Note Guarantee Prior to Construction Completion for Fiscal Year 2026 (91 FR 11272, March 9, 2026) (Federal Register, U.S. Department of Agriculture Rural Development, accessed 2026-09-18): https://www.federalregister.gov/documents/2026/03/09/2026-04581/onerd-annual-notice-of-guarantee-fee-rates-periodic-retention-fee-rates-loan-guarantee-percentage - [3] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates - [4] SOP 50 10 8, Lender and Development Company Loan Programs (effective June 1, 2025): 30-day transient revenue test (pp. 19-20), no balloon payments (p. 125), debenture limits (p. 350), hotels as Limited or Special Purpose Property (pp. 354-355) (U.S. Small Business Administration, accessed 2026-09-18): https://legacy.sba.gov/document/sop-50-10-lender-development-company-loan-programs - [5] 13 CFR 120.910, Borrower contributions (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/13/120.910 - [6] 7 CFR 5001.105, Eligible projects: tourist and recreation facilities, including hotels and motels (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/7/5001.105 - [7] 7 CFR 5001.3, Definitions: rural and rural area (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/7/5001.3 - [8] 7 CFR 5001.402, Term length, loan schedule, and repayment (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/7/5001.402 - [9] 12 CFR 32.3, Lending limits (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/12/32.3 - [10] Benchmark 2026-B42 Mortgage Trust, free writing prospectus: new issue announcement, February 18, 2026 (U.S. Securities and Exchange Commission, EDGAR, accessed 2026-09-18): https://www.sec.gov/Archives/edgar/data/2110410/000153949726000696/n5676_x6-newissue.htm - [11] 13 CFR 120.160, Loan conditions (personal guarantees) (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/13/120.160 - [12] 504 loans (U.S. Small Business Administration, accessed 2026-09-18): https://www.sba.gov/loans/504-loans/ - [13] 7 CFR 5001.406, Maximum loan amounts (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/7/5001.406 - [14] 12 CFR 723.8, Aggregate member business loan limit; exclusions and exceptions (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/12/723.8 - [15] 7 CFR 5001.454, Guarantee fee, and 7 CFR 5001.455, Guarantee retention fee (how each fee is calculated) (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/7/5001.454 ### How much hotel debt is maturing in 2026 and 2027? URL: https://matthewshotelmarkets.com/hotel-financing/loan-maturities-2026-2027 Last updated: 2026-09-18 Trepp counts $18.7 billion of hotel CMBS maturing in 2026, and nearly 70 percent of it floats, reported August 3, 2026. No public source gives a hotel-specific 2027 figure, so this page does not state one. The number that decides your own outcome is smaller and local: does today's NOI support today's balance at today's rate? Key takeaways: - Trepp's published hotel CMBS figure is $18.7 billion maturing in 2026. Nearly 70 percent of it carries a floating rate. - There is no publicly published hotel-specific 2027 maturity volume as of September 2026. We do not estimate one. - A maturity default is a refinancing failure, not a payment failure. A loan can be current on every payment and still default at maturity. - The diagnostic is one calculation: does today's NOI support today's balance at today's rate? - Twelve months of lead time is the difference between five options and one. #### How much hotel debt is actually maturing, and who says so? Trepp counts $18.7 billion of hotel CMBS maturing in 2026, nearly 70 percent of it floating; nobody publishes a hotel-specific 2027 number, and the figures that do exist count different loan universes. Trepp's figure covers securitized hotel CMBS only.[1] It does not include bank balance-sheet hotel loans, life company loans, SBA loans, or debt-fund paper, none of which Trepp's CMBS count covers. So $18.7 billion is a real, dated, checkable number for one slice of the market, and it is not the size of the hotel maturity wall. The floating-rate detail matters more than the headline. If nearly 70 percent of that 2026 book floats, then SOFR, not the 10-year Treasury, is the number that decides whether those specific loans can extend.[1] SOFR was 3.85% for September 17, 2026.[4] A floating loan that was underwritten when SOFR was near zero has already repriced; the question for that borrower is whether the cap they bought is still in the money and what a replacement cap costs, which is covered on `/hotel-financing/bridge-loans`. For 2027 we found nothing publishable. The Mortgage Bankers Association's maturity survey says 30 percent of hotel/motel loan balances come due in 2026, but it gives no hotel dollar amount and no hotel breakdown for 2027, only a $652 billion total for all commercial and multifamily loans maturing that year.[2] Quoting that total here would imply a hotel figure that the release does not contain. The Federal Reserve publishes bank-held commercial real estate balances in H.8 with no hotel split at all.[3] A larger, round-number, multi-year hotel figure covering 2026 through year-end 2027 circulates in the trade press and, until this update, in three articles on this site. We could not source it to any publisher, so we removed it from those articles and we do not restate it here, not even to knock it down. Adding an unknown 2027 book to a sourced 2026 figure and attributing the total to a research house is not sourcing. The reasoning is on `/data/hotel-financing-statistics`, which lists every figure we rejected and why. #### How do I tell if my loan is at risk? Run one calculation: divide trailing NOI by your lender's coverage test to get maximum debt service, convert that to a loan amount at today's rate and amortization, and compare it to your balance. That number, the gap between what the asset supports today and what you owe, is the only maturity statistic that changes what you should do. A national maturity total does not. The worked example below runs the arithmetic twice on the same hypothetical loan, once at a healthy NOI and once at a soft one, because the same balance produces two completely different conversations. Three inputs move the answer and you can get all three in a week: your trailing twelve-month NOI from the P&L, your lender's stated coverage test, and today's index plus the spread a lender will actually quote you. The first two are yours. For the third, `/rates` publishes the index and says plainly which spreads are not published, and `/hotel-financing/refinance` walks the full process. #### What is a maturity default? A maturity default is a failure to repay the loan on its maturity date, even when every scheduled payment has been made on time. It is the reason a hotel with no payment history problem can end up in special servicing. The loan documents require the full remaining balance on a date. If the refinance does not close and the borrower does not write a check, the loan is in default on that date regardless of how the property is performing. That is a different event from a payment default, where the borrower misses a monthly payment because the property is not producing enough cash. The practical difference is timing and leverage. A payment default is visible to the lender the month it happens. A maturity default is visible to both sides years in advance, on the term sheet, which is why it is the one kind of default an owner can usually prevent. `/hotel-financing/loan-workouts` covers what happens once a loan does transfer. #### What do lenders do when a hotel loan cannot refinance? Most often they extend a performing loan on new terms rather than take the asset back, but that is a tendency driven by their own economics, not a policy you can rely on. A lender taking back a hotel takes back an operating business: a franchise agreement with transfer conditions, a management contract, payroll, and a property condition assessment it has not seen. That is expensive and slow, which is why an extension on new terms, often with a rate reset, a partial paydown, a cash-management sweep and a funded reserve, is the common outcome for a loan that is current and covering. The tendency weakens fast when the loan is not covering. The overall CMBS special servicing rate rose 33 basis points in August 2026 to 11.42%, its highest level since February 2013.[5] Special servicing leads delinquency, because a loan transfers before it misses a payment. The lodging CMBS delinquency rate was 5.35% in July 2026, up 13 basis points on the month.[6] Trepp reported a further lodging increase in August without publishing the August lodging number in any release we could open.[5] So the direction is clear and the current level is not; we publish July's figure rather than an August figure we cannot source. #### Which segments are seeing the most stress? Floating-rate loans on transitional assets with open PIPs, across segments, rather than any one brand or market that public data identifies. We are deliberately not naming brands or markets here. No public release we could open breaks hotel maturity or delinquency data down by flag or by metro, and inventing that breakdown from a handful of deals we happen to have seen would be a worse answer than saying so. What the public data does support is a structural read. The stress concentrates where three things overlap: a floating-rate loan originated in the 2019 to 2021 rate environment, an asset that has not stabilized or that carries an unfunded brand-mandated PIP, and a sponsor without the liquidity to write a paydown check. Any one of those is manageable. All three together is the profile that transfers to special servicing. `/hotel-financing/pip-and-renovation-loans` covers the PIP-funding piece specifically. #### What should I do 12 months before maturity? Order a fresh value opinion, get the PIP status in writing, run the coverage test at today's rate, and open the conversation with your incumbent lender before you need anything from it. Twelve months out, an owner has five real options: write a paydown check, negotiate an extension with the incumbent lender, bring in mezzanine or preferred equity, bridge to a later permanent takeout, or sell. Each of those takes time to arrange, and the ones that require a third party take the most. The sequence that works is boring: value opinion first, because it prices the equity and it is what a new lender will size against; franchise and PIP status second, in writing, because an unquantified PIP stalls every other track; coverage test third, at a quoted rate rather than a remembered one. `/hotel-financing/refinance-or-sell` is the decision page for the last of the five options, and it is not a defeat. A sale at 14 months out is a normal disposition. A sale at 60 days out is a distressed one. #### What if I am already inside 90 days? The five options have usually narrowed to whatever the incumbent lender will offer, so the work is to make that offer as good as it can be and to run a takeout search in parallel. Inside 90 days, a new permanent lender generally cannot complete third-party reports, franchise approval and closing in time, which removes the competitive tension that would otherwise improve terms. What is still available: a short extension to create runway for a proper process, a forbearance while a takeout is arranged, and a paydown sized to whatever the incumbent needs to re-underwrite. Go to the lender with the same package a new lender would want: trailing twelve-month P&L, a current STAR report, the franchise agreement and PIP status, and a written plan with dates. A borrower who arrives with that gets a materially different conversation than one who arrives asking for time. `/hotel-financing/loan-workouts` covers the mechanics from there. Table: Hotel loan maturity figures, by publisher, as of September 17, 2026 Publisher | What it counts | Figure | As of Trepp, read via Hotel Dive | Securitized hotel CMBS only, 2026 maturities | $18.7 billion, nearly 70% floating rate | August 3, 2026 Trepp, read via Hotel Dive | Securitized hotel CMBS only, 2027 maturities | Not published | n/a Mortgage Bankers Association | All commercial and multifamily lenders; hotel/motel share only, no hotel dollar amount | 30% of hotel/motel loan balances mature in 2026; no hotel figure for 2027 | February 10, 2026 Federal Reserve, H.8 | Bank-held commercial real estate; no hotel split published | Not published for hotels | n/a Widely repeated trade figure | Claimed hotel CMBS through year-end 2027 | Not used on this site. We could not source it to any publisher. | n/a First-party data point: Matthews Hotel Markets' September 2026 rate sheet gives you the index to run your own maturity stress test against: the 10-year Treasury at 4.94% on September 17, 2026 and SOFR at 3.85% for September 17, 2026.[4] It marks the spread over each as not yet published, because we do not print a spread until three independent lenders quote the same structure in a month.[7] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: the one calculation that tells you if you are at risk): Hypothetical. Loan balance $12.60M maturing in 14 months. Trailing twelve-month NOI $1.42M. The lender's stated coverage test is 1.35x, on a 25-year schedule, at a 7.25 percent quote. Maximum debt service = $1.42M / 1.35 = $1,051,852. The annual constant at 7.25 percent over 25 years is about $86,800 per $1M of loan. Supportable loan = $1,051,852 / $86,800 per $1M = $12.12M. Gap = $12.60M minus $12.12M = $480,000, about 3.8 percent of the balance. A 3.8 percent gap is a check, not a crisis. Now rerun the identical loan with NOI at $1.15M: maximum debt service $851,852, supportable loan about $9.81M, gap $2.79M, or 22 percent of the balance. Same building, same balance, same rate. That second version is a different conversation and it needs to start today, not in month thirteen. FAQ: - Q: How much hotel CMBS debt matures in 2026? A: Trepp counts $18.7 billion, reported August 3, 2026, with nearly 70 percent of it carrying a floating rate. That covers securitized hotel CMBS only, not bank, life company, SBA or debt-fund loans. - Q: How much hotel debt matures in 2027? A: No public source we could open publishes a hotel-specific 2027 maturity figure as of September 2026. We do not estimate one. A widely repeated multi-year number is not attributable to any publisher. - Q: What is a maturity default on a hotel loan? A: A failure to repay the balance on the maturity date, even when every monthly payment has been made on time. It is a refinancing failure rather than a payment failure, and it is usually preventable. - Q: Will my lender extend my hotel loan? A: Often, if the loan is current and covering, because taking back an operating hotel is expensive for a lender. Expect new terms: a rate reset, a paydown, a cash sweep, or a funded reserve. - Q: How do I know if my hotel loan can refinance? A: Divide trailing NOI by your lender's coverage test, convert the result to a loan amount at today's rate and amortization, and compare it to your balance. The gap is your answer. - Q: What is special servicing? A: Transfer of a securitized loan to a servicer that handles troubled loans. It leads delinquency, because a loan usually transfers before it misses a payment. The overall rate hit 11.42 percent in August 2026. - Q: When should I start working on a maturity? A: Twelve months out. At that point an owner has five options: pay down, extend, add mezzanine or preferred equity, bridge, or sell. At ninety days out, most of those have closed off. Sources: - [1] 4 trends reshaping the 2026 hospitality investment market (Hotel Dive, citing Trepp, accessed 2026-09-17): https://www.hoteldive.com/news/trends-reshaping-2026-hospitality-investment-market/826807/ - [2] MBA: 17% of Commercial and Multifamily Mortgage Balances to Mature in 2026 (Mortgage Bankers Association (MBA NewsLink), accessed 2026-09-18): https://newslink.mba.org/cmf-newslinks/2026/february/mba-commercial-multifamily-newslink-thursday-feb-12-2026/mba-17-of-commercial-and-multifamily-mortgage-balances-to-mature-in-2026/ - [3] H.8 Assets and Liabilities of Commercial Banks in the United States (Board of Governors of the Federal Reserve System, accessed 2026-09-17): https://www.federalreserve.gov/releases/h8/ - [4] Secured Overnight Financing Rate (SOFR) (Federal Reserve Bank of New York, accessed 2026-09-18): https://www.newyorkfed.org/markets/reference-rates/sofr - [5] Multifamily CMBS servicing rate declined, delinquencies stayed flat in August (Multifamily Dive, citing Trepp, accessed 2026-09-17): https://www.multifamilydive.com/news/bank-reo-cmbs-servicing-multifamily-deliquency/830531/ - [6] Trepp: CMBS Delinquency Rate Up 51 Basis Points in July (MBA Newslink, citing Trepp, accessed 2026-09-17): https://newslink.mba.org/mba-newslinks/2026/august/mba-newslink-thursday-august-6-2026/trepp-cmbs-delinquency-rate-up-51-basis-points-in-july/ - [7] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-17): https://matthewshotelmarkets.com/rates ### What do lenders require for a hotel loan? URL: https://matthewshotelmarkets.com/hotel-financing/loan-requirements Last updated: 2026-09-17 A hotel lender wants three things: cash flow that clears its coverage test, a sponsor with hotel experience and liquidity, and a clean franchise position. The package is a trailing twelve-month P&L, a STAR report, a PIP status letter, the franchise agreement and a personal financial statement. As of September 2026, SBA 504 caps a hotel at 85 percent of project cost.[1][2][3] Key takeaways: - The trailing twelve-month P&L and the STAR report are the two documents that decide the deal. - A first-time buyer should expect to bring more equity than an experienced operator. The lender sets the amount. - An open PIP does not kill a loan, but an unfunded PIP does. - Most bank and SBA hotel loans carry a personal guarantee. Non-recourse usually means CMBS or a life company at a larger loan size. - Start the maturity conversation 12 months out, not 90 days out. #### What documents does a hotel lender ask for? Six documents move a hotel loan from an indication to a real term sheet, and the table below shows what each one tests. The trailing twelve-month profit and loss statement, ideally monthly, is the single most important document in the package, because it is the raw NOI a lender underwrites. A STAR report, produced by STR through the brand, shows occupancy, ADR and RevPAR against a defined competitive set and tells a lender whether performance is trending with, above, or below the market. The franchise agreement and any PIP letter show the lender what capital obligation, if any, is attached to keeping the flag. A personal financial statement and schedule of real estate from the sponsor show liquidity, net worth, and whether the sponsor has hotel operating experience. Recent capital expenditure history shows whether the trailing NOI was earned or bought with deferred maintenance. The lender orders its own appraisal and property condition assessment once the package is complete. #### What ratios do I have to clear? A hotel loan clears a debt service coverage test, a debt yield floor, and a loan-to-value cap, each set by the lender, with the lowest result setting the loan size. These three tests, and how they interact, are covered in full on `/hotel-financing`, the cluster hub. The short version for a loan-requirements checklist: bring the trailing twelve-month NOI, know your target leverage, and expect the lender to run all three tests independently rather than take your own math at face value. No conventional lender type publishes its thresholds, which is why our rate sheet marks them not yet published.[1] Ask for yours in writing. #### How much cash do I need to bring? The lender's leverage ceiling sets the down payment, a buyer without hotel operating experience usually brings more, and the cash needed at closing runs above the down payment alone. Whatever the loan-to-value, the equity check is the rest of the price, before closing costs, reserves, and franchise fees are added. SBA 504 is the one program with a written hotel ceiling: 85 percent of project cost, so the borrower puts in at least 15 percent.[1][2] Closing costs, a lender-required FF&E reserve, and franchise application and transfer fees add more. The franchise fees need to come from the specific brand's own FDD, not a general estimate. The worked example below shows how these add up on a hypothetical deal. #### What does a lender look for in the sponsor? A lender underwrites the sponsor's liquidity, net worth, and hotel operating experience separately from the asset, and a weak sponsor can sink a strong deal. Post-closing liquidity requirements are common, typically enough cash and marketable securities left over after closing to cover several months of debt service and a capital contingency. A sponsor with no hotel operating experience is not automatically disqualified but is typically required to bring a qualified management company or an experienced partner into the ownership or management structure, and the equity requirement generally rises. Personal credit history matters most on bank and SBA loans, where a personal guarantee is standard; it matters less on non-recourse CMBS and life company loans, where the sponsor's track record and the asset's own performance carry more of the underwriting weight. #### Will an open PIP stop my loan? An open PIP with a funding plan is routine; an open PIP with no funding source attached is the more common reason a loan stalls. Lenders expect PIPs on branded hotels and have standard ways to handle them: a capex reserve or holdback in a refinance, a future-funding facility in a bridge structure, or simply confirmation that the PIP is already funded and scheduled. What stops a loan is an owner who has not gotten the PIP scope letter in writing, has no financing plan for it, and cannot tell the lender when it will be complete. Get the scope letter first; everything downstream depends on it. More detail on financing a PIP specifically is on `/hotel-financing/pip-and-renovation-loans`. #### Can I get financed if occupancy dropped? Yes, if the lender believes the drop is temporary and can see a credible path back, and the trend line matters more than the single trailing number. A lender reviewing a hotel with softened occupancy will look at year-over-year and month-over-month trend, the comp-set performance over the same period, and whether a specific, identifiable cause explains the dip: a renovation, new supply that has not yet been absorbed, or a temporary demand disruption. A structural decline against a strengthening comp set is underwritten more conservatively, and in the more severe cases a lender will decline or require materially more equity and recourse. #### What should I be doing 12 months before my loan matures? Order a fresh valuation, get the PIP status in writing, and run today's rate against today's NOI, twelve months before maturity, not ninety days before. Twelve months out, an owner has five real options if the numbers do not immediately work: write a check, negotiate an extension with the incumbent lender, use mezzanine or preferred equity, bridge to a later permanent takeout, or sell. Ninety days out, most of those options have narrowed to whatever the incumbent lender is willing to offer. The full step-by-step refinance process, with the proceeds-gap comparison table, is on `/hotel-financing/refinance`. Table: Hotel loan document package, by purpose Document | Who produces it | What the lender is testing | Lead time Trailing 12-month P&L, monthly | Owner or management company | NOI, and whether it is trending | Days, if the books are current STAR report | STR, via the brand | Occupancy, ADR and RevPAR index versus the comp set | Request it early through the brand Franchise agreement + PIP letter | Brand | Remaining term, transfer rights, capital required | The brand's timeline; start here Personal financial statement, schedule of real estate | Sponsor | Liquidity, net worth, hotel experience | Days Capital expenditure history | Owner | Whether NOI was bought with deferred maintenance | Days Appraisal and PCA | Lender-ordered | Value, and deferred maintenance | Several weeks, ordered by the lender First-party data point: Matthews Hotel Markets' September 2026 rate sheet publishes one hotel leverage ceiling that is actually written down anywhere: SBA rules cap a 504 hotel structure at 85% of project cost. For every other lender type the sheet marks maximum LTV as not yet published, because no lender type prints one. Ask your lender for its ceiling in writing.[1] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: what a first-time buyer brings to a $20.0M purchase): Hypothetical. A first-time hotel buyer under contract at $20.0M on a 95-key select-service asset with $1.60M of NOI. Loan at 60 percent LTV equals $12.00M. Equity for the purchase equals $20.00M minus $12.00M, or $8.00M. Closing costs, assumed at 2 percent of price, add $400,000. A lender-required FF&E reserve at closing, assumed at 4 percent of $4.20M of revenue, adds $168,000. Franchise application and transfer fees, assumed here and to be confirmed against the brand's own FDD, add $100,000. Total cash at closing is about $8.67M, not $8.00M. The 8 percent gap between the down payment and the actual check is the part first-time buyers miss most often. FAQ: - Q: What credit score do hotel lenders require? A: There is no single published number across all hotel lenders. SBA lenders generally want strong personal credit from every guarantor; banks weigh credit alongside liquidity and experience. Ask your specific lender for its minimum before you apply. - Q: How much equity do I need to buy a hotel? A: It depends on the lender's leverage ceiling. Under SBA 504, at least 15 percent of project cost on a hotel. Conventional lenders set their own ceilings. Add closing costs, reserves, and franchise fees on top. First-time hotel owners are usually asked for more. - Q: Do hotel lenders require hotel operating experience? A: Not always, but a sponsor without it is usually required to bring an experienced management company or partner into the structure, and the equity requirement generally rises. - Q: Is a personal guarantee required on a hotel loan? A: Standard on most bank and SBA hotel loans. Non-recourse structures are available through CMBS and life insurance companies, generally at larger loan sizes. - Q: Can I finance a hotel with an open PIP? A: Yes, if the PIP has a funding plan: a reserve, a future-funding facility, or confirmation it is already scheduled. An open PIP with no funding source is the more common reason a loan stalls. - Q: What is a comfort letter and who issues it? A: A franchise comfort letter is the brand's agreement to let a lender step into the franchise agreement if it forecloses. The franchisor issues it, and it is a closing condition on almost every branded hotel loan. - Q: How far in advance should I start a refinance? A: Twelve months before maturity. At that point an owner has five real options. At ninety days out, the options have usually narrowed to whatever the current lender offers. Sources: - [1] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates - [2] 13 CFR 120.910, How much must the Borrower contribute? (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/13/120.910 - [3] SOP 50 10 8, Lender and Development Company Loan Programs (effective June 1, 2025), Section C, Ch. 1: debenture limits (p. 350) and Limited or Special Purpose Property, which lists hotels (pp. 354-355) (U.S. Small Business Administration, accessed 2026-09-18): https://legacy.sba.gov/document/sop-50-10-lender-development-company-loan-programs ### What is a loan workout and how does it work for a distressed hotel? URL: https://matthewshotelmarkets.com/hotel-financing/loan-workouts Last updated: 2026-09-18 A workout is a negotiated change to loan terms after a default or an imminent one. In securitized loans, the file transfers to a special servicer whose duty runs to the bondholders, not to you. Trepp put the lodging CMBS special servicing rate at 8.63 percent in July 2026.[1] Workouts buy time. They do not fix an asset whose cash flow cannot carry the debt at any term. Key takeaways: - A special servicer is not your lender and does not have a relationship with you. It follows the pooling agreement. - Transfer usually happens at default or at imminent default, which you can often trigger deliberately to start the conversation. - Workout fees, servicing fees and legal costs are added to your balance. They are real money. - The servicer's options are extend, modify, take a discounted payoff, sell the note, or foreclose. - A workout buys time. If the asset cannot carry the debt at any rate or term, time is not the answer. #### What is a loan workout? A workout is a negotiated modification of loan terms, reached after the borrower defaults or shows a lender it is about to, aimed at getting the loan back to a status both sides can live with. A workout can take many forms: an extension of the maturity date, a temporary reduction or deferral of interest, a covenant waiver, a principal paydown in exchange for relaxed terms, or some combination. What a workout is not is a renegotiation of the original business deal. The lender or servicer is trying to maximize recovery on the loan as it stands, not to help the borrower's investment thesis succeed for its own sake, and every proposal should be read with that incentive in mind. #### How does a hotel loan get to special servicing? A securitized hotel loan transfers to a special servicer at an actual default or at imminent default, a threshold the borrower can often meet deliberately to start the workout conversation early. Imminent default typically means the borrower can demonstrate, in good faith, that a default is reasonably foreseeable, commonly because the loan cannot refinance at maturity on current terms or because cash flow no longer covers debt service. Borrowers sometimes request a transfer to imminent-default status specifically because it opens a workout conversation before an actual missed payment damages the relationship and the borrower's credit further. This is a real strategic choice, not just something that happens to you, and it should be made deliberately, ideally with counsel. #### Who is the special servicer and whose interest do they serve? The special servicer's fiduciary duty runs to the certificate holders of the securitization trust as a pool, governed by the pooling and servicing agreement, not to the individual borrower. This is the single fact borrowers most often misunderstand entering a workout. There is no relationship banker on the other side of the table who wants the deal to work for its own sake. The special servicer is evaluating whether extending, modifying, or foreclosing produces the best net present value recovery for the trust, under the specific standards written into the pooling and servicing agreement. Framing a proposal in terms of what maximizes the trust's recovery, rather than what is fair to the borrower, is more likely to land. #### What can a workout actually change? A workout can extend the maturity, adjust the rate or coverage covenants, defer interest, or restructure the balance, and each option fits a different underlying problem. The table below orders the realistic outcomes by how often they actually happen, not by how severe they sound. Extensions and modifications are the most common outcomes for a performing or near-performing asset with a temporary problem. Discounted payoffs and note sales come up when the servicer wants to exit the position and the borrower or a third party has capital ready to move. Foreclosure or a deed in lieu of foreclosure is the last resort, used when no other path is viable, not the default outcome of a transfer to special servicing. #### What does a workout cost me? Workout fees, extended servicing fees, and legal costs are typically added to the loan balance, and they are real cash costs, not paperwork. An extension fee is commonly quoted as a percentage of the outstanding balance. Special servicing fees accrue for as long as the loan remains with the special servicer, on top of whatever normal servicing fee already existed. Legal fees on both sides, the servicer's and often the borrower's own counsel, add up over a multi-month negotiation. The worked example below shows how these add up to a real total cost that should be compared directly against the alternative of selling. #### What do I do in the first 30 days? Get counsel experienced in CMBS workouts, assemble current financials and a realistic business plan, and decide deliberately whether you are asking for time or negotiating an exit. This is not legal advice, and every borrower in this position should retain counsel with specific special-servicing experience before engaging substantively with a servicer. What is universally true: the servicer will ask for current and projected financials, and the quality and honesty of that package shapes the servicer's view of what outcome makes sense. A borrower who shows up with a credible, conservative plan is in a materially better position than one who shows up with an optimistic story that does not survive scrutiny. #### When is selling better than working it out? Selling is the better answer when the asset's cash flow cannot support the debt at any realistic rate or term, because a workout only buys time, and time does not fix a structural problem. Before agreeing to any workout terms, run the honest comparison: what does the full cost of the proposed workout, fees, higher rate, and any paydown, actually total over its term, and how does that compare to what a sale nets today. That comparison, worked in full with a real example, is on `/hotel-financing/refinance-or-sell`. A workout that simply delays an inevitable outcome by two years, at real cost, is not automatically the better choice just because it keeps the asset in hand longer. Table: What a special servicer can do with a distressed hotel loan Outcome | What it means for the owner | Typical trigger | What it does not solve Extension | More time at modified terms | Performing asset, timing problem | A permanent NOI shortfall Modification | Rate, amortization or covenant changes | Coverage is tight but positive | Negative cash flow Forbearance | Temporary suspension of enforcement | Short, identifiable disruption | Anything structural Discounted payoff | Pay less than the balance to retire it | Owner has outside capital | Nothing, if you cannot fund it Note sale | A new holder buys the loan | Servicer wants out | Your position; it may improve or worsen Foreclosure or deed in lieu | You lose the asset | No viable path | The equity, which is gone First-party data point: Matthews Hotel Markets' September 2026 rate sheet is where a workout conversation starts, because an extension only makes sense if a takeout exists at today's index: the 10-year Treasury was 4.94% on September 17, 2026 and SOFR was 3.85% for September 17, 2026.[3] The spread over each is marked not yet published.[2] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: what a two-year extension actually costs): Hypothetical. Balance $14.0M. The servicer offers a 24-month extension: a 1 percent extension fee, the rate moves from 4.10 percent to 7.00 percent, and a $500,000 principal paydown. The extension fee at 1 percent of $14.0M is $140,000. The paydown is $500,000. The new balance is $14.0M minus $500K, or $13.5M. Added interest over 24 months at the higher rate, $13.5M times 2.90 percent times 2, is about $783,000. Total cost of the two years is about $1.42M, of which $640,000 is cash out of pocket today. That is the number to compare against selling now, not the headline balance, and not the emotion. FAQ: - Q: What is special servicing? A: Special servicing is the transfer of a securitized loan file, at default or imminent default, to a servicer whose job is to maximize the trust's recovery, through an extension, modification, sale, or foreclosure. - Q: Why did my hotel loan transfer to a special servicer? A: Either an actual default occurred, most commonly a missed payment or a maturity default, or you demonstrated imminent default, meaning a default is reasonably foreseeable even though the loan is technically current. - Q: Can I negotiate directly with a special servicer? A: Yes, and most borrowers do, generally with counsel experienced in CMBS workouts. The negotiation is framed around what maximizes the trust's recovery, not around fairness to the borrower. - Q: What fees does a workout add to my loan? A: Commonly an extension or modification fee quoted as a percentage of balance, ongoing special servicing fees for as long as the file stays with the servicer, and legal costs on both sides. All are typically added to the loan balance. - Q: How long does a hotel loan workout take? A: It varies widely with the complexity of the asset and the servicer's caseload, commonly several months from transfer to a signed modification. Retaining experienced counsel early tends to shorten the process. - Q: What percentage of hotel loans are in special servicing right now? A: Trepp put the lodging CMBS special servicing rate at 8.63 percent for July 2026, down 26 basis points on the month, as reported by CRE Daily. Trepp updates it monthly, so check the latest release before relying on it. - Q: Will a workout hurt my ability to borrow again? A: A workout or a special servicing transfer generally appears in credit history and lender due diligence on future deals. The severity of the impact depends on the outcome, an extension reads very differently than a foreclosure, and on how the borrower explains it going forward. - Q: Should I sell instead of working out the loan? A: Run the total cost of the proposed workout, fees, higher rate, any paydown, against net sale proceeds today. A workout that only delays an inevitable sale, at real cost, is not automatically the better choice. Sources: - [1] CMBS Special Servicing Rate Falls as Office, Lodging Recover (CRE Daily, citing Trepp, accessed 2026-09-18): https://www.credaily.com/briefs/cmbs-special-servicing-rate-falls-as-office-lodging-recover/ - [2] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates - [3] Secured Overnight Financing Rate (SOFR) (Federal Reserve Bank of New York, accessed 2026-09-18): https://www.newyorkfed.org/markets/reference-rates/sofr ### Can I get a non-recourse loan on a hotel? URL: https://matthewshotelmarkets.com/hotel-financing/non-recourse-loans Last updated: 2026-09-18 Yes, on a stabilized hotel from the right lender. CMBS conduits, life companies and many debt funds lend non-recourse with carve-outs. Banks usually want a guaranty, and SBA rules generally require one from every owner of 20 percent or more.[1] The 10-year Treasury, the index for a fixed-rate non-recourse quote, was 4.94 percent on September 17, 2026.[2][3] Non-recourse is never unconditional. Key takeaways: - Non-recourse means the lender's remedy for an ordinary default is the hotel, not your other assets. It does not mean nobody signs anything. - A person or entity with real net worth signs a carve-out guaranty. Public hotel borrowers list the usual triggers: fraud, misrepresentation, waste, misappropriated rents, voluntary bankruptcy, unpermitted transfers and environmental liabilities.[4] - Some carve-outs only cover the lender's losses. Others make the whole loan recourse. The second kind is the one to negotiate.[4] - SBA loans are recourse by rule: holders of at least 20 percent generally must guarantee the loan.[1] Bank regulators require every bank to set limits on non-recourse lending.[5] - Recourse changes the tax result of a foreclosure. With non-recourse debt there is no cancellation of debt income, but the full loan balance counts as your sale price.[6] #### Which hotel lenders offer non-recourse loans? CMBS conduits, life insurance companies and many debt funds lend non-recourse; banks and credit unions usually do not, and SBA lenders cannot. CMBS is the most common source of non-recourse debt for a stabilized select-service hotel. Our rate sheet describes the CMBS row as fixed-rate, non-recourse and securitized, priced as a spread over the matched-term Treasury.[2] Life companies lend non-recourse at lower leverage on the best assets. Debt funds and bridge lenders often lend non-recourse on transitional hotels, sometimes with a completion or carry guaranty attached. `/hotel-financing/hotel-lenders-by-type` compares all five types, and `/hotel-financing/cmbs-loans` covers the conduit execution in detail. Banks are a different business. The interagency real estate lending guidelines require each bank's loan policy to set limits on partial recourse or nonrecourse loans and requirements for guarantor support.[5] In practice a community or regional bank lending on a hotel asks for a full or partial personal guaranty, and trades a lower rate and more flexibility for it. SBA is recourse by design. The regulation says holders of at least a 20 percent ownership interest generally must guarantee the loan, and SBA or the lender may require guaranties from others regardless of ownership.[1] #### What does non-recourse actually protect me from? It protects your other assets from a deficiency claim if the hotel fails for ordinary business reasons and the collateral is worth less than the debt. If revenue falls, the loan defaults and the hotel sells for less than the balance, a non-recourse lender absorbs the shortfall. A recourse lender can pursue the guarantor for it. That is the whole value of the structure, and it matters most in the scenario owners least like to model. A public example shows how borrowers describe it. Ashford Hospitality Trust's 10-K for 2025 says its mortgage and mezzanine loans are non-recourse to the borrowers, except for customary exceptions or carve-outs that trigger recourse liability in certain limited instances, and that the assets of the borrowing subsidiaries are pledged to those loans and are not available to satisfy the parent's other debts.[4] That second half is the other feature of non-recourse lending: the hotel sits in a single-purpose entity, walled off from the rest of what you own. #### What are the carve-outs, and who signs for them? Carve-outs are a list of acts that turn a non-recourse loan into a recourse one, and a creditworthy person or entity guarantees them in a separate document. Ashford's filing lists the typical triggers: fraud, misrepresentation, willful conduct resulting in waste, misappropriation of rents following an event of default, voluntary bankruptcy filings, unpermitted transfers of collateral and certain environmental liabilities. A second passage in the same filing adds delinquency of trade payables.[4] The filing also draws the line that matters. Recourse obligations typically include only the costs and liabilities the lender suffers from the bad act, but in certain cases carve-outs can trigger recourse for all or a portion of the outstanding principal.[4] Lawyers call these loss carve-outs and full-recourse carve-outs. Misapplied insurance proceeds are usually a loss item. A voluntary bankruptcy filing or an unpermitted transfer is usually a full-recourse item. For a private owner, the guarantor is usually the key principal, and the lender will test that person's net worth and liquidity. Read the full-recourse list line by line. Items such as trade payables, a failure to stay solvent, or any violation of the single-purpose covenants are where an honest operator can trip a guaranty in a bad year. #### Can a carve-out make me liable just because the hotel ran out of money? It can if the documents make a solvency covenant a carve-out, which is why at least one state has banned the practice and why that language deserves a lawyer's attention. Loan documents often require the borrowing entity to remain solvent and adequately capitalized. If a breach of that covenant is also a full-recourse carve-out, then the ordinary failure of the hotel, the exact risk non-recourse is supposed to shift, triggers the guaranty. Michigan's Nonrecourse Mortgage Loan Act, effective March 29, 2012, addresses this directly. It says a post closing solvency covenant shall not be used, directly or indirectly, as a nonrecourse carveout, and that a loan provision that does so is invalid and unenforceable. The legislature's enacting section states that it is inherent in a nonrecourse loan that the lender takes the risk of a borrower's insolvency.[7] The act's definition of a solvency covenant leaves out a covenant not to file a voluntary bankruptcy, so that carve-out survives.[8] Most states have no such statute. Negotiate the language instead: limit solvency and capitalization covenants to the extent the property's own cash flow allows, and keep them out of the full-recourse list. #### What does non-recourse cost me? You pay for it in leverage, flexibility and closing cost more than in headline rate. No conventional lender publishes its spread, DSCR floor or leverage ceiling, so we do not print a recourse premium.[2] The trade shows up in structure. Non-recourse lenders size to in-place cash flow, want a single-purpose borrower with separateness covenants, control cash through lockboxes when coverage falls, and restrict transfers and prepayment. A CMBS loan is serviced by the documents, not by a banker who knows you; `/hotel-financing/loan-workouts` explains what that means when something goes wrong. A bank loan with a guaranty is usually more flexible on prepayment, future funding and covenant relief. Some owners split the difference with partial recourse that burns off once the hotel reaches an agreed coverage level. If a PIP or a repositioning is ahead, see `/hotel-financing/bridge-loans` for how transitional lenders handle recourse. #### Does recourse change what happens at tax time if I lose the hotel? Yes. The IRS treats a foreclosure differently depending on whether you were personally liable for the debt. IRS Publication 4681 sets out both cases. With recourse debt, the amount realized on a foreclosure is the property's fair market value, and any canceled debt above that is ordinary income from cancellation of debt unless an exclusion applies. With nonrecourse debt, the entire unpaid balance is treated as the amount realized, even if the property is worth less, and there is no cancellation of debt income.[6] The Treasury regulation says the same thing in one line: the disposition of property that secures a nonrecourse liability discharges the transferor from the liability.[9] So a non-recourse owner who hands back an underwater hotel can owe tax on a gain without receiving any cash, because the full loan balance is the sale price. The worked example runs both cases. This page is not tax advice. Work through the numbers with your CPA before a workout, a deed in lieu or a foreclosure. Table: Recourse by hotel lender type, September 2026 Lender type | Recourse position | Who signs | Source or note SBA 7(a) and 504 | Recourse | Holders of at least 20% generally must guarantee; others can be required | 13 CFR 120.160[1] Bank and credit union | Usually full or partial recourse | Principals, under the bank's own policy | Regulators require each bank to set limits on non-recourse loans[5] CMBS conduit | Non-recourse with carve-outs | Carve-out guarantor, usually the key principal | Described as non-recourse on our rate sheet[2] Life company | Non-recourse with carve-outs | Carve-out guarantor | Lower leverage, most selective on asset quality[2] Debt fund or bridge | Often non-recourse with carve-outs; sometimes partial recourse or a completion guaranty | Carve-out guarantor; sponsor for any completion or carry guaranty | Varies by lender and business plan Construction | Recourse during the build at banks | Repayment and completion guarantors | See the construction loans page First-party data point: Matthews Hotel Markets' September 2026 rate sheet lists the SBA 7(a) and 504 rows as recourse and describes the CMBS row as fixed-rate, non-recourse and securitized, struck against a 10-year Treasury of 4.94% as of September 17, 2026. It marks the CMBS spread as not yet published, so it prints no recourse premium.[2] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: the same failed hotel under recourse and non-recourse debt): Hypothetical. A hotel has a $9,000,000 loan balance. Its fair market value has fallen to $7,500,000. The owner's adjusted tax basis is $8,000,000. The lender forecloses. The tax treatment follows IRS Publication 4681.[6] Recourse loan. The amount realized is the fair market value, $7,500,000. Against an $8,000,000 basis, that is a $500,000 loss on the property. The shortfall is $9,000,000 minus $7,500,000, or $1,500,000. The lender can pursue the guarantor for that $1,500,000. If the lender forgives it instead, the $1,500,000 is ordinary income from cancellation of debt unless an exclusion such as insolvency applies. Non-recourse loan. The amount realized is the full $9,000,000 balance. Against an $8,000,000 basis, that is a $1,000,000 gain, with no cash received. There is no deficiency claim and no cancellation of debt income, as long as no carve-out was triggered. The non-recourse owner keeps $1,500,000 of personal exposure off the table and takes a taxable gain in exchange. The recourse owner has a loss on the property and a $1,500,000 problem with the bank. Neither result is free, and the carve-out guaranty is what stands between the two. FAQ: - Q: Which lenders do non-recourse hotel loans? A: CMBS conduits, life insurance companies and many debt funds. All of them require a carve-out guaranty. Banks and credit unions usually want a personal guaranty, and SBA rules generally require one from every owner of 20 percent or more. - Q: I don't want to sign a personal guarantee on my hotel loan. What are my options? A: A stabilized hotel can go to CMBS or a life company. A transitional hotel can go to a debt fund. Expect lower leverage than a recourse bank loan, a single-purpose borrowing entity, and a carve-out guaranty that still has your name on it. - Q: What are bad boy carve-outs? A: They are the acts that make a non-recourse loan recourse. A public hotel borrower's 10-K lists fraud, misrepresentation, waste, misappropriation of rents after a default, voluntary bankruptcy filings, unpermitted transfers and certain environmental liabilities. - Q: If my hotel loan is non-recourse, can the lender come after me personally? A: Not for an ordinary default where the hotel simply cannot pay. Yes if a carve-out is triggered. Some carve-outs cover only the lender's actual loss. Others, such as a voluntary bankruptcy or an unpermitted transfer, can make the whole balance recourse. - Q: Is an SBA hotel loan non-recourse? A: No. Under 13 CFR 120.160, holders of at least a 20 percent ownership interest generally must guarantee the loan, and SBA or the lender can require guaranties from others. That applies to both 7(a) and 504. - Q: Is a non-recourse hotel loan more expensive? A: Lenders do not publish spreads, so there is no honest single premium to quote. The cost usually shows up as lower leverage, prepayment restrictions, cash management triggers and higher legal costs at closing, not only in the rate. - Q: Can I get a non-recourse loan under $5 million on a hotel? A: It is harder. Conduits and life companies generally prefer larger loans, so small hotel loans usually come from banks, credit unions and SBA lenders, which are recourse. See our page on lenders for hotels under $5 million. - Q: Is it better for taxes to have recourse or non-recourse debt in a foreclosure? A: Neither is simply better. Recourse debt can produce cancellation of debt income. Non-recourse debt makes the full loan balance your amount realized, which can create a taxable gain without cash. IRS Publication 4681 explains both. Ask your CPA. Sources: - [1] 13 CFR 120.160, Loan conditions (personal guarantees) (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/13/120.160 - [2] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates - [3] Daily Treasury Par Yield Curve Rates (U.S. Department of the Treasury, accessed 2026-09-18): https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve - [4] Ashford Hospitality Trust, Inc. Form 10-K for fiscal year 2025: non-recourse indebtedness and carve-out guaranty disclosures (U.S. Securities and Exchange Commission, EDGAR, accessed 2026-09-18): https://www.sec.gov/Archives/edgar/data/1232582/000123258226000067/aht-20251231.htm - [5] 12 CFR Part 34, Subpart D, Appendix A: Interagency Guidelines for Real Estate Lending Policies (loan policy must limit partial recourse or nonrecourse loans) (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/12/appendix-A_to_subpart_D_of_part_34 - [6] Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments (Internal Revenue Service, accessed 2026-09-18): https://www.irs.gov/publications/p4681 - [7] Nonrecourse Mortgage Loan Act, Act 67 of 2012, MCL 445.1593 (post closing solvency covenant; prohibited use) and enacting section (Michigan Legislature, accessed 2026-09-18): https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-445-1593 - [8] Nonrecourse Mortgage Loan Act, MCL 445.1592 (definitions of nonrecourse loan, nonrecourse carveout and post closing solvency covenant) (Michigan Legislature, accessed 2026-09-18): https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-445-1592 - [9] 26 CFR 1.1001-2, Discharge of liabilities (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/26/1.1001-2 ### How do I finance a hotel PIP or renovation? URL: https://matthewshotelmarkets.com/hotel-financing/pip-and-renovation-loans Last updated: 2026-09-18 A PIP is funded four ways: cash from reserves, a future-funding facility inside a bridge loan, a capex holdback in a refinance, or a price reduction when you sell. The brand sets the scope and the deadline. A future-funding facility floats over SOFR, which was 3.85 percent for September 17, 2026.[1] Get the scope in writing before you price any of the four. Key takeaways: - The PIP scope letter is the document. Everything downstream is priced off it, so get it first. - Per-room cost varies by brand, scope and market. Cite the brand's own published requirement or a public benchmark, never a remembered figure. - A bridge loan with future funding is a common financing route for a large PIP. - A permanent lender will usually reserve for a PIP rather than fund it. - Missing a PIP deadline puts the franchise agreement at risk, which puts the loan at risk. #### What exactly is a PIP and who decides the scope? A Property Improvement Plan is the franchisor's written requirement for renovation and brand-standard upgrades, and the brand alone sets its scope and deadline. A PIP is issued at brand conversion, at a change of ownership, or periodically during the franchise term as the brand updates its standards. The scope letter itemizes required work, room by room and area by area, from soft goods and case goods to structural and systems upgrades, and it is the single document that everything else in this page depends on. Full definitional detail on PIP scope and typical categories is on `/glossary/pip`; this page focuses specifically on how the cost gets paid for. #### How long do I have to finish it? The PIP completion window is set by the specific brand in the PIP notice, based on the scope of work, not by a single industry-wide rule. The exact deadline depends on the brand, the scope of work, and sometimes negotiated extensions tied to permitting or supply timelines. Because this figure varies by brand and by deal, cite the specific brand's own Franchise Disclosure Document for the deadline that applies to a specific property, rather than treating any single number as universal. #### What does a PIP cost per room? Per-room PIP cost varies by brand, scope, and market, and any specific figure needs to come from the brand's own published requirement or a public industry benchmark, with a date attached. A light refresh, soft goods only, costs meaningfully less per key than a full renovation that includes case goods, bathrooms, and public space. A brand conversion PIP, moving a property to a new flag entirely, typically costs more than a standard-cycle PIP on an existing flag. The worked example on this page uses a hypothetical $25,000-per-key figure purely to illustrate the financing arithmetic; it is explicitly not a market benchmark, and a real PIP estimate should come from the brand's own FDD or a published industry study, dated and cited. #### How do I pay for it? Four financing routes exist, and the right one depends on how much cash is on hand, how large the scope is, and whether a refinance or sale is already happening for other reasons. Cash from an accumulated FF&E reserve is the lowest-cost, fastest option when the reserve is large enough to cover the scope. A bridge loan with a future-funding facility, which draws capital as the work progresses, is a common route for a large PIP that exceeds available reserves; full detail on bridge structures is on `/hotel-financing/bridge-loans`. A capex holdback inside a refinance works when the owner is refinancing anyway and the scope is moderate. A price reduction at sale shifts the cost to the buyer's side of the ledger entirely, covered in the next section. #### Will my PIP block a refinance? Not by itself. A lender expects PIPs on branded hotels and has standard structures to handle them; what blocks a refinance is a PIP with no funding plan attached. A permanent lender will typically reserve for a known, scoped PIP rather than fund the renovation itself, which is a structural reason bridge debt, not permanent debt, is the more common financing vehicle for a large PIP in progress. The interaction between refinance timing and PIP status, including what to do when both are happening at once, is covered on `/hotel-financing/refinance`. #### Who pays for the PIP in a sale, the buyer or the seller? In practice, the buyer prices the PIP into the offer, which functions as the seller paying for it through a reduced sale price rather than through direct capital outlay. A buyer underwriting an acquisition with a known, open PIP will typically reduce the offer price by roughly the estimated cost of the work, sometimes with an additional discount for the disruption and execution risk of completing it post-closing. Some transactions instead require the seller to complete or fully escrow the PIP before closing, which shifts execution risk back to the seller but preserves headline price. Either structure is common; which one applies is a negotiated deal term, not a fixed rule. #### What happens if I miss the deadline? Missing a PIP deadline puts the franchise agreement at risk of termination, which in turn puts any loan tied to that franchise agreement at risk, because most branded hotel loans require the flag to remain in place. Franchise agreements typically give the franchisor the right to terminate for an uncured PIP default, and a terminated franchise agreement is very often an event of default under the loan documents as well, because the lender underwrote the property as a branded asset with a specific demand-generation system attached. An owner who sees a deadline is genuinely at risk should contact the brand proactively about an extension request well before the deadline, not after it has passed. Table: Four ways to fund a hotel PIP Method | Cost | Speed | Best fit FF&E reserve and cash | Lowest | Immediate | Small scope, funded reserve Bridge loan with future funding | Highest ongoing | Weeks to a few months to close | Large scope, transitional asset Capex holdback in a refinance | Moderate | The refinance timeline | Refinancing anyway, moderate scope Price reduction at sale | Paid out of proceeds | Sale timeline | Owner is exiting and does not want the project First-party data point: Matthews Hotel Markets' September 2026 rate sheet puts SOFR, the index a future-funding PIP facility floats over, at 3.85% for September 17, 2026, and marks the spread and the cost of the capex facility as not yet published.[1][2] Get both in writing from the lender before you sign the PIP scope letter. Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: funding a $2.6M PIP on 104 keys): Hypothetical. 104 keys, a $2.6M PIP, which works out to $25,000 per key in this hypothetical, not a market figure. Twenty months to complete. NOI today $1.35M. FF&E reserve on hand, assumed at 4 percent of $4.6M revenue accrued over 3 years, is about $552,000. The remaining need is $2.6M minus $552K, or $2.05M. On the bridge path, a future-funding facility draws the $2.05M as the work progresses. At an 8.75 percent all-in floating rate, with average outstanding of roughly half the facility over 20 months, the carry is about $2.05M times 0.5 times 8.75 percent times (20/12), or $149,000. On the sale path, a buyer discounts the price by the full $2.6M, and usually a bit more for the disruption. So funding it yourself costs about $149,000 of carry. Handing it to a buyer costs $2.6M or more of price. That spread is why owners with the liquidity usually do the work. FAQ: - Q: What is a hotel PIP? A: A Property Improvement Plan is a franchisor's written renovation requirement, issued at conversion, sale, or periodically during the franchise term, itemizing the work required to bring the property to current brand standards. - Q: How much does a hotel PIP cost per room? A: It varies by brand, scope and market. Get the specific figure from the brand's own scope letter and FDD, or a dated public industry benchmark. A hypothetical figure used for financing math is not a market estimate. - Q: How long do I have to complete a PIP? A: The brand sets it in the PIP notice, based on the scope of work. There is no single industry-wide deadline. Confirm the exact date in your scope letter and franchise agreement. - Q: Can I finance a PIP with a bridge loan? A: Yes. A bridge loan with a future-funding facility, drawing capital as the work progresses, is a common financing route for a PIP that exceeds available reserves. - Q: Does an open PIP stop a refinance? A: Not by itself. Lenders expect PIPs and typically reserve for them. What stalls a refinance is a PIP with no funding plan or completion timeline attached. - Q: Who pays for the PIP when a hotel sells? A: In practice, the buyer, through a reduced offer price that accounts for the estimated PIP cost, or the seller directly, if the deal requires completion or escrow before closing. Both structures are common. - Q: What happens if I miss the PIP deadline? A: The franchisor can move to terminate the franchise agreement, which very often triggers a default under the loan documents as well. Contact the brand about an extension before the deadline, not after. Sources: - [1] Secured Overnight Financing Rate (SOFR) (Federal Reserve Bank of New York, accessed 2026-09-18): https://www.newyorkfed.org/markets/reference-rates/sofr - [2] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates ### Should I refinance my hotel or sell it instead? URL: https://matthewshotelmarkets.com/hotel-financing/refinance-or-sell Last updated: 2026-09-17 Run both numbers before you decide. Refinancing works when today's NOI supports today's balance at today's rate and you still believe the hold thesis. Selling works when the proceeds gap is permanent, the PIP is larger than your appetite, or the equity is better deployed elsewhere. The binding variable is usually NOI, not the rate. The 10-year Treasury was 4.94 percent on September 17, 2026.[1] Key takeaways: - This is an arithmetic question first and a preference question second. Do the arithmetic first. - Refinance proceeds are set by NOI, not by what you paid or what you owe. - Net sale proceeds are price minus fee minus debt payoff minus tax. Compare that to the equity you would inject to refinance. - A PIP due inside 24 months belongs in both columns, because it is cash you spend or a price reduction you take. - A broker who never says hold is not giving you advice. #### How do I compare the two paths in dollars? Compare the cash you would inject to refinance against the net cash you would collect from a sale, using the same NOI and the same PIP assumption in both columns. The comparison only works if both sides use consistent inputs. The refinance side starts with today's NOI, sizes a new loan against a current rate using the DSCR, debt yield, and LTV tests described on `/hotel-financing`, and nets against your current balance to find the equity gap. The sale side starts with the same NOI, applies a current cap rate to get value, then subtracts a brokerage fee, the debt payoff, and any tax due, to find net proceeds. Put both numbers side by side before you talk about preference. #### What does refinancing require me to bring? Refinancing requires equity to close any gap between the new loan and the existing balance, plus any cash the PIP requires that the new lender will not fund. The full mechanics of sizing a refinance, and the five ways to close a proceeds gap, are covered on `/hotel-financing/refinance`. For this comparison, the number that matters is the total cash the refinance path requires: the equity gap plus PIP cash plus closing costs. That total is what you are choosing to keep spending on the asset, in exchange for keeping it. #### What do I actually net from a sale? Net sale proceeds equal price minus the brokerage fee minus the debt payoff minus any tax due, and a PIP typically reduces the price a buyer will pay before any of that math starts. Buyers underwrite a known PIP into their offer, either as a direct price reduction or as a condition that the seller complete or escrow for it before closing. The Matthews Hotel Index for Q1 2026 gives the cap-rate band the sale side of this comparison should be run at, broken out by market and segment on `/research/mhi/q1-2026`.[2] Tax is a real cost on the sale side. A sale produces a gain when the amount realized exceeds adjusted basis, and depreciation taken on the building lowers adjusted basis, which makes that gain larger.[3] A refinance is not a sale, so it does not realize that gain. #### Where does the PIP belong in the comparison? A PIP due inside 24 months belongs on both sides of the comparison: as cash you spend or reserve if you refinance and keep the asset, or as a price reduction a buyer prices in if you sell. Treating the PIP as a cost only on the sale side, or ignoring it entirely on the refinance side, is the most common error in this comparison. A funded, in-progress PIP is a sunk cost on both sides and should be excluded from the marginal comparison; an unfunded, upcoming PIP is a live cost that belongs in both columns, sized consistently. #### How do taxes change the answer? Selling triggers capital gains tax and depreciation recapture unless the proceeds go into a 1031 exchange; refinancing is not a sale, so it does not realize a gain. This asymmetry is real and often decisive for owners who have held a hotel long enough to accumulate significant depreciation. A 1031 exchange, covered in full on `/hotel-financing/1031-exchange-hotels`, can defer the tax on a sale if the proceeds go into qualifying replacement real property, identified within 45 days and received within 180 days.[4] This page states the tax mechanics at a high level only; consult a CPA before finalizing any sale-versus-refinance decision, because the specific basis, depreciation schedule, and holding structure change the answer for every owner. #### When is holding clearly right? Holding is clearly right when the refinance equity requirement is modest relative to the asset's ongoing cash flow and the hold thesis, the market, the brand, the competitive position, still holds. A hotel that clears its refinance with little or no injected equity, in a market with continuing demand growth, with a manageable or already-funded PIP, is a straightforward hold. The math confirms the decision most owners already lean toward in this case, which is why the arithmetic matters most in the harder cases below. #### When is selling clearly right? Selling is clearly right when the equity required to refinance is large relative to the asset's value, the PIP is bigger than the owner's appetite, or the capital is better used somewhere else entirely. A large, unfunded PIP stacked on top of a meaningful refinance equity gap is the clearest case for selling: the owner is being asked to fund two large cash needs to keep an asset whose sale would instead return capital. The worked example below runs exactly this scenario with real numbers on both sides. Table: Refinance versus sell: the comparison that matters Line | Refinance | Sell Sets the number | NOI, rate, DSCR test | NOI, cap rate, buyer pool Cash in or out today | Equity injection if there is a gap | Net proceeds after fee, payoff and tax PIP treatment | You fund it, or the lender reserves for it | The buyer prices it into the bid Tax | No sale, so no gain is realized[3] | Capital gain and depreciation recapture, unless 1031[3][4] What you keep | The asset and the upside | The capital and the optionality Biggest risk | NOI does not recover and you did it again in 5 years | You sold the bottom First-party data point: The Matthews Hotel Index for Q1 2026 gives the cap-rate band the sale side of this comparison should be run at.[2] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: 78-key select-service hotel, Georgia): Hypothetical, matching the shape of the question people ask. 78 keys, NOI $1.05M, loan balance $8.40M maturing in 13 months, a $1.10M PIP due within 24 months. On the refinance path, at 7.25 percent, 25-year schedule, 1.35x test, maximum debt service is $777,778, supporting a loan of $8.96M. That clears the $8.40M balance. But the lender reserves for the PIP, so figure $1.10M of cash or reserve. Net cash out of pocket is about $1.10M, and you keep the asset. On the sale path, at an 8.25 percent cap on $1.05M of NOI, value is $12.73M, or $163,000 per key. A buyer prices the PIP in, call it a $900,000 reduction, for $11.83M. Less a brokerage fee at 2 percent, $237,000. Less the $8.40M payoff. Pre-tax net is $3.19M. So: spend $1.10M and keep an asset producing $1.05M, or collect $3.19M pre-tax and redeploy. Neither answer is obvious, which is the point. Run your own version with your own cap rate and your own tax basis before anyone gives you a recommendation. FAQ: - Q: Should I sell my hotel now or wait? A: Run the refinance-versus-sell arithmetic with your current NOI, current rate, and current cap-rate band from the Matthews Hotel Index. Waiting is a bet that NOI, rate, or cap rate improves; make sure you can name which one you are betting on. - Q: How do I know if my hotel can refinance? A: Run today's NOI against today's rate through the DSCR, debt yield, and LTV tests on the hub page. If the resulting loan covers your balance with acceptable equity, it can refinance. - Q: Does a PIP make selling better than refinancing? A: It shifts the comparison, because a buyer prices the PIP into the offer while a refinance requires you to fund or reserve for it directly. Run both totals; a large unfunded PIP often tips the answer toward selling. - Q: What do I net from a hotel sale after fees and debt? A: Price minus the brokerage fee minus the debt payoff minus any capital gains and depreciation recapture tax, unless the proceeds go into a 1031 exchange. Run the specific numbers for your basis with a CPA. - Q: Can I 1031 exchange out of a hotel sale? A: Yes, into another qualifying real property, under the 45-day identification and 180-day closing rules. Full detail is on the 1031 exchange page. - Q: What if my lender will not extend? A: Then your realistic options are a new refinance, a bridge loan to a later permanent takeout, or a sale. Waiting without a plan is what turns a performing loan into a maturity default. - Q: Will a broker tell me not to sell? A: A broker showing you the honest refinance arithmetic alongside the sale arithmetic, including cases where refinancing is cheaper, is doing the job correctly. One who only ever presents a sale is not giving you a full picture. Sources: - [1] Daily Treasury Par Yield Curve Rates (U.S. Department of the Treasury, accessed 2026-09-18): https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve - [2] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/research/mhi/q1-2026 - [3] Publication 544, Sales and Other Dispositions of Assets (Internal Revenue Service, accessed 2026-09-18): https://www.irs.gov/publications/p544 - [4] 26 U.S.C. Section 1031 (Legal Information Institute, Cornell Law School, accessed 2026-09-18): https://www.law.cornell.edu/uscode/text/26/1031 ### How do I refinance a hotel loan before it matures? URL: https://matthewshotelmarkets.com/hotel-financing/refinance Last updated: 2026-09-17 Start twelve months before maturity. Order a fresh valuation, get the PIP status in writing, and size the new loan against today's rate, not the old one. The 10-year Treasury, the index a fixed refinance prices from, was 4.94 percent on September 17, 2026.[1] If the new loan is smaller than the balance, the gap closes with equity, an extension, mezzanine, or a sale. Key takeaways: - Twelve months out is the right time to start. Ninety days out, your options narrow to whatever the incumbent lender offers. - A higher rate means a higher payment on every dollar borrowed, so the same NOI supports a smaller loan than it did at 2021 rates. - The gap between the old balance and the new proceeds has four honest solutions and one bad one, which is waiting. - An unresolved PIP deadline is the most common reason a hotel refinance stalls. - Budget a few months from complete application to funding, and more if anything is missing. #### When should I start a hotel refinance? Twelve months before maturity, while every option is still on the table. At twelve months out, an owner can order a fresh appraisal, resolve any open PIP with the brand, shop the loan across multiple lender types, and still have time left over if the first plan does not work. At ninety days out, the appraisal and PIP conversations are compressed or skipped, the lender universe narrows to whoever can close fast, and the incumbent lender knows it. Owners who start early keep leverage in the negotiation. Owners who start late lose it, regardless of how strong the asset is. #### How do I size the new loan? The new loan is sized the same way a purchase loan is sized: against today's NOI, at today's rate, through the DSCR, debt yield and LTV tests, not against the existing balance. The existing balance is not an input to what a new lender will lend. A refinance lender runs the same three tests covered on `/hotel-financing`: DSCR, debt yield, and LTV, against the trailing twelve-month NOI and a fresh appraisal. The rate that was available in 2019 or 2021 is irrelevant to the new loan's sizing. The only thing that matters is what today's NOI supports at today's rate and today's underwriting standards. #### What happens if the new loan is smaller than my balance? A proceeds gap has four real solutions and one that only postpones the problem. Writing a check closes the gap with cash if the owner has liquidity and conviction in the hold. An extension from the incumbent lender buys time, usually for a fee and often a rate bump, and fits when cash flow is fine but the timing is the issue. Mezzanine or preferred equity is the most expensive capital in the stack and fits when a near-term value event is expected. A bridge loan followed by permanent takeout fits when a PIP or repositioning stands between today and a stabilized refinance. Selling is the clean answer when the gap is permanent and the hold thesis no longer holds. Waiting, doing nothing and hoping the gap closes itself, is not a sixth option; it is how a performing loan becomes a maturity default. #### My hotel appraised lower than I paid. Now what? A lower appraisal shrinks the loan the LTV test supports, but it does not automatically shrink the loan the DSCR and debt yield tests support. Because a hotel loan is sized by the lowest of three tests, a disappointing appraisal only changes the outcome if LTV was the binding constraint. If DSCR or debt yield was already binding at a higher implied value, a lower appraisal may not move the loan amount at all. The worked example below shows exactly this: the same loan sizes very differently depending on which test binds, and the appraisal alone does not tell you which one that is. #### Does a PIP deadline block the refinance? It can, but usually because the funding plan is missing, not because the PIP itself exists. A lender expects to see a PIP on a branded hotel and has standard ways to handle one: a capex reserve, a holdback, or confirmation that the scope is already funded and scheduled. What actually stalls a refinance is a PIP notice with no financing plan attached and no completion date the lender can rely on. Get the scope letter and a funding plan in place before you go to market for the refinance, not after. More detail on financing the PIP itself is on `/hotel-financing/pip-and-renovation-loans`. #### How long does the process take, step by step? Budget a few months from a complete application package to funding, and add time for anything that is not yet in hand. The rough sequence, in our experience: assemble the document package (see `/hotel-financing/loan-requirements` for the full list), collect and compare term sheets if running a competitive process, wait on the lender's appraisal and property condition assessment, which typically run in parallel with underwriting, and close once terms are agreed. Each step takes weeks, not days. That timeline assumes the T-12, STAR report and PIP status are ready on day one. Anything missing adds time directly. #### When is refinancing the wrong answer? When the proceeds gap is structural, not temporary, and no combination of equity, extension or bridge closes it without simply postponing a sale that was always coming. If the NOI shortfall reflects a declining submarket, an aging asset losing share to new supply, or a brand position that is not recovering, refinancing, even successfully, resets the clock without fixing the underlying problem. In that case the honest comparison is refinance versus sell, worked in full on `/hotel-financing/refinance-or-sell`, not another round of extensions. Table: Closing a proceeds gap at refinance Option | What it costs | When it fits | What it does not fix Write a check | Cash out of pocket | You have liquidity and conviction on the hold | A structurally weak asset Extension with the incumbent lender | Fee, often a rate bump, sometimes a paydown | Cash flow is fine and the issue is timing | A permanent value shortfall Mezzanine or preferred equity | Highest cost in the stack | Bridging to a near-term value event | Thin coverage; it makes coverage worse Bridge loan, then permanent | Floating rate plus a cap, short term | PIP or repositioning is in front of you | A market that is not coming back Sell | Brokerage fee and a taxable event | The gap is permanent and the hold thesis is gone | Nothing. It is the clean answer when it is the answer. First-party data point: Matthews Hotel Markets' September 2026 rate sheet puts the 10-year Treasury, the index a permanent refinance is sized against, at 4.94% as of September 17, 2026, and marks the spread over it as not yet published. Stress-test your own refinance against the index plus your lender's quoted spread, not against a remembered coupon.[2] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: a 2021 loan maturing in 2027): Hypothetical. A 110-key hotel financed in 2021: $14.0M at 3.75 percent, 30-year amortization. Current balance $12.6M. NOI is $1.75M, roughly flat since origination. The old annual debt service is about $778,000, for a DSCR of $1.75M divided by $778K, or 2.25x. A new quote at 7.25 percent, 25-year amortization, with a 1.35x test: maximum debt service equals $1.75M divided by 1.35, or $1,296,296. The annual constant per $1M at 7.25 percent over 25 years is about $86,800, so the new loan equals $1,296,296 divided by $86,800 per $1M, or $14.93M. In this case the refinance covers the balance with room to spare, because the DSCR was 2.25x at origination. Now rerun it with NOI at $1.20M instead: maximum debt service $888,889, new loan $10.24M, against a $12.6M balance. The gap is $2.36M. The difference between the two outcomes is entirely NOI, not the rate. Diagnose which one you have before you shop. FAQ: - Q: When should I start refinancing my hotel loan? A: Twelve months before maturity. At that point you can order a fresh appraisal, resolve any PIP, and shop the loan. At ninety days out, your options narrow sharply. - Q: How long does a hotel refinance take? A: Budget a few months from a complete application package to funding. Add time for anything not yet in hand, especially an unresolved PIP or a slow appraisal. - Q: Can I refinance if my hotel is worth less than I paid? A: Possibly. A lower appraisal only reduces your loan if the LTV test was the binding constraint. If DSCR or debt yield already binds first, a lower value may not change the loan amount. - Q: Will my lender extend instead of refinancing? A: Sometimes, for a fee and often a rate bump. Extensions fit when cash flow is fine and the issue is timing, not when the NOI shortfall is structural. - Q: How much equity do I need for a hotel refinance? A: It depends entirely on the size of the proceeds gap between your balance and what today's NOI supports at today's rate. Run the numbers before assuming any specific percentage. - Q: Does an open PIP stop a refinance? A: Usually not by itself. What stalls a refinance is a PIP with no funding plan or completion date. Get the scope letter and a plan in place before you go to market. - Q: Can I refinance a hotel loan with a prepayment penalty outstanding? A: Yes, but the penalty is a real cost that has to be included in the refinance economics. Bank loans typically step down; CMBS loans use defeasance or yield maintenance, both expensive early in the term. Sources: - [1] Daily Treasury Par Yield Curve Rates (U.S. Department of the Treasury, accessed 2026-09-18): https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve - [2] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates ### What is the difference between an SBA 7(a) loan and an SBA 504 loan for a hotel? URL: https://matthewshotelmarkets.com/hotel-financing/sba-7a-vs-504 Last updated: 2026-09-18 Both programs finance hotels. 7(a) is one loan from one lender, capped at $5 million, and it can cover working capital.[1] 504 is two loans: a bank first lien plus a fixed-rate CDC debenture capped at $5 million for a hotel.[3][9] The 25-year debenture rate for September 2026 funding was 6.54 percent.[4] 7(a) is simpler. 504 fixes part of the cost for up to 25 years. Key takeaways: - Hotels are eligible for both programs. SBA bars passive landlords, not operators, and a hotel owner runs an active business.[5] - A 7(a) loan caps at $5 million.[1] A 504 debenture on a hotel caps at $5 million, and the bank's first lien sits alongside it.[9] - Under 504, a hotel buyer contributes at least 15 percent of project cost, or 20 percent for a business two years old or less.[6][9] Under 7(a), the lender's credit policy sets the equity. - 504's debenture is fixed for 10, 20 or 25 years.[2] 7(a) is usually variable off Prime, with a maximum spread SBA sets.[1] - 504 never finances 100 percent of a hotel purchase, because the borrower contribution is a regulatory minimum.[6] #### Is a hotel eligible for an SBA loan at all? Yes. Hotels qualify as owner-occupied small business real estate because the owner operates the hotel as an active business, not as a passive landlord. SBA rules exclude passive businesses owned by developers and landlords that do not actively use or occupy the assets they finance.[5] A hotel owner runs an active business in the building, which is what separates a hotel from a pure real estate investment like an apartment building or a net-leased retail box. The 504 program also excludes speculation or investment in rental real estate.[2] Both programs have size and eligibility tests of their own; confirm them with the lender before you apply. #### What is the actual structural difference between 7(a) and 504? 7(a) is a single loan from a single lender with an SBA guaranty; 504 is two loans closing together, a conventional bank first lien and a fixed-rate CDC debenture. Under 7(a), the borrower deals with one lender, one closing, and one set of loan documents, and the SBA guarantees a portion of that single loan. Under 504, a Certified Development Company (CDC) partners with a conventional lender: the bank takes the first lien, the CDC-issued debenture usually takes a second lien on the property, and the borrower contributes equity.[3] Two closings, two sets of documents, but a portion of the debt, the debenture, comes with a long-term fixed rate.[2] Both programs generally require a personal guarantee from anyone who owns 20 percent or more of the business.[8] #### How much do I have to put down under each? Under 504, a hotel buyer contributes at least 15 percent of project cost, or 20 percent if the business is two years old or less; under 7(a), the lender sets the equity requirement.[6] The 504 figures are regulatory minimums, not typical amounts.[6] SBA lists hotels, motels and other lodging facilities as Limited or Special Purpose Property, which is why the 504 minimum is 15 percent rather than the 10 percent an ordinary building with an established operator needs.[6][9] Lenders can ask for more, based on the borrower's experience, the asset's condition, and their own credit policy. SBA's 7(a) program page publishes no single equity percentage, so get your lender's requirement in writing before relying on any number.[1] #### Are the rates fixed or variable? 504's debenture piece is fixed for the life of that portion of the loan; 7(a) is usually variable off Prime, though a fixed-rate 7(a) option exists. The 504 debenture is fixed for 10, 20 or 25 years and is pegged to an increment above the 10-year Treasury.[2] The 25-year rate for September 2026 funding was 6.54 percent, fees included.[4] The bank's first lien in a 504 structure is priced by the bank and can be fixed or variable depending on the lender. A standard 7(a) loan is usually variable, pegged to Prime or an optional peg rate, with a maximum spread SBA sets by loan size: Prime plus 3.00 percent above $350,000.[1] With Prime at 7.00 percent since September 17, 2026,[10][11] that caps the rate at 10.00 percent.[7] SBA also publishes maximum fixed rates for 7(a).[1] #### How big a hotel can each program finance? A 7(a) loan caps at $5 million; a 504 debenture on a hotel caps at $5 million, and the bank's first lien in a 504 structure is sized by the bank.[1][9] The $5 million cap under 7(a) applies to the loan itself,[1] which caps the size of hotel that 7(a) alone can finance without a second, non-SBA source of capital layered in. In a 504 structure on a hotel, the bank loan must be at least 50 percent of project cost,[3] and the debenture caps at $5 million,[9] so the total project can be far larger than the debenture. That is why 504 suits bigger, real-estate-heavy hotel purchases. Program limits can change, so confirm the current caps on SBA.gov. #### Which is faster to close? 7(a) is generally faster because it involves one lender and one closing; 504's two-closing structure adds coordination time between the bank and the CDC. A straightforward 7(a) loan can close in a matter of weeks once the package is complete. A 504 loan requires the bank and the CDC to coordinate two sets of loan documents and often two closing dates, which typically adds time versus a single-lender 7(a) transaction of similar size and complexity. Speed is one input, not the deciding one; a slower close that locks a long-term fixed rate can be worth the extra weeks on a large purchase. #### Which one fits my deal? 7(a) fits a smaller purchase that needs working capital and speed; 504 fits a larger, real-estate-heavy purchase where a long-term fixed rate on part of the stack is worth the extra closing complexity. The worked example below runs the same $6.0 million hotel purchase through both programs side by side. Neither program is categorically better; the right choice depends on deal size, how much of the purchase is real estate versus working capital and FF&E, and how much the borrower values a fixed rate on part of the stack against the speed and simplicity of a single closing. Table: SBA 7(a) versus SBA 504 for a hotel purchase Category | SBA 7(a) | SBA 504 Structure | One loan, one lender, SBA guaranty | Bank first lien + CDC debenture + borrower equity Maximum SBA exposure | $5,000,000 loan maximum[1] | Debenture up to $5,000,000 on a hotel; bank first lien sized by the bank[9] Typical borrower equity | Set by the lender's credit policy | At least 15% for a hotel, 20% if a new business[6] Rate type | Usually variable off Prime; SBA caps the spread and publishes fixed maximums[1] | Debenture fixed for 10, 20 or 25 years[2] Use of proceeds | Real estate, equipment, working capital, change of ownership, some refinancing[1] | Real estate and long-lived equipment; no working capital[2] Prepayment | On terms of 15 years or more: 5%, 3% and 1% fees in years one to three if 25% or more is prepaid[1] | Prepayment penalty in the early years; ask the CDC for the schedule Best fit | Smaller purchase, needs working capital, wants speed | Larger real-estate-heavy purchase, wants fixed rate First-party data point: Matthews Hotel Markets' September 2026 rate sheet puts the SBA 7(a) maximum allowable rate at 10.00%, which is the 7.00% Prime in effect since September 17, 2026 plus the 3.00% cap SBA sets on loans over $350,000, and the 25-year 504 debenture at 6.54% as of September 10, 2026.[7] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: $6.0M hotel purchase under each program): Hypothetical. A 62-key exterior-corridor hotel at a $6.0M purchase price. Under the 7(a) path, the loan is capped at $5.0M. At 85 percent of price that would be $5.1M, so the cap binds: the loan is $5.0M, borrower equity is $1.0M, or 16.7 percent. One closing, one lender. Under the 504 path, the bank first lien at 50 percent equals $3.0M. The CDC debenture at 35 percent equals $2.1M. Borrower equity at 15 percent equals $900,000. Two closings, and the $2.1M debenture piece is fixed for 25 years. The 504 path costs $100,000 less at closing and fixes a third of the stack for 25 years. The 7(a) path closes faster and leaves room for working capital. Neither is wrong. Confirm the current percentage splits against SBA.gov before you rely on this. FAQ: - Q: Can I buy a hotel with an SBA loan? A: Yes. Hotels qualify as owner-occupied small business real estate because the owner actively operates the hotel, unlike a passive real estate investment. - Q: What is the maximum SBA 7(a) loan for a hotel? A: A 7(a) loan caps at $5 million. A larger project can layer non-SBA financing on top, or use SBA 504, where the debenture on a hotel caps at $5 million and a bank first lien sits alongside it. - Q: How much do I need to put down on an SBA hotel loan? A: Under 504, at least 15 percent of project cost for a hotel, or 20 percent if the business is two years old or less. Under 7(a), the lender's credit policy sets it. Get the requirement in writing. - Q: Is an SBA 504 loan fixed rate? A: The CDC debenture portion is fixed for 10, 20 or 25 years. The bank's first lien portion can be fixed or variable depending on the lender. - Q: Can I use an SBA loan to refinance an existing hotel loan? A: Yes, with conditions. 7(a) can refinance certain existing debt, and 504 can refinance qualified debt. Confirm eligibility with an SBA lender before you apply. - Q: How long does an SBA hotel loan take to close? A: 7(a) can close in a matter of weeks with a complete package. 504's two-closing structure, coordinating a bank and a CDC, typically takes longer. - Q: Does an SBA loan require a personal guarantee? A: Yes. SBA rules generally require a guarantee from anyone holding 20 percent or more of the business, under both 7(a) and 504, and lenders can ask others to guarantee too. Sources: - [1] 7(a) loan program: terms, conditions, and eligibility (U.S. Small Business Administration, accessed 2026-09-18): https://www.sba.gov/sba-lenders/#7a-terms - [2] 504 loans (U.S. Small Business Administration, accessed 2026-09-18): https://www.sba.gov/loans/504-loans/ - [3] 13 CFR 120.920, Required participation by Third Party Lenders (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/13/120.920 - [4] SBA 504 rates and rate history, September 2026 funding (CDC Small Business Finance, republishing NADCO debenture pricing, accessed 2026-09-18): https://cdcloans.com/sba-504-rates/ - [5] 13 CFR 120.110, What businesses are ineligible for SBA business loans? (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/13/120.110 - [6] 13 CFR 120.910, How much must the Borrower contribute? (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/13/120.910 - [7] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates - [8] 13 CFR 120.160, Loan conditions (guarantees) (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/13/120.160 - [9] SOP 50 10 8, Lender and Development Company Loan Programs (effective June 1, 2025), Section C, Ch. 1: debenture limits (p. 350) and Limited or Special Purpose Property, which lists hotels (pp. 354-355) (U.S. Small Business Administration, accessed 2026-09-18): https://legacy.sba.gov/document/sop-50-10-lender-development-company-loan-programs - [10] BNY Increases Prime Lending Rate to 7.00% (The Bank of New York Mellon Corporation, via PR Newswire, accessed 2026-09-18): https://www.prnewswire.com/news-releases/bny-increases-prime-lending-rate-to-7-00-302881066.html - [11] PNC Bank, N.A. Changes Prime Rate (PNC Bank, N.A., via PR Newswire, accessed 2026-09-18): https://www.prnewswire.com/news-releases/pnc-bank-na-changes-prime-rate-302881163.html ## What is involved in selling a hotel? ### What is involved in selling a hotel? URL: https://matthewshotelmarkets.com/sell-a-hotel Last updated: 2026-09-18 Selling a hotel is a marketed process. As of September 2026, our published playbook runs about 24 weeks from engagement to close.[1] It moves from a value opinion to a document package, a buyer list, a call for offers, then due diligence and franchise approval. Hilton's 2025 Hampton disclosure document gives the brand 60 days to rule on a completed transfer application.[2] Key takeaways: - Our playbook budgets about 24 weeks from engagement to close.[1] Due diligence and franchise approval own the back half. - A broker opinion of value comes first. You cannot price a process you have not valued. - An open PIP does not kill a sale. An undisclosed PIP does. - Confidential and marketed are both real options, and they produce different buyer pools. - The document package is the deal. Buyers price uncertainty, and missing documents are uncertainty. #### What are the steps to sell a hotel? Eight stages, in order: value opinion, package, marketing, call for offers, PSA negotiation, due diligence, franchise approval, close. A value opinion sets the number the rest of the process tests. The broker's package, usually a confidential information memorandum with the trailing financials, photos and market context, goes to a targeted list of buyers under NDA. In our playbook, marketing runs from week 3 to week 8 and ends in a call for offers on a fixed date, so bids can be compared side by side instead of trickling in.[1] The seller and broker pick a buyer, negotiate a purchase and sale agreement, and the buyer's deposit goes hard. From there, due diligence and franchise approval run at the same time, not back to back, because that parallel path is what keeps the calendar near 24 weeks. The Matthews Hotel Index for Q1 2026 gives the cap-rate band your value opinion will be built against.[3] A stage-by-stage view, with realistic durations for each, is below and in more detail at [How to sell a hotel, step by step](/sell-a-hotel/how-to-sell-a-hotel). #### How long does it take? About 24 weeks from engagement to close in our published playbook, with due diligence and franchise approval running in parallel in the back half.[1] That plan assumes a prepared seller with a clean trailing twelve months and a written PIP scope letter in hand before marketing starts. An unprepared seller, one still assembling financials or waiting on a brand response, should expect it to run longer. On the brand side, Hilton's 2025 Hampton franchise agreement gives the franchisor 60 days from a completed application to consent to a change of ownership.[2] The full breakdown by stage, plus what a prepared versus unprepared timeline looks like side by side, is at [How long does it take to sell a hotel](/sell-a-hotel/how-long-it-takes). #### What does it cost? A success fee at closing that scales down as price rises, plus title, legal, transfer tax and prorations that are not part of the commission. The brokerage fee is the largest single line item, but it is not the only cost. Title insurance, escrow, state transfer taxes, seller's counsel, and, on a CMBS loan, defeasance can add up to a large share of the total, especially when a loan must be paid off early. The full cost stack, with a worked example, is at [Hotel broker fees](/sell-a-hotel/broker-fees). Tax on the gain is separate and is covered at [What taxes do I pay when I sell a hotel?](/sell-a-hotel/taxes-when-selling-a-hotel) #### What do I have to prepare? A trailing twelve-month P&L that reconciles to bank statements, a current STAR report, a written PIP scope letter, and three years of capital expenditure history. In our experience, those four documents decide more of the outcome than anything else an owner controls, and a T-12 that does not tie out to the bank is a leading cause of re-trades in due diligence. The full document checklist, tier by tier, from teaser to closing, is at [Documents needed to sell a hotel](/sell-a-hotel/documents-needed). #### Should I sell confidentially or market it openly? Confidential protects staff and vendor relationships and narrows the buyer pool; marketed reaches more buyers and creates price tension at the cost of discretion. A confidential process works when the owner cannot risk staff, guests or lenders learning the asset is for sale before a deal is signed, common on a single trophy asset or a family-owned property with long-tenured management. A broadly marketed process, syndicated to a wider buyer list, produces more competitive tension and typically a tighter timeline to a call for offers, because more buyers are underwriting at once. Most owners land somewhere in between: a targeted, NDA-gated list that is broad enough to create competition without a public listing. The three methods are compared side by side at [Should I sell my hotel off-market or list it publicly?](/sell-a-hotel/off-market-vs-marketed) #### Does an open PIP kill my deal? No. An open PIP with a written scope letter gets priced into the offer; an undisclosed one that surfaces in due diligence is what kills deals. A franchisor can require the buyer to agree to upgrades, written up as a PIP, as a condition of approving a change of ownership.[2] So a branded hotel that trades should expect one. Buyers underwrite that cost the same way they underwrite any other capital item: as a deduction from the unencumbered value, plus a premium for the risk that the scope grows once work starts. What actually derails a sale is a PIP letter the seller did not disclose, because it makes the buyer distrust every other number in the package, not because a PIP exists. The arithmetic on exactly how much a PIP costs a seller is worked through in the example below and in more depth at [What is my hotel worth, and who decides?](/hotel-valuation) #### Can I sell without a broker? Yes, and it narrows the buyer pool to people who already know the asset is available. An owner-direct sale is legal and it happens, most often when the buyer is already known, a neighboring operator, a family member, or an existing tenant. What an owner gives up is the underwriting discipline, the buyer-list breadth, and the negotiating power a call-for-offers process creates. The trade-offs, honestly stated, are at [How do I choose a hotel broker?](/sell-a-hotel/how-to-choose-a-hotel-broker), which also covers what a broker should be doing for that fee. Table: The hotel sale process, stage by stage (our planning ranges) Stage | What happens | Typical duration | Who drives it Value opinion | Broker opinion of value on current financials | 1 to 2 weeks | Broker Package | CIM, financial model, photos, data room | 2 to 3 weeks | Broker and owner Marketing | Targeted outreach, NDAs, tours | 4 to 6 weeks | Broker Call for offers | Offers due on a common date, then best and final | 2 to 3 weeks | Broker PSA negotiation | Contract, deposit, access | 2 to 3 weeks | Attorneys Due diligence | Buyer inspection, financial audit, PCA, survey | 30 to 60 days | Buyer Franchise approval | Buyer application, PIP scope, comfort letter | Up to 60 days for the brand to rule, run in parallel[2] | Brand Close | Funding, title, FF&E and inventory settlement | 1 week | Everyone First-party data point: The Matthews Hotel Index for Q1 2026 gives the cap-rate band your value opinion will be built against.[3] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: what an open PIP does to a bid): Hypothetical. A 96-key select-service hotel with $1.42 million of NOI. At an 8.25 percent cap the unencumbered value is $1.42 million divided by 0.0825, or $17.21 million. Now add a brand PIP scoped at $2.30 million, due within 18 months. The buyer deducts the PIP cost: $17.21 million minus $2.30 million is $14.91 million. The buyer also deducts displacement during the renovation, say 60 rooms out for 90 days, roughly $310,000. Then the buyer adds an assumed risk premium for scope uncertainty, here $300,000, about 13 percent of the PIP. The indicative bid comes to $14.30 million, versus $17.21 million unencumbered. The PIP cost $2.30 million and the price fell $2.91 million. The extra $610,000 is what uncertainty costs. Getting the scope letter in writing before you go to market is how you get most of that back. FAQ: - Q: How long does it take to sell a hotel? A: About 24 weeks from engagement to close in our published playbook, as of September 2026. Roughly 12 weeks to a selected buyer, then about 12 weeks of contract, due diligence and parallel franchise approval.[1] - Q: What does it cost to sell a hotel through a broker? A: A success fee paid at closing, quoted as a percentage of price that falls as price rises, plus title, legal, transfer tax and prorations. See the full breakdown at /sell-a-hotel/broker-fees. - Q: What documents do I need to sell my hotel? A: A teaser before an NDA, a CIM after it, and a full data room in due diligence. The trailing twelve-month P&L, STAR report, franchise agreement with PIP status, and capex history matter most. - Q: Can I sell my hotel confidentially? A: Yes. A confidential process limits marketing to a targeted, NDA-bound buyer list instead of public syndication. It protects staff and vendor relationships at some cost to competitive price tension. - Q: Does an open PIP stop a hotel sale? A: No. A disclosed PIP with a written scope letter gets priced into the offer. An undisclosed PIP that surfaces in due diligence is what actually kills deals. - Q: Can I sell a hotel without a broker? A: Yes. It is legal, and it narrows the buyer pool to people who already know the asset is for sale, which usually means fewer offers and less price tension. - Q: Do I need a broker opinion of value first? A: Not legally, but pricing a hotel without one is guessing. A BOV gives comps, a cap rate and a buyer-pool view before you set an asking price. - Q: What happens to my staff when the hotel sells? A: Staff are commonly terminated by the seller's operator and rehired by the buyer's operator at closing. Federal WARN notice rules can apply to employers with 100 or more employees.[4] Use employment counsel to plan notices. Sources: - [1] How to sell a hotel: the 24-week transaction process (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/process - [2] 2025 Hampton Franchise Disclosure Document, Item 17 and Franchise Agreement section 12.2.2 (change of ownership transfers) (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - [3] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-17): https://matthewshotelmarkets.com/research/mhi/q1-2026 - [4] 20 CFR 639.3, WARN Act definitions (employer) (Legal Information Institute, Cornell Law School, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/20/639.3 ### How much does it cost to sell a hotel through a broker? URL: https://matthewshotelmarkets.com/sell-a-hotel/broker-fees Last updated: 2026-09-18 Hotel brokerage is usually paid as a success fee at closing, quoted as a percentage of the sale price. Broker pay is not set by law and is negotiable.[1] It is not the whole cost. Title, legal, transfer taxes and loan payoff costs add up. A brand transfer adds an application fee, $0 to $200,000 on Hampton deals in 2024, which the buyer pays.[2] Key takeaways: - The fee is a percentage of price, paid at closing. In our experience the percentage falls as deal size rises. - The seller pays it, and it covers the buy-side broker when there is one. - It is negotiable, because broker pay is not set by law.[1] So is what you get for it, which matters more. - Retainers are uncommon on marketed dispositions and more common on complex or confidential assignments. - Commission is only one line. Budget title, transfer tax, legal and any loan payoff cost separately. #### How is a hotel broker paid? A success fee at closing, calculated as a percentage of the sale price, with no fee owed if the deal does not close. That structure aligns the broker's incentive with the seller's: the broker is paid for a closed transaction at the price and terms achieved, not for hours logged. Some engagements also include reimbursable, out-of-pocket marketing costs (photography, a data room platform, travel for tours), agreed in writing up front and typically small relative to the commission. #### What percentage is typical, and how does it scale? There is no single published industry rate. Broker pay is not set by law, and any specific percentage should be stated in writing before engagement, not assumed.[1] Owners sometimes hear a number from a prior deal, a friend, or a general commercial real estate convention and assume it applies. Hotel brokerage fee schedules vary by brokerage, by deal complexity, and by price, and the National Association of REALTORS Code of Ethics requires members to tell sellers that broker compensation is not set by law and is fully negotiable.[1] The honest answer is to ask for the fee in writing before signing an engagement letter, and to ask what services sit behind it, covered in the last section below. #### Who pays it, buyer or seller? The seller pays the commission at closing, and that fee typically covers a cooperating buyer's broker when one is involved. This is standard practice in hotel investment sales: the listing broker's agreement with the seller sets the total fee, and when a buyer arrives with their own broker, the listing broker splits a cooperating commission out of that same fee rather than charging the seller twice. A buyer who is unrepresented does not reduce the seller's fee automatically; that is itself a negotiation point. #### Is it negotiable? Yes, and so is the scope of work behind it, which is the part owners negotiate too rarely. Negotiating the percentage down without asking what marketing, underwriting depth, and reporting cadence come with it can cost more than it saves. A broker who cuts the fee by discounting the story, fewer buyer conversations, a thinner CIM, less reporting, is not actually cheaper. The nine questions worth asking before signing, including this one, are at [How do I choose a hotel broker?](/sell-a-hotel/how-to-choose-a-hotel-broker) #### Do brokers charge retainers? Not commonly on a standard marketed sale; retainers show up more often on confidential, complex or distressed assignments where the broker's time commitment is heavier upfront. An owner asked for a retainer on a routine marketed disposition should ask why: it can be a legitimate reflection of unusual complexity, or it can be a sign the broker is not confident enough in the assignment to work purely on success. #### What else do I pay at closing? Title insurance and escrow, transfer taxes, seller's legal fees, prorations, and, on a CMBS loan, defeasance. The table above lays these out with who typically pays and how negotiable each one is. Transfer taxes vary by state and can stack a local rate on a state rate. Washington, for example, charges a graduated state rate by sale price and adds a local rate on top.[3] Check the specific jurisdiction rather than assuming a percentage. Defeasance, the usual way to retire a CMBS loan before maturity, costs whatever a bond portfolio big enough to cover the remaining loan payments costs, plus fees, and its terms can only be negotiated before the loan is made.[4] On a loan with years left to run it can be a large line, shown in the worked example below. For federal income tax purposes, selling expenses reduce the gain on the sale.[5] #### What should the fee actually buy me? Underwriting, a buyer list, negotiating power from a call-for-offers process, and a document package that survives due diligence. A fee is worth paying when it buys real underwriting work (the person doing it, by name, not a template), a buyer list specific to the asset's chain scale and price band, and a marketing and call-for-offers process that creates competitive tension. A cheap fee attached to none of that usually costs more in a lower sale price than it saves in commission. Table: Selling costs on a hotel, beyond the brokerage fee Cost | Who pays | Typical size | Negotiable? Brokerage fee | Seller | Percentage of price | Yes, not set by law[1] Title insurance and escrow | Varies by state and custom | Basis points on price | Somewhat Transfer tax or documentary stamps | Varies by state | State and local specific[3] | No Seller legal | Seller | Hourly, deal-size dependent | By scope Franchise transfer and application fees | Buyer applies and pays the brand[2] | Per the brand's FDD; Hampton reported $0 to $200,000 in 2024[2] | Sometimes Prorations and FF&E / inventory settlement | Split at closing | Deal specific | By contract Loan prepayment or defeasance | Seller | Set by bond prices at payoff, plus fees[4] | No First-party data point: The Matthews Hotel Index for Q1 2026 gives the cap-rate bands that drive price, and price drives where a fee lands.[6] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: total cost of sale on a $17.0 million hotel): Hypothetical, with each line labeled as an assumption rather than a market rate. Sale price: $17.00 million. Brokerage fee at an assumed 2.0 percent: $340,000. Title, escrow and survey, assumed at 0.3 percent: $51,000. Transfer tax, assumed at 0.2 percent, which varies enormously by state and should be checked locally: $34,000. Seller legal, assumed: $45,000. Defeasance on a CMBS loan, assumed: $260,000. Total costs: $730,000, or 4.3 percent of price. The brokerage fee is 47 percent of that total. Owners who negotiate the fee hard and ignore the defeasance number are optimizing the smaller line. FAQ: - Q: What is a typical hotel broker commission? A: There is no single published industry rate. Broker pay is not set by law, so the fee is a negotiated percentage of price.[1] Ask any broker to quote their fee in writing before you engage. - Q: Who pays the hotel broker fee? A: The seller, at closing, out of sale proceeds. That fee typically covers a cooperating buyer's broker when one represents the purchaser. - Q: Is a hotel broker fee negotiable? A: Yes. So is the scope behind it: what marketing, underwriting and reporting the fee actually buys. Negotiate both together, not the percentage alone. - Q: Do hotel brokers charge a retainer? A: Not commonly on a standard marketed sale, where the fee is success-based. Retainers appear more often on confidential, complex or distressed assignments. - Q: When is the broker fee paid? A: At closing, out of sale proceeds, as a success fee. No fee is owed if the transaction does not close. - Q: Does the fee cover the buyer's broker too? A: Typically yes, when a buyer's broker is involved. The listing broker's fee usually includes a cooperating commission split with the buy-side broker. - Q: What are total closing costs on a hotel sale? A: Commission plus title, escrow, transfer tax, seller legal, prorations and, on a CMBS loan, defeasance. Budget each line separately; the worked example above shows how they add up. Sources: - [1] 2026 Code of Ethics and Standards of Practice (Article 1; Standards of Practice 1-3 and 1-12) (National Association of REALTORS, accessed 2026-09-18): https://www.nar.realtor/sites/default/files/2025-12/2026-COE-Standards-of-Practice-2026-01-01.pdf - [2] 2025 Hampton Franchise Disclosure Document (issued March 30, 2025), Items 5, 6 and 17 and Franchise Agreement section 12.2.2 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - [3] Real estate excise tax (Washington State Department of Revenue, accessed 2026-09-18): https://dor.wa.gov/taxes-rates/other-taxes/real-estate-excise-tax - [4] Defeasance FAQs (Chatham Financial, accessed 2026-09-18): https://cf.com/insights/defeasance-frequently-asked-questions - [5] Publication 544, Sales and Other Dispositions of Assets (Internal Revenue Service, accessed 2026-09-18): https://www.irs.gov/publications/p544 - [6] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-17): https://matthewshotelmarkets.com/research/mhi/q1-2026 ### What documents do I need to sell my hotel? URL: https://matthewshotelmarkets.com/sell-a-hotel/documents-needed Last updated: 2026-09-18 Three tiers: the marketing package a buyer sees before an NDA, the CIM they see after, and the data room they get in due diligence. As of September 2026, in our experience, the four documents that decide the deal are the trailing twelve-month P&L, the STAR report, the franchise agreement with the PIP status letter, and three years of capital expenditure history. Key takeaways: - A hotel CIM carries operating detail a standard commercial OM does not: segmentation, index, departmental margins under USALI, brand position.[1] - The T-12 is a monthly profit and loss for the trailing twelve months. It must reconcile to bank statements. - The PIP status letter is the document buyers price uncertainty against. Get it in writing before marketing. - Employees are commonly terminated and rehired by the buyer's operator at closing. Plan the communication. - Missing documents do not delay a deal. They reduce the price. #### What goes in the package before an NDA? An anonymized teaser: key count, market, chain scale and price guidance, with nothing that identifies the property. This is the first thing a prospective buyer sees, before signing anything. It is deliberately thin, enough to let an unqualified buyer self-select out and a qualified one ask for the NDA. Nothing in a teaser should let a competitor, employee or guest identify the specific hotel. #### What is in a hotel CIM? Trailing and stabilized financials, a market and competitive-set analysis, segmentation and brand position, PIP status, capital expenditure history, and photos. A hotel CIM covers everything a commercial real estate offering memorandum covers, plus the operating-business layer that makes a hotel different from an apartment or office asset: revenue segmentation by source (transient, group, contract), a competitive-set index position, departmental profit margins under the Uniform System of Accounts for the Lodging Industry,[1] and a clear PIP status. The market context section draws on the Matthews Hotel Index for Q1 2026 without republishing any licensed STAR or CoStar tables.[2] #### What is a T-12 and why does it matter so much? A month-by-month profit and loss for the trailing twelve months, and it is the single document a buyer's accountant will try to break. Every number in a hotel CIM traces back to the T-12: NOI, margin, segmentation, all of it. A buyer's diligence team reconciles the T-12 line by line against bank deposits and vendor payments. In our experience, a T-12 that does not tie out, whether from a genuine bookkeeping error or an undisclosed add-back, is a leading reason a deal re-trades or dies, shown in the worked example below. #### What does the buyer ask for in due diligence? Everything behind the CIM: the franchise and management agreements, title and survey, a property condition assessment, environmental reports, tax bills, insurance loss runs, and the employee census. The data room row in the table above lists the full set. Two items deserve specific attention: a Phase I Environmental Site Assessment under the ASTM E1527-21 standard,[3] and current title and an ALTA/NSPS land title survey,[4] both of which take time to order and should start as soon as the PSA is signed, not after. #### What franchise documents do I need? The current franchise agreement, brand correspondence on standards compliance, and a written PIP status or scope letter. A buyer cannot simply assume the seller's franchise agreement. Under Hilton's 2025 Hampton agreement, for example, the buyer must meet the requirements for new franchisees, submit a change of ownership application, sign the current form of franchise agreement and agree to requested upgrades.[5] The seller's job is to make the brand relationship as legible as possible: no ambiguity about current compliance status, and a written answer on what PIP, if any, is coming due. #### What happens to my staff at closing? Employees are commonly terminated by the seller's operator and rehired by the buyer's operator, and employers with 100 or more employees may owe federal WARN Act notice.[6] This is standard in hotel transactions because the operating agreement, not just the real estate, changes hands. Sellers should plan the employee communication timeline with counsel. Where WARN applies, notice generally must be served 60 days before a plant closing or mass layoff, and in a sale the seller is responsible for notice of any layoff up to and including the closing, the buyer after it.[7] #### What should I start gathering today? Twelve months of bank statements to reconcile against the P&L, the current STAR report, and a written PIP scope letter, regardless of when you plan to list. None of these require a broker engagement to begin, and starting early is one of the biggest things an owner can do to shorten the process, covered at [How long does it take to sell a hotel?](/sell-a-hotel/how-long-it-takes) Table: Hotel sale document package, by tier Tier | Documents | When it is shared | Who prepares it Teaser | Anonymized summary, keys, market, price guidance | Pre-NDA | Broker CIM | T-12 and T-36 P&L, STAR summary, segmentation, brand position, PIP status, capex history, photos, market analysis | Post-NDA | Broker and owner Data room | Franchise agreement, management agreement, ground lease, title, survey, PCA, environmental, tax bills, insurance loss runs, service contracts, employee census, permits, licenses, liquor license | Under contract | Owner and counsel Closing | Payoff letter, estoppels, transfer applications, FF&E inventory, prorations | Final 2 weeks, weeks 22 to 24 in our playbook[8] | Attorneys and broker First-party data point: The Matthews Hotel Index for Q1 2026 supplies the market context section of the CIM without republishing any licensed data.[2] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: what a T-12 that does not reconcile costs): Hypothetical. A hotel goes under contract at $17.0 million on reported NOI of $1.42 million, an 8.35 percent cap. In due diligence the buyer's accountant finds $94,000 of owner-paid expenses that were booked below the NOI line. Corrected NOI: $1.42 million minus $94,000 is $1.326 million. At the same 8.35 percent cap, that recalculates to $15.88 million. The re-trade is $1.12 million, or 6.6 percent of price. And the re-trade is the good outcome. The other outcome is that the buyer stops trusting every other number in the package and walks in week 18, after the property has been off the market for four months. Reconcile the T-12 to bank statements before you list. FAQ: - Q: What is a T-12 in a hotel deal? A: A month-by-month profit and loss statement for the trailing twelve months. Buyers reconcile it against bank statements, and in our experience discrepancies are a leading reason deals re-trade or fail. - Q: What documents do I need to sell my hotel? A: A teaser, a CIM with trailing financials and market data, and a due diligence data room with the franchise agreement, title, survey, PCA and employee census. See the tier breakdown above. - Q: What is in a hotel CIM? A: Trailing and stabilized financials, competitive-set positioning, segmentation, brand and PIP status, capital expenditure history, and photos, all under NDA. - Q: How is a hotel CIM different from a normal commercial OM? A: It carries operating-business detail an apartment or office OM does not: revenue segmentation, competitive index, departmental margins, franchise standing and PIP status. - Q: What does a buyer ask for in hotel due diligence? A: The franchise and management agreements, title and survey, a property condition assessment, environmental reports, tax bills, insurance loss runs, service contracts and the employee census. - Q: What happens to my employees when the hotel sells? A: They are commonly terminated by the seller's operator and rehired by the buyer's operator at closing. Employers with 100 or more employees can owe 60 days' WARN Act notice.[6][7] Use employment counsel. - Q: Can my franchise agreement transfer to the buyer? A: Not automatically. The buyer applies to the franchisor as a new franchisee, subject to approval and typically a PIP, rather than assuming the seller's existing agreement.[5] - Q: Do I need a PIP letter before I list? A: Not legally, but it removes the single biggest source of re-trade risk. Request the brand's current PIP status in writing before marketing starts. Sources: - [1] HFTP, AHLA and GFC unveil the 12th Revised Edition of the Uniform System of Accounts for the Lodging Industry (adopted January 1, 2026) (American Hotel & Lodging Association, accessed 2026-09-18): https://www.ahla.com/news/hftp-ahla-and-gfc-unveil-groundbreaking-12th-revised-edition-uniform-system-accounts-lodging - [2] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-17): https://matthewshotelmarkets.com/research/mhi/q1-2026 - [3] E1527-21 Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process (ASTM International, accessed 2026-09-18): https://store.astm.org/e1527-21.html - [4] ALTA/NSPS Land Title Survey Standards (2026 standards, effective February 23, 2026) (American Land Title Association, accessed 2026-09-18): https://www.alta.org/topics/topic-land-survey-standards - [5] 2025 Hampton Franchise Disclosure Document (issued March 30, 2025), Items 5, 6 and 17 and Franchise Agreement section 12.2.2 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - [6] 20 CFR 639.3, WARN Act definitions (employer) (Legal Information Institute, Cornell Law School, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/20/639.3 - [7] 20 CFR 639.4, who must give notice (including in a sale of a business) (Legal Information Institute, Cornell Law School, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/20/639.4 - [8] How to sell a hotel: the 24-week transaction process (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/process ### Selling a hotel: questions owners ask URL: https://matthewshotelmarkets.com/sell-a-hotel/faq Last updated: 2026-09-18 This page answers the short questions hotel owners ask before a sale and links each one to the page that goes deeper. The anchors, as of September 2026: about 24 weeks from engagement to close in our published playbook,[1] 60 days for Hilton to rule on a Hampton change of ownership,[2] and a 25 percent maximum federal rate on gain from building depreciation.[3] Key takeaways: - Plan on about 24 weeks from engagement to close, with the brand's 60-day review running inside due diligence.[1][2] - Start with a broker opinion of value. It does not commit you to sell, and it tells you whether selling beats holding. - Tax is layered: up to 20 percent on capital gain, up to 25 percent on building depreciation, ordinary rates on FF&E.[3] - Staff, brand and lender all find out eventually. A confidential process controls when. - Every answer on this page links to a longer page with its sources. #### How do I find out what my hotel is worth before I decide? Ask for a broker opinion of value, a written estimate built from your trailing twelve-month financials, comparable sales and current cap rates. A BOV is not an appraisal and does not commit you to sell. It is the document that lets you compare selling against holding or refinancing. The Matthews Hotel Index for Q1 2026 publishes the cap-rate bands a BOV is built against.[4] How a BOV differs from a lender's appraisal is at `/hotel-valuation/broker-opinion-of-value`, and the valuation math is at `/hotel-valuation/how-to-value-a-hotel`. An offering memorandum, by contrast, is the marketing document written for buyers after you decide to sell. See `/glossary/bov` and `/glossary/iom`. #### How long will it take, and what are the steps? About 24 weeks in our published playbook: 2 weeks of packaging, 6 of marketing, 4 of offers and contract, and 12 of due diligence and closing.[1] The steps in order are value opinion, package, marketing, call for offers, contract, due diligence, franchise approval and close. They are laid out at `/sell-a-hotel/how-to-sell-a-hotel`. What stretches or shortens each stage is at `/sell-a-hotel/how-long-it-takes`. #### What will it cost me to sell? A success fee paid at closing, plus title, legal, transfer tax and, on some loans, a prepayment or defeasance cost. The fee structure, who pays it and what is negotiable are at `/sell-a-hotel/broker-fees`. Federal and state tax on the gain is usually the bigger number. It is layered: long-term capital gain at up to 20 percent, gain from building depreciation at up to 25 percent, and ordinary income on FF&E recapture.[3] The full walk-through is at `/sell-a-hotel/taxes-when-selling-a-hotel`. #### Do I need a 1031 exchange lined up before I sell? If you want to defer the gain, yes. The exchange has to be structured before closing, because the 45-day and 180-day clocks start when you transfer the hotel.[5] You have 45 days after the sale to identify replacement property and 180 days to close on it, or until your tax return is due, with extensions, if that is earlier.[5] Only the real property qualifies, so the price allocated to FF&E is taxed anyway. The hotel-specific mechanics are at `/hotel-financing/1031-exchange-hotels`. #### Should I sell quietly or put the hotel on the market? Most owners do best in between: a confidential process marketed to a targeted buyer list under NDA. Off-market saves the marketing weeks and gives up competing bids. A public listing reaches the most buyers and exposes the sale to staff and competitors. The three methods are compared at `/sell-a-hotel/off-market-vs-marketed`. Whether to use a broker at all, and how to pick one, is at `/sell-a-hotel/how-to-choose-a-hotel-broker`. #### What happens to my franchise agreement and my staff? The buyer applies to the brand as a new franchisee, and staff are typically rehired by the buyer's operator at closing. Under Hilton's 2025 Hampton agreement, the seller gives 60 days' written notice, the buyer signs a new franchise agreement and accepts a PIP, and the brand has 60 days from a completed application to consent.[2] If your agreement is within a few years of expiring, read `/sell-a-hotel/franchise-agreement-expiration` first. On staff, federal WARN notice rules can apply to employers with 100 or more employees.[6] Use employment counsel to plan notices. #### What should I get ready now? A trailing twelve-month P&L that ties to the bank statements, a current STAR report, the franchise agreement with any PIP letter, and three years of capital spending. Those four items decide more of the outcome than anything else an owner controls. The full list, tier by tier from teaser to closing, is at `/sell-a-hotel/documents-needed`. #### What if my hotel is losing money or my loan is in trouble? You can still sell, and an early sale you control is usually better than a later one the lender controls. If the price will not clear the loan, the lender has to approve the payoff in writing, and forgiven debt can be taxable. The sale paths, from a lender-approved sale to a receivership sale and a deed in lieu, are at `/sell-a-hotel/selling-a-distressed-hotel`. The workout side is at `/hotel-financing/loan-workouts`, and the hold-or-sell math is at `/hotel-financing/refinance-or-sell`. Table: Quick reference: selling a hotel, September 2026 Question | Short answer | Full page How long does it take? | About 24 weeks, engagement to close[1] | `/sell-a-hotel/how-long-it-takes` How long does the brand take? | Hampton: 60 days from a completed application[2] | `/sell-a-hotel/franchise-agreement-expiration` What is the broker paid? | A success fee at closing that scales down as price rises | `/sell-a-hotel/broker-fees` What is the federal tax? | Up to 20% capital gain, up to 25% on building depreciation, ordinary on FF&E[3] | `/sell-a-hotel/taxes-when-selling-a-hotel` 1031 deadlines? | 45 days to identify, 180 days to close[5] | `/hotel-financing/1031-exchange-hotels` Quiet or public? | Usually confidential marketing under NDA | `/sell-a-hotel/off-market-vs-marketed` What do I prepare? | T-12, STAR report, franchise agreement and PIP letter, capex history | `/sell-a-hotel/documents-needed` Loan in default? | Sell early; lender must approve any short payoff | `/sell-a-hotel/selling-a-distressed-hotel` First-party data point: The Matthews Hotel Index for Q1 2026 publishes cap-rate bands by market and segment, which is where a broker opinion of value starts.[4] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: counting back from a target closing date): Hypothetical. An owner wants to close by December 15, 2027 so the gain lands in that tax year. Our playbook runs about 24 weeks from engagement to close,[1] so the engagement date is about July 1, 2027. The owner needs four to six weeks before that to reconcile the trailing twelve months and get a PIP scope from the brand, so preparation starts in mid-May. The purchase contract should be signed around week 12, late September, and the buyer should file its franchise application that same week, because a brand with 60 days to rule[2] would then answer by late November, inside due diligence. If the owner plans a 1031 exchange, the 45-day identification window opens at closing and ends January 29, 2028, and the 180-day window ends June 12, 2028, or on the due date of the owner's 2027 tax return including extensions if that comes first, so the owner files an extension.[5] Working backward from the date you care about shows quickly if the start date has already passed. FAQ: - Q: I am thinking about selling my hotel. Where do I start? A: With a broker opinion of value, which prices the hotel from your trailing twelve-month financials and current cap rates without committing you to sell. Then compare selling against holding or refinancing. See /hotel-valuation/broker-opinion-of-value. - Q: How long does it take to sell a hotel? A: About 24 weeks from engagement to close in our published playbook, as of September 2026: roughly 12 weeks to a signed contract and 12 weeks of due diligence, franchise approval and closing.[1] Details at /sell-a-hotel/how-long-it-takes. - Q: How much tax will I pay when I sell my hotel? A: Federal tax is layered: up to 20 percent on long-term capital gain, up to 25 percent on gain from building depreciation, and ordinary rates on FF&E recapture.[3] State tax is extra. See /sell-a-hotel/taxes-when-selling-a-hotel. - Q: Should I sell my hotel now or wait until next year? A: Compare in dollars: net sale proceeds today against a year of cash flow plus next year's likely price, less any PIP or loan maturity in between. The framework is at /hotel-financing/refinance-or-sell. - Q: Will my employees and the brand find out I am selling? A: The brand must, because it approves the buyer. Hampton's 2025 agreement requires 60 days' notice.[2] Staff usually learn near closing in a confidential process. See /sell-a-hotel/off-market-vs-marketed. - Q: My franchise agreement expires soon. Should I sell first? A: Decide two to three years out. Hampton's 2025 disclosure document gives no right to renew, and both a sale and a re-license trigger a PIP.[2] See /sell-a-hotel/franchise-agreement-expiration. - Q: Can I sell a hotel that is losing money or behind on its loan? A: Yes. If the price covers the loan, it is a normal sale. If not, the lender must approve the payoff in writing, and forgiven debt can be taxable. See /sell-a-hotel/selling-a-distressed-hotel. - Q: Can I sell my hotel without a broker? A: Yes. It is legal, and it limits the buyer pool to people who already know the hotel is available, which usually means fewer offers. The trade-offs are at /sell-a-hotel/how-to-choose-a-hotel-broker. Sources: - [1] How to sell a hotel: the 24-week transaction process (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/process - [2] 2025 Hampton Franchise Disclosure Document (issued March 30, 2025), Item 17 and Franchise Agreement section 12.2.2 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - [3] Topic no. 409, Capital gains and losses; and Publication 544 (2025), Sales and Other Dispositions of Assets (Internal Revenue Service, accessed 2026-09-18): https://www.irs.gov/taxtopics/tc409 - [4] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/research/mhi/q1-2026 - [5] 26 U.S. Code section 1031, Exchange of real property held for productive use or investment (Legal Information Institute, Cornell Law School, accessed 2026-09-18): https://www.law.cornell.edu/uscode/text/26/1031 - [6] 20 CFR 639.3, WARN Act definitions (employer) (Legal Information Institute, Cornell Law School, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/20/639.3 ### Should I sell my hotel before the franchise agreement expires? URL: https://matthewshotelmarkets.com/sell-a-hotel/franchise-agreement-expiration Last updated: 2026-09-18 Usually decide two to three years out, not in the final months. Hilton's Hampton disclosure document, issued March 30, 2025, gives the owner no right to renew. Re-licensing is at the brand's sole discretion and carries a $100,000 application fee and a PIP.[1] A buyer signs a new agreement and gets a PIP too, so the real comparison is who funds the renovation and keeps the upside. Key takeaways: - A Hampton franchise agreement has no renewal right. At expiration the hotel is re-licensed on the brand's terms or it loses the flag.[1] - Selling and re-licensing both trigger a PIP. You cannot avoid the renovation by choosing one over the other; you choose who pays for it. - In a sale the buyer, not the seller, applies to the brand. Hampton's change of ownership application fee is $200,000, against $100,000 for re-licensing.[1] - A short remaining term cuts both ways. It worries a buyer's lender, and it shrinks the liquidated damages a buyer would owe to change flags.[1] - Allow about 24 weeks to sell in our playbook, including the brand's 60-day review, and count back from the expiration date.[2] #### What actually happens when a hotel franchise agreement expires? The license ends. There is no automatic renewal, and the hotel must stop operating under the brand unless the franchisor agrees to a new license. Owners often assume a franchise agreement renews the way a lease option does. The Hampton disclosure document says otherwise in plain words: "You do not have the right to renew or extend the Franchise Agreement." If Hilton agrees, in its sole discretion, to re-license the hotel, the owner may be asked to sign a contract with materially different terms and must comply with any PIP conditions Hilton specifies.[1] If there is no new license, the obligations at expiration are the same as at termination. The owner must stop operating as a system hotel, stop using the marks, remove the signs and brand decor, return the manual, and hand over brand-related domain names and listings.[1] The hotel leaves the reservation system on that date. Term lengths in the same document show how long the runway normally is: generally 22 years for new construction, and 10 to 20 years from opening for a conversion.[1] Other brands write different terms, and you can look them up. The FTC Franchise Rule requires every franchisor to disclose renewal, termination and transfer terms in Item 17 of its disclosure document, and fees in Items 5 and 6.[4] Then read the term and transfer sections of your own agreement, because that contract controls, not this example. #### What does re-licensing cost if I keep the hotel? An application fee, a PIP fee, a new contract on current terms, and the renovation the PIP requires. Hampton's 2025 disclosure document lists a $100,000 franchise application fee for re-licensing and a $10,000 fee to prepare the PIP. It reports that franchisees actually paid between $50,000 and $100,000 in re-licensing application fees in 2024.[1] The new agreement is the then-current form, so fees can differ from the agreement signed years ago. The current Hampton form charges a monthly royalty of 6 percent of gross rooms revenue and a monthly program fee of 4 percent.[1] The fee is the small number. The PIP is the large one, and the disclosure document does not price it because it is set hotel by hotel. How lenders fund that work is covered at `/hotel-financing/pip-and-renovation-loans`. #### What does the buyer face if I sell instead? The buyer does not inherit your agreement. It applies as a new franchisee, signs the current form of agreement, and accepts its own PIP. Under the Hampton agreement, a sale is a change of ownership transfer. The seller gives 60 days' written notice and must not be in default. The buyer submits a change of ownership application, pays the application fee, meets Hilton's requirements for new franchisees, signs the then-current franchise agreement, and agrees to the upgrades Hilton requests. Hilton has 60 days from the completed application to consent, and consent may not be unreasonably withheld. At closing, the seller's agreement ends and the buyer's begins.[1] The listed application fee for a change of ownership is $200,000, and the document reports that franchisees paid between $0 and $200,000 in 2024.[1] The term of the buyer's agreement is, in the document's words, generally the remaining term under the existing agreement or another term Hilton approves.[1] That last clause is why the expiration date matters in a sale. A buyer and its lender want to know before they bid whether the brand will grant a fresh, longer term. In our experience, getting the brand's PIP scope and an indication on term before going to market removes the biggest unknown a buyer would otherwise price in. #### Does a short remaining term lower my price? It can, if the buyer cannot get comfort on a new term. It can also widen the buyer pool to groups that want a different flag. A buyer's lender sizes a loan on branded cash flow and wants the flag in place for the life of the loan. Hilton's lender comfort letter form states that nothing in it extends the franchise agreement beyond its stated expiration date.[1] So a hotel with four years of term and no indication from the brand on a new license is harder to finance than the same hotel with a new term in hand. The other side: a hotel near expiration is cheaper to reflag. Under the Hampton agreement, liquidated damages for an early termination equal the hotel's average monthly royalty fees multiplied by 60, or by the number of months remaining when fewer than 60 remain.[1] A buyer who plans to convert to another brand, or to run the hotel as an independent, pays less to exit the closer the agreement is to its end. The worked example below shows the arithmetic. #### Do I owe liquidated damages if I sell? The Hampton document ties liquidated damages to termination, by Hilton for cause or by an owner who walks away, not to an approved sale. Item 6 of the disclosure document describes liquidated damages as payable when Hilton terminates the franchise agreement, and Item 17 adds that an owner who terminates unilaterally without cause is in material breach and must pay them.[1] In an approved change of ownership, the seller's agreement ends at closing as a condition of Hilton's consent, and the buyer's new agreement starts the same day.[1] The seller does have to pay all amounts due to Hilton through closing, which the parties may escrow.[1] That is one brand's form. Older agreements and other brands differ, and some sales close without brand consent, which changes everything. Have franchise counsel read your agreement before you sign a purchase contract. #### So when should I decide? Early enough that a sale can close, and the buyer's PIP can be scoped, before the expiration date does the deciding for you. Work backward. Our published playbook runs about 24 weeks from engagement to close, and the brand's 60-day review sits inside that.[2] Add the months it takes to get a PIP scoped and to reconcile the financials, and an owner who might sell should start the conversation with the brand and a broker two to three years before expiration. That leaves time to sell with term still on the agreement, or to re-license and sell later on a fresh term with the renovation done. The choice itself is a return calculation. If you re-license, you fund the PIP and keep the lift in revenue it produces. If you sell first, the buyer funds it and deducts its cost, plus a margin for risk, from the price. The PIP arithmetic is worked through at [What is involved in selling a hotel?](/sell-a-hotel), and the hold-or-sell comparison at `/hotel-financing/refinance-or-sell`. Table: Hampton by Hilton, 2025 disclosure document: keep and re-license versus sell[1] Item | Keep the hotel and re-license | Sell (change of ownership) Right to it | None. Brand's sole discretion | Brand consent required, not unreasonably withheld Who applies | Current owner | Buyer, as a new franchisee Listed application fee | $100,000 | $200,000 Fees actually paid in 2024 | $50,000 to $100,000 | $0 to $200,000 PIP | Yes, plus a $10,000 PIP fee | Yes, plus a $10,000 PIP fee Agreement signed | Then-current form, terms may differ materially | Then-current form Term | As the brand offers | Generally the remaining term, or another term the brand approves Brand timing | Not stated | 60 days' notice; 60 days to consent from a completed application First-party data point: The Matthews Hotel Index for Q1 2026 gives the cap-rate band a buyer will apply to your branded cash flow, which is the number a missing or short franchise term puts at risk.[3] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: what it costs a buyer to change flags, by months remaining): Hypothetical. A Hampton-branded hotel produces $3.0 million of gross rooms revenue a year. At the 6 percent royalty in the 2025 form, royalty fees are $180,000 a year, or $15,000 a month.[1] Case one: 84 months remain on the agreement. More than 60 months remain, so liquidated damages for an early termination are $15,000 times 60, or $900,000. Case two: 30 months remain. Fewer than 60 months remain, so the figure is $15,000 times 30, or $450,000. Case three: 12 months remain, so $15,000 times 12, or $180,000. A buyer who wants a different brand subtracts that exit cost from its bid. At 84 months it is a $900,000 deduction. At 12 months it is $180,000, and some buyers will simply wait out the term. The same clock that worries a lender makes the hotel more attractive to a conversion buyer. This uses the hotel's own average royalty, which the agreement measures over the prior 24 months.[1] FAQ: - Q: Should I sell my hotel before the franchise agreement expires? A: Decide two to three years out. Hampton's 2025 disclosure document gives no renewal right, and both re-licensing and a sale trigger a PIP.[1] Selling with term left, or re-licensing first and selling later, both beat reaching expiration with no plan. - Q: My franchise agreement has three years left. Will buyers care? A: Yes. The buyer signs a new agreement whose term is generally the remaining term or another term the brand approves.[1] Buyers and lenders want the brand's position on term and PIP scope before they bid. - Q: Can I renew my Hampton Inn franchise agreement? A: Not as of right. The 2025 disclosure document says the franchisee has no right to renew or extend. Hilton may re-license at its sole discretion, on a new contract, with a $100,000 listed application fee and a PIP.[1] - Q: Does the buyer take over my franchise agreement when I sell? A: Not under the Hampton form. The buyer applies as a new franchisee, pays the change of ownership application fee, and signs the then-current agreement. The seller's agreement ends at closing.[1] - Q: How long does the brand take to approve a hotel sale? A: Hilton's 2025 Hampton agreement requires 60 days' written notice and gives the brand 60 days from a completed application to consent.[1] File at contract signing so the review runs alongside due diligence. - Q: What are liquidated damages on a hotel franchise? A: A preset payment for ending the agreement early. Under the 2025 Hampton form it is generally the hotel's average monthly royalty times 60, or times the months remaining when fewer than 60 remain.[1] - Q: What happens if I let the franchise agreement expire? A: The hotel must stop operating under the brand: signs and marks come down, the manual goes back, and the hotel leaves the reservation system.[1] It then runs as an independent or under a new flag. - Q: Is it better to do the PIP myself and then sell? A: Sometimes. If you fund it, you keep the revenue lift and sell on a fresh term. If the buyer funds it, the cost plus a risk margin comes off the price. Compare both in dollars before choosing. Sources: - [1] 2025 Hampton Franchise Disclosure Document (issued March 30, 2025): Items 5, 6 and 17; Franchise Agreement sections 12.2.2, 13.4 and 13.6; Exhibit K lender comfort letter form (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - [2] How to sell a hotel: the 24-week transaction process (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/process - [3] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/research/mhi/q1-2026 - [4] 16 CFR 436.5, Disclosure items (what a Franchise Disclosure Document must contain, including Items 5, 6 and 17) (Legal Information Institute, Cornell Law School, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/16/436.5 ### How long does it take to sell a hotel through a broker? URL: https://matthewshotelmarkets.com/sell-a-hotel/how-long-it-takes Last updated: 2026-09-18 About 24 weeks from engagement to close in our published playbook, as of September 2026: roughly 12 weeks to a selected buyer, then about 12 weeks of contract, due diligence and franchise approval.[1] The brand clock is set by contract. Hilton's 2025 Hampton agreement gives the franchisor 60 days from a completed application to consent.[2] Preparation moves the front half most. Key takeaways: - Twenty-four weeks is the plan in our published playbook.[1] - Due diligence length is a negotiated contract term. A Hampton franchise transfer can take up to 60 days for the brand to decide, so run it alongside diligence, not after.[2] - Preparation compresses the front half. Nothing compresses the brand. - A fast sale to a known buyer trades weeks for dollars, and usually more dollars than owners expect. - The clock that matters most is the franchise application date. #### How long does the whole process take? About 24 weeks for a prepared seller in our published playbook,[1] shorter with a known buyer and longer for an unprepared seller. In our experience, the spread between a fast sale and a slow one is mostly preparation, not market conditions. A seller who arrives with a reconciled trailing twelve-month P&L, a current STAR report and a written PIP scope letter compresses the front half of the process by weeks. A seller who is still assembling financials when marketing starts loses that time and more, because a buyer who senses disorganization in the package underwrites more conservatively and negotiates harder. #### How long does each stage take? In our playbook, the package runs weeks 1 to 2, marketing weeks 3 to 8, offers and contract weeks 8 to 12, and due diligence through close weeks 12 to 24.[1] The table above breaks out our planning estimates for prepared, typical and unprepared sellers, stage by stage. They are estimates from our own deal planning, not market statistics. The biggest single swing is marketing to a selected buyer: 6 weeks for a prepared, well-packaged asset versus 10 weeks when the broker is still filling gaps in the data room while trying to run a process. The back half is more fixed, because due diligence and franchise approval both have external actors, the buyer's team and the brand, setting the pace rather than the seller. #### How long is due diligence on a hotel? As long as the purchase agreement allows. Our playbook budgets 60 to 90 days for due diligence and closing together.[1] A buyer's diligence team works from a standard list: financial audit against bank statements, a property condition assessment under the ASTM E2018 standard,[3] a current ALTA/NSPS survey,[4] title review, and confirmation of franchise standing. Any one of those turning up a surprise, most often the financial audit, extends the period. A seller who has already run a PCA and reconciled the T-12 before listing removes the two most common sources of delay before the buyer ever asks. #### How long does franchise approval take? Hilton's 2025 Hampton agreement gives the brand 60 days from a completed application to consent, so the application should start at PSA signing and finish alongside due diligence.[2] The window varies by brand and by agreement, so check the transfer section of your own franchise agreement. The Hampton agreement, for example, requires the buyer to meet the brand's requirements for new franchisees, sign the current form of franchise agreement and agree to requested upgrades before the brand consents.[2] In our experience, a buyer who already operates that brand clears faster than a first-time franchisee. The variable owners control is not the brand's timeline but when the clock starts: filing at PSA signing rather than waiting for due diligence to clear is the most valuable timing decision in the whole process, worked through in the example below. #### What makes a sale take longer? An unreconciled T-12, an undisclosed PIP, a franchise application filed late, or a buyer whose financing was not vetted before the PSA. Each of these adds weeks in a predictable place: financial discrepancies surface in the first two weeks of diligence, an undisclosed PIP surfaces when the buyer requests brand correspondence, franchise delay compounds whenever the application starts late, and financing problems typically surface right after the appraisal comes back, inside the diligence window. #### How fast can I sell if I have to? Faster than a marketed process, with a known buyer who has cash or pre-arranged financing, but speed usually costs price. Compressing the timeline usually means going direct to a small number of buyers who already know the asset and skipping a broad marketing process, which removes the competitive tension that a call for offers creates. It can also mean accepting a buyer's financing contingency timeline rather than negotiating it down. Sellers under real time pressure, an estate, a maturing loan, a partnership dispute, should expect to give something on price for the speed. #### What can I do now to shorten it? Reconcile the T-12 to bank statements, get a written PIP scope letter, and order your own property condition assessment before you list. These three actions remove the three most common causes of delay before a buyer ever sees the asset. None of them require a broker engagement to start; an owner can do all three months before deciding to sell, which is also good portfolio hygiene independent of a transaction. Table: Hotel sale timeline: prepared versus unprepared seller (our planning estimates) Stage | Prepared seller | Typical | Unprepared seller Value opinion | 1 week | 2 weeks | 4 weeks, waiting on financials Package and data room | 2 weeks | 3 weeks | 6 weeks Marketing to selected buyer | 6 weeks | 8 weeks | 10 weeks PSA negotiation | 2 weeks | 3 weeks | 4 weeks Due diligence | 30 days | 45 days | 60 days plus re-trade Franchise approval | parallel | parallel | sequential, adds 4 to 6 weeks Total | about 16 weeks | about 24 weeks[1] | about 32 weeks First-party data point: The Matthews Hotel Index for Q1 2026 reports observed transaction counts by market, which is the demand side of how fast a given asset moves.[5] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: what sequencing franchise approval is worth): Hypothetical. Purchase price $17.0 million, closing targeted for week 24. Parallel path: the buyer files the franchise application at PSA signing, week 17. The brand responds in 45 days, week 23.5. Due diligence ends week 23. Close at week 24. Sequential path: the buyer waits until due diligence clears at week 23 to apply. The brand responds 45 days later, week 29.5. Close at week 30. That is six weeks. On a $17.0 million deal with an $11.0 million loan at 7.25 percent, the seller's carrying cost for those six weeks is roughly $11.0 million times 7.25 percent times 6 over 52 weeks, or about $92,000, before operating risk and before the chance that something changes in the meantime. It is one email, filed six weeks earlier. FAQ: - Q: How long does it take to sell a hotel? A: About 24 weeks from engagement to close in our published playbook, as of September 2026, for a prepared seller with a clean trailing twelve-month P&L and a written PIP scope letter.[1] - Q: How long is due diligence on a hotel sale? A: As long as the purchase agreement allows. Our playbook budgets 60 to 90 days for due diligence and closing together.[1] A re-trade, a title issue or a Phase I environmental follow-up can stretch it. - Q: How long does hotel franchise approval take? A: Hilton's 2025 Hampton agreement gives the brand 60 days from a completed application to consent.[2] Other brands and agreements vary. Start it at PSA signing so it runs alongside due diligence. - Q: What is the fastest a hotel can sell? A: Faster than a marketed process when a known buyer has financing already arranged, though speed typically trades against price and buyer-pool depth. - Q: Why do hotel sales take longer than other commercial deals? A: Franchise approval adds a step apartment and office deals do not have, and a hotel's operating-business character means diligence covers labor, brand standards and PIP status, not just real estate. - Q: Can I speed up a hotel sale? A: Yes. Reconcile the T-12 before listing, get a written PIP scope letter in hand, and start the franchise application at PSA signing instead of waiting for due diligence to clear. - Q: How long should my hotel be on the market? A: Our playbook runs active marketing from week 3 to week 8, with the call for offers in weeks 8 to 9.[1] A long stretch without meaningful offers usually signals a pricing or packaging problem. Sources: - [1] How to sell a hotel: the 24-week transaction process (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/process - [2] 2025 Hampton Franchise Disclosure Document (issued March 30, 2025), Items 5, 6 and 17 and Franchise Agreement section 12.2.2 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - [3] E2018-24 Standard Guide for Property Condition Assessments (ASTM International, accessed 2026-09-18): https://store.astm.org/e2018-24.html - [4] ALTA/NSPS Land Title Survey Standards (2026 standards, effective February 23, 2026) (American Land Title Association, accessed 2026-09-18): https://www.alta.org/topics/topic-land-survey-standards - [5] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-17): https://matthewshotelmarkets.com/research/mhi/q1-2026 ### How do I choose a hotel broker? URL: https://matthewshotelmarkets.com/sell-a-hotel/how-to-choose-a-hotel-broker Last updated: 2026-09-18 Ask these nine questions before you sign an engagement in 2026: recent closings in your chain scale and price band, who does the underwriting, how the buyer list is built, the fee and what it covers, the marketing plan, reporting cadence, the value opinion methodology, references from sellers who did not close, and whether they will tell you to hold. The answers to the last two tell you the most. Key takeaways: - Track record in your chain scale and price band beats total transaction volume. - Ask who does the underwriting. If it is an analyst you will never meet, you have a template, not a value opinion. - A broker who cannot describe the buyer list specifically does not have one. - Ask for a reference from a seller whose deal did not close. How a broker handles that is the real signal. - A broker who has never advised a client to hold is selling, not advising. #### What should I ask before signing? The nine questions in the table below, asked in the first conversation, before any engagement letter is on the table. Each question is designed to separate a broker who has done the specific work from one giving a polished general answer. The table shows what a weak answer sounds like next to what a strong one sounds like, so the difference is easy to hear in a real conversation. **Our answer.** Matthews Hotel Markets underwrites off the Matthews Hotel Index, published each quarter with cap-rate bands across 14 markets,[1] and names the analyst who runs the numbers on a client's specific asset before the first call ends. #### How do I judge a broker's track record? By named, recent closings in your specific chain scale and price band, not by a total transaction-volume figure that could include any asset class or any decade. A broker who closed forty apartment buildings and two hotels is not a hotel specialist, whatever the combined dollar figure says. Ask for named deals: address or market, key count, price band, and year. When a public REIT was on the other side, the trade may also appear in SEC filings you can search yourself.[2] As a rule of thumb, a broker who cannot produce three examples in your segment within the last 18 months either does not specialize in your asset type or has not been active recently, both worth knowing before you sign. **Our answer.** Ask Matthews Hotel Markets for closings in your specific chain scale and metro. We will name them, or tell you plainly if we have not done one recently in that exact segment. #### National brokerage or local specialist? Neither wins by default. A national platform brings a wider buyer database; a local specialist brings deeper knowledge of one market. Ask which one actually applies to your asset. A single-market boutique hotel in a leisure destination may be better served by a specialist who knows every buyer active in that specific niche. A branded select-service asset that could attract a family office in one region and a REIT in another benefits more from a national buyer reach. There is a real trade-off here, and a broker who tells you their model is right for every asset is not being straight with you. **Our answer, honestly stated.** Matthews Hotel Markets is a national platform, which is the right fit for a branded, sellable-anywhere asset with a broad buyer pool. It is not automatically the right fit for a hyper-local, relationship-driven niche asset where a specialist with decades in one submarket may know the three real buyers better than anyone. Ask us directly whether your asset is a national-platform fit; if it is not, we will tell you. #### What is the difference between a hotel broker and a business broker? A hotel broker underwrites the real estate and the operating business together; a general business broker, used to selling restaurants or retail concepts, typically does not. Hotels are transacted as going concerns, which means value depends on operating performance, brand agreement terms, and capital obligations, not just the real estate underneath. A broker trained on business sales generally, without hospitality-specific underwriting, can undervalue or mis-scope a PIP, misread a STAR competitive set, or miss a franchise transfer condition that changes the timeline. #### How do I know the broker is working for me and not the deal? Watch whether they push you toward a fast, easy transaction that suits their calendar or an honest one that suits your outcome, and ask directly whether they have ever told a client not to sell. Brokers who are REALTOR members pledge under the NAR Code of Ethics to protect and promote their client's interests.[3] Still, a broker paid only on a closed transaction has a structural incentive to get a deal done. That is not automatically a conflict, most of the time a closed deal is also the right outcome for the seller, but it means the questions in this list matter. Asking for a reference from a seller whose deal did not close is the single best test: a broker with nothing to hide can produce one and explain why it did not close. #### Will a good broker ever tell me not to sell? Yes, when the numbers say hold. A broker who has never once advised a client against selling has an incentive problem, not a perfect track record. **Our answer.** Matthews Hotel Markets has told clients to hold when a cap-rate cycle or a near-term PIP made selling the wrong move for that owner's goals. We will say so on the first call if that is what the numbers show for your asset, even though it means no fee that quarter. #### What should the engagement agreement say? The fee in writing, the marketing plan with dates, a reporting cadence, and a defined term, so both sides know what happens if the asset does not sell in that window. A vague engagement letter, no dates, no defined deliverables, is itself a signal. The fee structure and what it covers is worth reading in detail; see [Hotel broker fees](/sell-a-hotel/broker-fees) for the full breakdown of what a fee typically does and does not include. Table: Nine questions, and what a good answer sounds like Ask | A weak answer | A strong answer Recent closings in my chain scale and price band | A total volume number | Named deals, with keys, price band and year Who underwrites my asset | Our team does | The person, by name, who you will speak with How is the buyer list built | We have a huge database | The specific buyer types and why they want this asset What is the fee and what does it cover | Standard rate | The percentage in writing, and the deliverables it includes What is the marketing plan | We will list it widely | A named sequence with dates and a call-for-offers date How often will I hear from you | We will keep you posted | A set cadence with a written activity report How did you get to that value | Comps | The method, the comps, the cap rate and the adjustments Can I speak to a seller whose deal did not close | Deflection | A name and a number Would you ever tell me to hold | We can sell it in any market | Yes, and here is when I have First-party data point: The Matthews Hotel Index for Q1 2026 is the dataset we underwrite from, and any broker should be able to show you theirs.[1] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: why the value opinion methodology question matters): Hypothetical. Two brokers value the same 96-key hotel with $1.42 million of NOI. Broker A says $18.5 million. Asked how, the answer is that is where the market is. Broker B says $17.2 million, at an 8.25 percent cap, and shows four comps in the same chain scale within 200 miles, adjusted for a $2.3 million PIP that two of the comps did not carry. Broker A's number is 7.6 percent higher and unfalsifiable. Broker B's number can be argued with, which is what makes it useful. The higher number wins listings. The explainable number survives due diligence. Ask for the method, then decide. FAQ: - Q: How do I choose a hotel broker? A: Ask the nine questions above before signing: track record in your chain scale, who underwrites, the buyer list, the fee, the marketing plan, reporting, methodology, references, and whether they will ever tell you to hold. - Q: What should I ask a hotel broker before hiring them? A: Recent closings in your specific chain scale and price band, who personally underwrites your asset, how the buyer list is built, and for a reference from a seller whose deal did not close. - Q: Is a national or local hotel broker better? A: Neither by default. A national platform brings a wider buyer database; a local specialist brings deeper market knowledge. Ask which advantage actually applies to your specific asset and market. - Q: What is the difference between a hotel broker and a business broker? A: A hotel broker underwrites the real estate and the operating business together, including franchise standing and PIP status. A general business broker typically does not have that specialization. - Q: Should I pick the broker with the highest valuation? A: No. Ask for the method behind the number. REALTOR members may not deliberately mislead an owner about market value to win a listing.[3] An explainable number with comps and a cap rate is more likely to survive due diligence. - Q: How do I know my broker is working for me? A: Ask whether they have ever advised a client to hold rather than sell, and ask for a reference from a seller whose deal did not close. Both answers are hard to fake. - Q: Will a hotel broker ever tell me to hold? A: A good one will, when the numbers say hold. A broker who has never once advised against selling has an incentive problem, since they are paid only when a sale closes. - Q: What should a hotel listing agreement include? A: The fee in writing, a marketing plan with dates, a reporting cadence, and a defined term specifying what happens if the asset does not sell within it. Sources: - [1] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-17): https://matthewshotelmarkets.com/research/mhi/q1-2026 - [2] EDGAR full-text search (U.S. Securities and Exchange Commission, accessed 2026-09-18): https://www.sec.gov/edgar/search/ - [3] 2026 Code of Ethics and Standards of Practice (Article 1; Standards of Practice 1-3 and 1-12) (National Association of REALTORS, accessed 2026-09-18): https://www.nar.realtor/sites/default/files/2025-12/2026-COE-Standards-of-Practice-2026-01-01.pdf ### What is the step-by-step process for selling a hotel? URL: https://matthewshotelmarkets.com/sell-a-hotel/how-to-sell-a-hotel Last updated: 2026-09-18 Eight stages over roughly 24 weeks in our published playbook, as of September 2026: value opinion, package, targeted marketing, call for offers, best and final, purchase agreement, due diligence, close.[1] Franchise approval runs in parallel with due diligence. Hilton's 2025 Hampton agreement gives the brand 60 days from a completed application to decide.[2] In our experience, failed deals usually fail over financial discrepancies, not price. Key takeaways: - Twenty-four weeks is the plan in our playbook.[1] Franchise approval is the variable that stretches it. - A call for offers on a fixed date creates competition. Rolling offers do not. - In our experience, deals die in due diligence over an unreconciled T-12 more often than over price. - Seasonality matters less than readiness. A packaged asset beats a well-timed unpackaged one. - Selling without a broker is possible and it narrows the buyer pool to people who found you. #### What happens in each stage? Value opinion, package, marketing, call for offers, PSA, due diligence and franchise approval in parallel, then close. The value opinion, typically a broker opinion of value, sets the number everything else tests against. The package stage builds the confidential information memorandum: financials, photos, market context and brand position. In our playbook, marketing runs from week 3 to week 8 against a targeted buyer list under NDA. The call for offers collects bids on a common date in weeks 8 to 9, and a best-and-final round with the top two or three bidders follows in week 10.[1] Once a buyer is selected, the purchase and sale agreement gets negotiated and signed, the deposit goes hard, and due diligence and franchise approval begin on parallel tracks. Closing, the final stage, is mostly mechanical: funding, title transfer, and FF&E and inventory settlement. #### How does a call for offers actually work? The broker sets a common due date, collects offers on the same terms, then runs a best-and-final round with the top two or three bidders. A fixed date matters because it forces every serious buyer to commit at the same time, rather than negotiating one at a time against a moving target. The Matthews Hotel Index for Q1 2026 shows the transaction counts and cap-rate bands the buyer list is built from,[3] which is what tells a broker how many qualified buyers to expect for a given asset in a given market. After offers come in, the broker typically shortlists two or three and asks for a best-and-final, sometimes with a request to firm up financing contingencies or shorten the diligence period. Rolling offers, where the seller negotiates whoever calls first, in our experience usually leave money on the table because no buyer is bidding against a deadline. #### What happens after I accept an offer? A purchase and sale agreement, a hard deposit, and the start of due diligence and franchise approval on parallel tracks. The PSA sets the price, the deposit, the diligence period, and the conditions to closing. Once the deposit goes hard, typically after an initial inspection period, the buyer's diligence team and the franchise application both start moving. This is the stage where sequencing choices matter most: a buyer who files the franchise application the day the PSA is signed finishes weeks ahead of one who waits until diligence clears. #### Where do hotel deals usually die? In due diligence, most often because the trailing twelve-month P&L does not reconcile to bank statements. A buyer's accountant will trace reported NOI back to bank deposits and vendor payments. When owner-paid personal expenses, one-time items, or unrecorded concessions show up below the line, the buyer either re-trades the price or walks. An undisclosed PIP that surfaces mid-diligence does similar damage, not because of the dollar amount but because it makes the buyer question every other number in the package. Franchise approval stalling, a buyer's financing resizing after the appraisal, and a property condition assessment under ASTM E2018 finding more deferred maintenance than expected[4] round out the common failure points, shown with timing and prevention in the table above. #### How does franchise approval fit in? It should start at PSA signing and run alongside due diligence. Hilton's 2025 Hampton agreement gives the brand 60 days from a completed application to consent.[2] The Hampton agreement, for example, requires the buyer to meet the brand's requirements for new franchisees, submit a change of ownership application, sign the current franchise agreement and agree to requested upgrades before the transfer can close.[2] In our experience, turnaround varies by brand and by how experienced the buyer's operating platform is; a first-time hotel owner takes longer to clear than an existing multi-unit franchisee of the same brand. The practical lesson is sequencing, not speed: starting the application at PSA signing rather than waiting for diligence to clear is worth about a month on the hypothetical calendar below. #### Is there a best time of year to list? Readiness matters more than season. A packaged, clean asset listed in a slow month outsells an unready one listed at the ideal time. Buyers underwrite trailing performance and forward bookings regardless of calendar month, and a targeted marketing process reaches the same buyer list in January as in June. What does move the needle is having the document package, the PIP status letter and a reconciled T-12 ready before the first buyer conversation, covered in full at [Documents needed to sell a hotel](/sell-a-hotel/documents-needed). #### Can I do this without a broker? Yes, and the buyer pool narrows to people who already know the asset exists, which usually means fewer bidders and less price tension. An owner-direct sale is legal and happens most often when the buyer is already known. What a broker adds is underwriting discipline, a wider and more current buyer list, and a negotiated call-for-offers structure that creates competition. Whether that trade is worth the fee, and what questions to ask before hiring one, is covered honestly at [How do I choose a hotel broker?](/sell-a-hotel/how-to-choose-a-hotel-broker) Table: Where hotel deals fail, and the fix (weeks on our playbook calendar) Failure point | What it looks like | When it shows up | How to prevent it T-12 does not reconcile | Buyer's audit finds NOI overstated | Due diligence, week 16 | Reconcile to bank statements before you list Undisclosed PIP | Scope letter arrives mid-diligence | Week 14 to 18 | Request the scope letter before marketing Franchise approval stalls | Buyer's application sits with the brand | Week 16 to 24 | Start the application at PSA signing Buyer financing falls out | Lender resizes after appraisal | Week 18 to 22 | Vet the buyer's lender, not just the buyer Deferred maintenance | PCA finds more than expected | Week 15 | Get your own PCA first First-party data point: The Matthews Hotel Index for Q1 2026 shows the transaction counts and cap-rate bands the buyer list is built from.[3] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: a 24-week calendar): Hypothetical. Engagement signed January 6. Weeks 1 to 2, value opinion delivered: January 20. Weeks 3 to 5, package complete: February 10. Weeks 6 to 11, marketing and tours: March 24. Week 12, call for offers: March 31. Weeks 13 to 14, best and final, buyer selected: April 14. Weeks 15 to 17, PSA signed, deposit hard-dated: May 5. Weeks 18 to 23, due diligence and franchise approval in parallel: June 16. Week 24, close: June 23. Add four weeks if the franchise application starts at the end of due diligence instead of at PSA signing. That one sequencing choice is worth a month. FAQ: - Q: How long does it take to sell a hotel? A: About 24 weeks from engagement to close in our published playbook, as of September 2026, for a prepared seller.[1] Franchise approval and due diligence run in parallel across the back half. - Q: What is a call for offers? A: A fixed date by which all interested buyers submit offers on the same terms, followed by a best-and-final round with the top bidders. It creates competitive tension that rolling offers do not. - Q: Can I sell a hotel without a broker? A: Yes. It narrows the buyer pool to people who already know the asset is available and puts the underwriting and negotiation work on the owner. - Q: What is the best time of year to sell a hotel? A: Readiness matters more than season. A hotel with a clean T-12 and a written PIP scope letter sells faster in a slow month than an unready one at the ideal time. - Q: What happens during hotel due diligence? A: The buyer audits the T-12, orders a property condition assessment and an ALTA/NSPS survey,[5] reviews the franchise agreement and PIP status, and verifies title. Our playbook budgets 60 to 90 days for diligence and closing together.[1] - Q: Why do hotel deals fall apart? A: In our experience, most often the trailing twelve-month P&L does not reconcile to bank statements, an undisclosed PIP surfaces, or the buyer's financing resizes after the appraisal comes in. - Q: When does franchise approval start? A: At purchase and sale agreement signing, ideally, so it runs alongside due diligence instead of after it. In our experience, starting it late is a common cause of a delayed close. Sources: - [1] How to sell a hotel: the 24-week transaction process (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/process - [2] 2025 Hampton Franchise Disclosure Document (issued March 30, 2025), Items 5, 6 and 17 and Franchise Agreement section 12.2.2 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - [3] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-17): https://matthewshotelmarkets.com/research/mhi/q1-2026 - [4] E2018-24 Standard Guide for Property Condition Assessments (ASTM International, accessed 2026-09-18): https://store.astm.org/e2018-24.html - [5] ALTA/NSPS Land Title Survey Standards (2026 standards, effective February 23, 2026) (American Land Title Association, accessed 2026-09-18): https://www.alta.org/topics/topic-land-survey-standards ### Should I sell my hotel off-market or list it publicly? URL: https://matthewshotelmarkets.com/sell-a-hotel/off-market-vs-marketed Last updated: 2026-09-18 Most owners should run a confidential marketed process: a targeted buyer list under NDA, not a public listing and not a single-buyer deal. As of September 2026, our published playbook markets that way from week 3 to week 8 of a 24-week sale.[1] Off-market skips those weeks but removes competing bids. No method hides a sale from the brand, which gets 60 days' notice under Hilton's 2025 Hampton agreement.[2] Key takeaways: - There are three methods, not two: off-market to one to three buyers, confidential marketing to an NDA-bound list, and a public listing. - Off-market saves the marketing weeks, 3 through 8 in our playbook.[1] It does not shorten due diligence or the brand's 60-day review.[2] - Price tension comes from competing bids on a common date. One buyer means no tension. - Confidentiality has a floor. The franchisor must be told, and federal WARN rules can require employee notice at larger employers.[3] - If your broker brings an off-market buyer it also represents, that is dual agency. It requires full disclosure and your informed consent.[4] #### What is the difference between off-market, confidential and public? Off-market means a few hand-picked buyers and no process. Confidential means a full process run quietly under NDA. Public means the hotel is advertised by name. Owners often use "off-market" and "confidential" as if they were the same thing. They are not. An off-market sale goes to one to three buyers, often someone who called you directly, with no offering memorandum and no bid deadline. A confidential marketed sale is a full process: a package, a buyer list, NDAs before any property-level detail, tours, and a call for offers. The only thing missing is public advertising. A public listing adds the hotel's name and photos to listing sites and email blasts. Our own playbook is the middle path. In week 3 we call and email the top prospects directly "while stressing confidentiality", and the employee roster in the financial package goes out with names removed.[1] The steps are laid out at [How do I sell a hotel, step by step?](/sell-a-hotel/how-to-sell-a-hotel). #### Which method gets the best price? The method that produces competing offers on the same date, which is a marketed process, confidential or public. A buyer who knows it is the only bidder prices the hotel to its own return target and no higher. A buyer who knows five other groups are underwriting the same package prices it to win. That is the whole case for marketing. In our playbook, initial offers come in during weeks 4 to 8, a call for offers goes out in weeks 8 to 9, and best-and-final offers land in week 10.[1] Each step exists to make buyers compete on price, deposit and diligence terms at the same moment. We do not publish a percentage for how much more a marketed process brings, because no public dataset measures it and any number would be invented. What an owner can check is thinner: the Matthews Hotel Index for Q1 2026 shows how few hotel trades are observed in any one market in a quarter.[5] In a thin market, one off-market offer is one data point, not a price. #### When does an off-market sale make sense? When speed or secrecy is worth more to you than the last increment of price, and the buyer is already known and credible. Off-market fits a narrow set of facts. A neighboring owner or an existing partner wants the hotel and already knows the numbers. An estate or a partnership dispute needs certainty more than price. A loan matures in months and there is no time for eight weeks of marketing. In those cases, skip the marketing weeks, but keep the discipline: get a broker opinion of value first so you know what you are giving up, ask for proof of funds, and put a short exclusivity period in writing so the buyer cannot stall. If the off-market buyer comes through a broker who also represents that buyer, read the engagement letter closely. Under the REALTOR Code of Ethics, a broker may represent both sides only after full disclosure and with the informed consent of both parties, and a listing broker must keep submitting all offers to the seller until closing unless the seller waives that in writing.[4] See [How do I choose a hotel broker?](/sell-a-hotel/how-to-choose-a-hotel-broker). #### Who finds out that my hotel is for sale? In a confidential process: the buyers who sign an NDA, the brand, your lender at payoff, and your staff near the end. Not the public. Three groups learn about the sale under any method. First, the franchisor. Hilton's 2025 Hampton agreement requires 60 days' written notice of a change of ownership, gives the brand 60 days from a completed application to consent, and lets the brand talk to any third party it considers necessary to evaluate the transfer.[2] Second, employees. In our playbook, buyers are introduced to employees in weeks 22 to 24, at the end of the closing period.[1] Federal WARN rules cover employers with 100 or more employees and make the seller responsible for any required notice of a plant closing or mass layoff up to the date of sale.[3] An employer below that count is outside the federal rule, but state laws differ, so check with employment counsel. Third, vendors and the lender, who learn at payoff and contract assignment. Guests and competitors do not need to know, and in a confidential process they generally do not. #### Does going off-market make the sale faster? It removes the marketing weeks. It does not move the back half, which is set by due diligence and the brand. Our playbook spends weeks 1 to 2 on the package, weeks 3 to 8 on marketing, weeks 8 to 12 on offers and contract, and weeks 12 to 24 on due diligence and closing.[1] An off-market sale can skip most of weeks 3 to 10. The buyer still needs to audit the financials, order a property condition report and a survey, arrange a loan, and get franchise approval, and the brand still has its 60 days.[2] The full stage-by-stage timing is at [How long does it take to sell a hotel?](/sell-a-hotel/how-long-it-takes). #### Is there a best time of year to list a hotel? Less than owners expect. Buyers underwrite a trailing twelve months, so the calendar month matters less than what the last twelve months show. A hotel is priced on its trailing twelve-month net operating income, which already contains every season. The better timing question is when your trailing twelve months will look strongest and cleanest: after a renovation has had a full year to show up in the numbers, after a one-time expense rolls off, or before a known PIP deadline rather than after it. Then count backward. With about 24 weeks from engagement to close in our playbook,[1] an owner who wants to close by year end should engage a broker by early summer. Table: Three ways to sell a hotel, compared | Off-market | Confidential marketed | Public listing Buyer pool | One to three known buyers | Targeted list under NDA | Anyone who sees the listing Price tension | None unless a second buyer appears | Call for offers, then best and final[1] | Call for offers, then best and final[1] Staff and guest exposure | Lowest | Low: names withheld, staff told near closing[1] | Highest: the hotel is advertised by name Marketing time | Skipped | Weeks 3 to 8 in our playbook[1] | Weeks 3 to 8 in our playbook[1] Due diligence and brand approval | Unchanged: brand has 60 days[2] | Unchanged: brand has 60 days[2] | Unchanged: brand has 60 days[2] Best fit | Known buyer, deadline, estate or dispute | Most branded select-service hotels | Assets where reach matters more than discretion First-party data point: The Matthews Hotel Index for Q1 2026 reports observed transaction counts and cap-rate bands by market, which is the context for judging whether a single off-market offer is a fair price.[5] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: what skipping the market has to be worth): Hypothetical. A buyer calls the owner of an 88-key select-service hotel and offers $10.0 million, all cash, 45-day close, no broker. The owner's broker opinion of value says a marketed process should land between $10.4 million and $11.0 million. The marketed path costs time: about 24 weeks in our playbook instead of roughly 8, so 16 more weeks of ownership.[1] It also costs a fee. Assume, for this example only, a 2.5 percent fee. At the low end, $10.4 million less a $260,000 fee is $10.14 million, which is $140,000 better than the direct offer. At the high end, $11.0 million less $275,000 is $10.725 million, which is $725,000 better. So the question is whether 16 weeks of certainty is worth $140,000 to $725,000 to this owner. For an owner with a loan maturing in 90 days, it might be. For an owner with no deadline, it usually is not. The useful move is often a third one: tell the direct buyer a process is starting and invite them to bid in it. FAQ: - Q: Should I sell my hotel confidentially or list it publicly? A: Most owners do best with a confidential marketed process: a targeted buyer list under NDA and a call for offers. It keeps competitive bidding while keeping the hotel's name off public listing sites. Our playbook markets this way in weeks 3 to 8.[1] - Q: Someone called and wants to buy my hotel directly. Should I just sell to them? A: Get a broker opinion of value first so you know what the offer leaves on the table. Then either negotiate with proof of funds and a short exclusivity period, or invite that buyer to bid inside a marketed process. - Q: Can I sell my hotel without my employees finding out? A: Until late in the process, usually yes. In our playbook buyers meet employees in weeks 22 to 24.[1] Federal WARN notice rules can apply to employers with 100 or more employees, so confirm notice duties with employment counsel.[3] - Q: Will Hilton, Marriott or IHG find out I am selling? A: Yes. A branded hotel cannot change hands without the franchisor. Hilton's 2025 Hampton agreement requires 60 days' written notice and gives the brand 60 days from a completed application to consent.[2] Your own agreement controls. - Q: Do off-market hotel deals sell for less? A: No public dataset measures it, so we will not print a percentage. The mechanism is simple: one buyer has no one to outbid. A marketed process puts several offers side by side on one date. - Q: Is an off-market hotel sale faster? A: It skips the marketing weeks, 3 through 8 in our playbook.[1] Due diligence, the buyer's loan and franchise approval take the same time either way. - Q: What is the best month to list a hotel for sale? A: There is no reliable best month. Buyers price a trailing twelve months, which includes every season. List when your trailing numbers are strongest, and count back about 24 weeks from when you want to close.[1] - Q: My broker says they already have a buyer. Is that a problem? A: Not by itself, but ask who the broker represents. Under the REALTOR Code of Ethics, representing both seller and buyer requires full disclosure and informed consent from both.[4] Sources: - [1] How to sell a hotel: the 24-week transaction process (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/process - [2] 2025 Hampton Franchise Disclosure Document (issued March 30, 2025), Item 17 and Franchise Agreement section 12.2.2 (change of ownership transfers) (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - [3] 20 CFR 639.3 (WARN Act employer definition) and 20 CFR 639.4(c) (sale of a business) (Legal Information Institute, Cornell Law School, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/20/639.4 - [4] 2026 Code of Ethics and Standards of Practice (Standards of Practice 1-5 and 1-7) (National Association of REALTORS, accessed 2026-09-18): https://www.nar.realtor/sites/default/files/2025-12/2026-COE-Standards-of-Practice-2026-01-01.pdf - [5] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/research/mhi/q1-2026 ### How do I sell a hotel that is losing money or in default? URL: https://matthewshotelmarkets.com/sell-a-hotel/selling-a-distressed-hotel Last updated: 2026-09-18 Yes, you can sell, and selling early keeps you in control. Once a loan defaults, the exits are a lender-approved sale, a receivership sale, a note sale, a deed in lieu or a bankruptcy sale, and the lender or a court controls most of them. Trepp put the lodging CMBS special servicing rate at 8.63 percent in July 2026.[1] Forgiven debt can be taxable, so model the tax before choosing.[2] Key takeaways: - The owner controls only one path: a marketed sale started before or early in default. Every later path is run by the lender, a receiver or a court. - If the price will not clear the loan, the sale needs the lender's written consent to a short payoff. Ask for it before going to market, not after. - A federal court receiver can sell privately only after three appraisals, and not below two-thirds of appraised value.[3] State receiverships follow state law. - A receiver's appointment is a non-curable default under Hilton's 2025 Hampton franchise agreement, so the flag is part of the negotiation.[4] - Handing back the keys is a sale for tax purposes. On a non-recourse loan the full debt counts as the amount realized.[2] #### Can I sell a hotel that is losing money? Yes. Hotels with negative cash flow sell regularly, but buyers price them on what the hotel can earn after a fix, less the cost and risk of the fix. A hotel that loses money has no positive net operating income to put a cap rate on. Buyers instead underwrite a stabilized year, after a renovation, a new manager, a new flag or simply a lower debt load, and then deduct the capital and the time it takes to get there. The valuation math itself is walked through at `/hotel-valuation/how-to-value-a-hotel`. What matters for the seller is evidence. A buyer will pay for a turnaround it can see: a current STAR report showing the comp set is healthy while your hotel is not, a written PIP scope, and a trailing twelve-month P&L that reconciles to the bank statements even though the numbers are bad. Bad numbers presented cleanly sell. Unclear numbers do not. The document list is at `/sell-a-hotel/documents-needed`. #### Can I sell while the loan is in default or with the special servicer? Yes, with the lender's cooperation. You still hold title until a foreclosure or deed in lieu, but the lender's lien has to be released at closing. If the sale price covers the loan balance, default interest, fees and closing costs, the lender is paid off at closing like any other sale. If it does not, the sale works only if the lender agrees in writing to release its lien for less than it is owed, often called a short sale or discounted payoff. A lender or special servicer weighs that offer against what it expects to net from its other remedies, so a marketed process with real bids is the owner's best evidence of value. Start that conversation early. Trepp reported that 8.63 percent of lodging CMBS loans were with the special servicer in July 2026, and that one large new transfer that month was a $280 million maturity default on two hotels.[1] Servicers are busy, and approvals take time. What a servicer can and cannot agree to, and what to do in the first 30 days, is covered at `/hotel-financing/loan-workouts`. This page picks up where a workout stops making sense. #### What is a receivership sale? A court appoints a neutral receiver to run the hotel, and the receiver, not the owner, markets and sells it with court approval. Lenders ask for a receiver to take control of cash and operations while the default is resolved. In federal court, the sale rules are in the statute. Property in the hands of a receiver is sold at public sale unless the court orders otherwise. A private sale requires a hearing with notice, three disinterested appraisers, a price of at least two-thirds of the appraised value, newspaper publication at least ten days before confirmation, and it fails if a bona fide offer comes in at least 10 percent higher.[3] State court receiverships, which are more common for single hotels, follow each state's own rules. Two hotel-specific points. Under Hilton's 2025 Hampton franchise agreement, an order appointing a receiver for the hotel lets the brand terminate immediately with no right to cure, and Hilton's lender comfort letter form says a receiver may be required to sign Hilton's receiver agreement.[4] So keeping the flag on is a three-way negotiation among the lender, the receiver and the brand. And the owner's equity is last in line: sale proceeds pay the receiver's costs and the lender first. #### What is a note sale, and what does it mean for me? The lender sells your loan, not your hotel. You now owe the same debt to a new holder, often one that wants the property. A lender that does not want to foreclose can sell the promissory note and mortgage to an investor, usually at a discount to the balance. The owner is not a party to that sale and has no vote. The loan documents do not change, but the counterparty does. A bank may have preferred an extension. A note buyer that paid less than par may prefer a fast discounted payoff, or may intend to foreclose and own the hotel. For an owner, a note sale is sometimes an opening. A new holder with a lower basis in the loan can accept a payoff the original lender could not. That is the moment a sale or recapitalization with fresh money can work. We do not publish note pricing, because no public source reports it for hotel loans. #### What is a deed in lieu of foreclosure? You voluntarily deed the hotel to the lender in exchange for a release, skipping the foreclosure lawsuit. The lender has to agree to it. A deed in lieu is faster and quieter than foreclosure, and the main thing the owner negotiates is the release: of the loan, and of any guaranty. Lenders usually want clean title, so junior liens and unpaid taxes can block it. The brand matters here too. Hilton's comfort letter form gives a lender a cure period plus an additional 180 days to complete its acquisition of the hotel through foreclosure or other proceedings, and states that such an acquisition is not a prohibited transfer under the franchise agreement.[4] Staff are the other practical issue. Federal WARN rules apply to employers with 100 or more employees, and in a sale the seller is responsible for any required notice up to the closing date.[6] Get employment counsel involved before a transfer date is set. #### What is the tax on a short sale, deed in lieu or foreclosure? The IRS treats each one as a sale of the hotel. Whether you also have canceled debt income depends on whether the loan is recourse. IRS Publication 4681 says a foreclosure is treated as a sale from which you may realize gain or loss, even if you voluntarily return the property to the lender, and that a voluntary conveyance in lieu of foreclosure is treated as an exchange of property to satisfy a debt.[2] On a non-recourse loan, the entire unpaid debt is treated as the amount realized, and there is no canceled debt income. If the debt is more than your adjusted basis, you have a taxable gain even though you receive no cash. On a recourse loan, gain or loss is measured against the hotel's fair market value, and any forgiven debt above that value is ordinary income unless an exclusion applies.[2] The exclusions include bankruptcy, insolvency, and an election for qualified real property business indebtedness.[2] This is where owners get surprised. A hotel that was depreciated for years and refinanced along the way can have debt well above basis. The layers of tax on the gain itself are explained at `/sell-a-hotel/taxes-when-selling-a-hotel`. Run the numbers with a CPA before choosing a path. #### When does a bankruptcy sale make sense? When liens, judgments or disputes make a normal closing impossible, because a bankruptcy court can order a sale free and clear of them. Section 363 of the Bankruptcy Code lets the trustee sell property of the estate outside the ordinary course of business after notice and a hearing, and sell it free and clear of other parties' interests when the statute's conditions are met.[7] Buyers like the clean title. The cost is legal fees, time and loss of privacy. It also touches the franchise: under the 2025 Hampton agreement a bankruptcy filing that results in an order for relief is a ground for immediate termination.[4] A bankruptcy sale is a decision to make with restructuring counsel, not a marketing tactic. Table: How a distressed hotel changes hands: six paths compared Path | Who controls it | What the owner can get | Key constraint Marketed sale, loan paid in full | Owner | Remaining equity | Price must clear the loan and closing costs Lender-approved short sale | Owner runs it, lender approves it | A release, if negotiated | Written lender consent; forgiven recourse debt can be income[2] Receivership sale | Receiver and court | Usually nothing until the lender is paid | Federal private sales: three appraisals, two-thirds of value floor[3] Note sale | Lender | Nothing directly; a new party to negotiate with | Owner has no vote Deed in lieu | Lender must agree | Release of the loan and, if negotiated, the guaranty | Treated as a sale for tax; clean title needed[2] Bankruptcy section 363 sale | Bankruptcy court | Whatever remains after creditors | Notice and hearing; cost and publicity[7] First-party data point: Matthews Hotel Markets' September 2026 rate sheet shows what a buyer's new loan is priced from: the 10-year Treasury was 4.94% on September 17, 2026 and SOFR was 3.85%.[5] A distressed hotel sells to a buyer who has to finance it at today's index, which is why the price is set by today's debt cost and not by the old loan balance. Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: a sale that does not clear the loan, and the tax that follows): Hypothetical. A 110-key hotel owes $12.0 million on a loan that matured. Marketed bids come in at $10.0 million. Closing costs are $300,000, so net proceeds are $9.7 million and the shortfall to the lender is $2.3 million. The owner's adjusted basis, after years of depreciation, is $9.0 million. If the loan is recourse and the lender approves the sale and forgives the $2.3 million: the owner has a sale at $10.0 million against a $9.0 million basis, so $1.0 million of gain before closing costs, plus $2.3 million of canceled debt that is ordinary income unless the insolvency, bankruptcy or qualified real property business debt exclusion applies.[2] If the loan is non-recourse and the owner instead deeds the hotel to the lender: the amount realized is the full $12.0 million of debt. Gain is $12.0 million minus $9.0 million, or $3.0 million, with no cash received and no canceled debt income.[2] Same hotel, same debt, two different tax bills, and in both cases the tax arrives in a year when the owner received little or no cash. That is why the tax model comes before the choice of path. FAQ: - Q: Can I sell my hotel if it is losing money? A: Yes. Buyers price a money-losing hotel on what it can earn after a renovation, new management or new flag, minus the cost and risk of getting there. Clean financials and a written PIP scope matter more than the current loss. - Q: Can I sell my hotel if I am behind on the loan? A: Yes, but the lender's lien must be released at closing. If the price covers the debt, it is a normal payoff. If not, you need the lender's written agreement to accept less before you can close. - Q: Should I give the hotel back to the bank or try to sell it first? A: Usually test the market first. Real bids tell you and the lender what the hotel is worth, and a sale you run keeps options open. A deed in lieu needs lender consent and is taxed as a sale anyway.[2] - Q: What is a receivership sale of a hotel? A: A court-appointed receiver runs the hotel and sells it with court approval. In federal court, a private sale needs three appraisals and cannot be confirmed below two-thirds of appraised value.[3] State rules vary. - Q: My lender sold my hotel loan. What does that mean? A: You owe the same debt on the same terms to a new holder. A note buyer that paid a discount may accept a lower payoff than your old lender could, or may plan to foreclose. Open a conversation quickly. - Q: Do I owe taxes if I lose my hotel to foreclosure? A: Possibly. The IRS treats foreclosure and deed in lieu as a sale. On non-recourse debt, the full loan balance is the amount realized. On recourse debt, forgiven amounts can be ordinary income unless an exclusion applies.[2] - Q: Will my hotel lose its flag if a receiver is appointed? A: It can. Under Hilton's 2025 Hampton agreement, a receiver's appointment allows immediate termination, and Hilton may require the receiver to sign a receiver agreement.[4] Keeping the flag becomes a negotiation among lender, receiver and brand. - Q: How fast can a distressed hotel be sold? A: A full marketed sale runs about 24 weeks in our published playbook.[8] A sale to a known buyer can be shorter, but lender approval of a short payoff and the brand's review of the buyer still take weeks. Sources: - [1] CMBS Special Servicing Rate Falls as Office, Lodging Recover (July 2026 Trepp data) (CRE Daily, citing Trepp, accessed 2026-09-18): https://www.credaily.com/briefs/cmbs-special-servicing-rate-falls-as-office-lodging-recover/ - [2] Publication 4681 (2025), Canceled Debts, Foreclosures, Repossessions, and Abandonments (Internal Revenue Service, accessed 2026-09-18): https://www.irs.gov/publications/p4681 - [3] 28 U.S. Code section 2001, Sale of realty generally (Legal Information Institute, Cornell Law School, accessed 2026-09-18): https://www.law.cornell.edu/uscode/text/28/2001 - [4] 2025 Hampton Franchise Disclosure Document (issued March 30, 2025): Item 17, Franchise Agreement section 13.2, and Exhibit K lender comfort letter form (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - [5] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/rates - [6] 20 CFR 639.3 (WARN Act employer definition) and 20 CFR 639.4(c) (sale of a business) (Legal Information Institute, Cornell Law School, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/20/639.4 - [7] 11 U.S. Code section 363, Use, sale, or lease of property (Legal Information Institute, Cornell Law School, accessed 2026-09-18): https://www.law.cornell.edu/uscode/text/11/363 - [8] How to sell a hotel: the 24-week transaction process (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/process ### What taxes do I pay when I sell a hotel? URL: https://matthewshotelmarkets.com/sell-a-hotel/taxes-when-selling-a-hotel Last updated: 2026-09-18 A hotel sale is taxed in layers. Per the IRS as of September 18, 2026: gain from building depreciation is unrecaptured section 1250 gain, taxed at a maximum 25 percent. Gain on furniture and equipment, up to the depreciation taken, is ordinary income. The rest is long-term capital gain at up to 20 percent.[1][2] A 3.8 percent net investment income tax and state taxes can apply on top.[3] Key takeaways: - Building depreciation is not taxed as ordinary income when the building was depreciated straight-line. It is unrecaptured section 1250 gain, capped at 25 percent for individuals.[1][2] - FF&E is different. It is section 1245 property, and gain up to the depreciation taken is ordinary income.[2] - The purchase price allocation among land, building, FF&E and goodwill decides how much gain lands in each layer. Buyer and seller both report it on Form 8594.[4] - A 1031 exchange defers gain on real property only. Since the Tax Cuts and Jobs Act, the FF&E does not qualify.[5] - State transfer taxes range widely. Florida charges 70 cents per $100, and Washington's top tier is 3 percent.[6][7] #### How is the gain on a hotel sale calculated? Asset by asset. A hotel sale is a sale of land, a building, personal property and often goodwill, and each has its own basis and its own tax treatment. Gain is the amount realized for an asset minus its adjusted basis, which is what you paid plus improvements minus the depreciation allowed or allowable. Because a hotel is an operating business, the IRS treats its sale as the sale of a group of assets. When goodwill or going concern value could attach, both the seller and the buyer must file Form 8594 and allocate the price across asset classes. Furniture, fixtures, buildings, land and equipment are generally Class V, other section 197 intangibles are Class VI, and goodwill and going concern value are Class VII.[4] The allocation is negotiated in the purchase agreement, and the two sides want different things. A buyer generally prefers more price on FF&E, which it can depreciate quickly. A seller generally prefers less, because FF&E gain is ordinary income. Settle the allocation with your CPA before you sign, not at closing. #### How is the building taxed? The gain equal to the depreciation you took is unrecaptured section 1250 gain, taxed at a maximum of 25 percent. It is not ordinary income if the building was depreciated straight-line. This is the point owners, and a lot of web pages, get wrong. A hotel building is section 1250 property. IRS Publication 544 says gain on section 1250 property is ordinary income only to the extent of "additional depreciation", which for property held more than a year means depreciation taken in excess of straight-line.[2] Nonresidential real property is depreciated over 39 years under the general depreciation system, and a hotel is on that side of the line: Publication 946 excludes units in a hotel or motel from the definition of a dwelling unit, so a hotel is not residential rental property.[9] A building depreciated straight-line has no additional depreciation, so none of its gain is ordinary under section 1250. Instead, the part of the long-term gain that is due to depreciation is "unrecaptured section 1250 gain". The IRS taxes it at a maximum 25 percent rate. It cannot be more than your net section 1231 gain for the year.[1][2] Two exceptions. A C corporation must treat an extra 20 percent of that depreciation-related gain as ordinary income.[2] And for a building held one year or less, all of the depreciation counts as additional depreciation, so it is recaptured as ordinary income.[2] #### How are the land and the rest of the gain taxed? As section 1231 gain, which is treated as long-term capital gain in a net gain year: 0, 15 or 20 percent for individuals, depending on taxable income. Real property used in a business and held longer than a year is section 1231 property. After the recapture amounts are carved out, the remaining gain on the building and all of the gain on the land is section 1231 gain. If your section 1231 transactions net to a gain for the year, it is treated as long-term capital gain.[2] The IRS lists the long-term rates as 0, 15 and 20 percent. For tax years beginning in 2025, the 20 percent rate starts above $600,050 of taxable income for married couples filing jointly and above $533,400 for single filers.[1] A hotel sale usually pushes the owner's income past those lines in the year of sale, so plan on 20 percent for this layer. One trap: if you deducted net section 1231 losses in the previous five years, an equal amount of this year's section 1231 gain is taxed as ordinary income first.[2] Most hotels are owned through LLCs and partnerships, so all of these layers pass through to the members' own returns. #### How is the FF&E taxed? As ordinary income, up to the depreciation you took. Furniture, fixtures and equipment are section 1245 property. Publication 544 is direct: gain on the disposition of section 1245 property is treated as ordinary income to the extent of depreciation allowed or allowable, and only gain above that is section 1231 gain.[2] Section 1245 property includes depreciable personal property, which covers guest room furniture, televisions, kitchen and laundry equipment and vehicles. Hotel FF&E is usually depreciated fast and is often fully depreciated, so nearly every dollar of price allocated to it is ordinary income. The same rule reaches anything else you depreciated as personal property. If a cost segregation study moved parts of the building into shorter-lived personal property classes, you took faster deductions then, and that depreciation comes back as ordinary income now. #### What other taxes apply on top? Possibly the 3.8 percent net investment income tax, plus state income tax and a state or local transfer tax. The net investment income tax is 3.8 percent on the lesser of net investment income or the amount by which modified adjusted gross income exceeds $250,000 for joint filers or $200,000 for single filers. It reaches gain on property held in a trade or business that is a passive activity for the taxpayer. It does not apply to income from an active business.[3] For a hotel owner, the answer depends on whether that owner materially participates. That is a question of fact for your CPA. Transfer taxes are set by states and localities. Florida's documentary stamp tax on deeds is 70 cents per $100 of consideration, or 60 cents plus a 45 cent surtax in Miami-Dade County.[6] Georgia charges $1 for the first $1,000 and 10 cents for each additional $100.[10] Washington's real estate excise tax is graduated, from 1.1 percent on the first $525,000 to 3 percent on the portion of price above $3,025,000, before local tax.[7] Some states charge nothing. Who pays is set by local custom and the contract. The rest of the closing cost stack is at [How much does a hotel broker charge?](/sell-a-hotel/broker-fees). #### Can a 1031 exchange or an installment sale defer the tax? A 1031 exchange can defer the gain on the real property. It cannot defer the FF&E, and an installment sale cannot defer recapture. Section 1031 lets you defer gain when you exchange real property held for business or investment for like-kind real property. You have 45 days after the sale to identify replacement property and 180 days to close on it, or until the due date of your tax return, including extensions, if that comes first.[11] Since the Tax Cuts and Jobs Act, section 1031 applies only to real property, not personal or intangible property, and any money or other property you receive is taxable to that extent.[5] For a hotel, that means the price allocated to FF&E and goodwill is taxed even in a well-run exchange. The mechanics, including the hotel-specific problems, are at `/hotel-financing/1031-exchange-hotels`. Seller financing spreads capital gain over the years you collect payments. It does not spread recapture. Publication 537 requires depreciation recapture income to be reported in the year of sale, whether or not a payment was received that year.[12] Table: How each part of a hotel sale is taxed federally (individual and pass-through owners, assets held over one year) Part of the gain | Tax treatment | Maximum federal rate | 1031 eligible? Land appreciation | Section 1231 gain, long-term capital gain[2] | 20%[1] | Yes[5] Building: gain equal to straight-line depreciation | Unrecaptured section 1250 gain[2] | 25%[1] | Yes[5] Building: gain above original cost | Section 1231 gain, long-term capital gain[2] | 20%[1] | Yes[5] FF&E: gain up to depreciation taken | Section 1245 recapture, ordinary income[2] | Owner's ordinary rate | No[5] Goodwill and going concern value | Class VII asset on Form 8594[4] | Ask your CPA | No[5] Net investment income tax | Applies if the hotel is a passive activity for the owner[3] | 3.8% on top | Not applicable First-party data point: The Matthews Hotel Index for Q1 2026 gives the cap-rate band that sets the sale price, and the sale price is the starting number for every tax layer on this page.[8] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: the federal layers on a $12.0 million hotel sale): Hypothetical, for an individual owner at the top rates, held more than one year. Sale price $12.0 million, allocated $2.0 million to land, $9.0 million to the building and $1.0 million to FF&E. Original cost: land $1.5 million, building $7.0 million, FF&E $1.2 million. Depreciation taken: $1.8 million on the building, straight-line, and the full $1.2 million on the FF&E. Land: $2.0 million minus $1.5 million is $500,000 of gain, at 20 percent, or $100,000. Building: adjusted basis is $7.0 million minus $1.8 million, or $5.2 million, so gain is $9.0 million minus $5.2 million, or $3.8 million. The first $1.8 million is unrecaptured section 1250 gain at a maximum 25 percent, or $450,000. The other $2.0 million is capital gain at 20 percent, or $400,000. FF&E: basis is zero, so all $1.0 million is gain, and all of it is within the $1.2 million of depreciation taken. It is ordinary income at the owner's own rate. Total before the FF&E layer: $950,000 of federal tax on $4.3 million of real property gain. If the earlier, wrong reading were true and the $1.8 million of building depreciation were ordinary income, that slice alone would be taxed at the owner's top ordinary rate instead of 25 percent. Add the ordinary tax on $1.0 million of FF&E, possibly 3.8 percent NIIT, and state tax. If this hotel were in Florida outside Miami-Dade, documentary stamp tax at 70 cents per $100 on $11.0 million of real property consideration would be $77,000.[6] FAQ: - Q: What taxes do I pay when I sell a hotel? A: Federal tax in layers: up to 20 percent on capital gain, up to 25 percent on gain from building depreciation, and ordinary rates on FF&E recapture.[1][2] Then possibly 3.8 percent NIIT, state income tax and a state transfer tax.[3] - Q: Is depreciation recapture on a hotel building taxed as ordinary income? A: Generally no. If the building was depreciated straight-line, there is no ordinary recapture under section 1250. The depreciation-related gain is unrecaptured section 1250 gain, taxed at a maximum 25 percent.[1][2] FF&E recapture is the part taxed as ordinary income. - Q: I have depreciated my hotel for 15 years. How much tax will I owe? A: Add up the depreciation taken on the building and expect up to 25 percent on that amount, then up to 20 percent on gain above original cost.[1] FF&E gain is ordinary. Your CPA needs your depreciation schedules to compute it. - Q: Can I avoid taxes on a hotel sale with a 1031 exchange? A: You can defer the gain on the real property if you identify replacement property within 45 days and close within 180.[11] The FF&E and goodwill do not qualify, so part of the price is taxed anyway.[5] - Q: Do I need the 1031 exchange set up before I close? A: Yes. The 45-day and 180-day clocks start when you transfer the hotel, so the exchange structure has to be in place before closing.[11] See /hotel-financing/1031-exchange-hotels for the steps. - Q: Does seller financing spread out the tax? A: Only part of it. An installment sale spreads capital gain over the payment years, but IRS Publication 537 requires depreciation recapture income to be reported in the year of sale.[12] - Q: Is there a transfer tax when I sell a hotel? A: It depends on the state. Florida charges 70 cents per $100 of consideration.[6] Georgia charges $1 on the first $1,000 and 10 cents per additional $100.[10] Washington's top tier is 3 percent.[7] Some states have none. - Q: Does the purchase price allocation really matter? A: Yes. Every dollar allocated to FF&E is likely ordinary income to the seller, while a dollar on land or building is taxed at 20 or 25 percent at most.[1][2] Both sides report the same allocation on Form 8594.[4] Sources: - [1] Topic no. 409, Capital gains and losses (2025 rate thresholds; 25% maximum on unrecaptured section 1250 gain; page last reviewed February 25, 2026) (Internal Revenue Service, accessed 2026-09-18): https://www.irs.gov/taxtopics/tc409 - [2] Publication 544 (2025), Sales and Other Dispositions of Assets, chapter 3 (section 1231, section 1245 and section 1250 property) and chapter 4 (unrecaptured section 1250 gain) (Internal Revenue Service, accessed 2026-09-18): https://www.irs.gov/publications/p544 - [3] Topic no. 559, Net investment income tax (page last reviewed April 2, 2026) (Internal Revenue Service, accessed 2026-09-18): https://www.irs.gov/taxtopics/tc559 - [4] Instructions for Form 8594, Asset Acquisition Statement Under Section 1060 (Internal Revenue Service, accessed 2026-09-18): https://www.irs.gov/instructions/i8594 - [5] Like-kind exchanges: real estate tax tips (page last reviewed May 1, 2026) (Internal Revenue Service, accessed 2026-09-18): https://www.irs.gov/businesses/small-businesses-self-employed/like-kind-exchanges-real-estate-tax-tips - [6] Documentary Stamp Tax (deed rates, section 201.02, Florida Statutes) (Florida Department of Revenue, accessed 2026-09-18): https://floridarevenue.com/taxes/taxesfees/Pages/doc_stamp.aspx - [7] Real estate excise tax (graduated state rates effective January 1, 2023) (Washington State Department of Revenue, accessed 2026-09-18): https://dor.wa.gov/taxes-rates/other-taxes/real-estate-excise-tax - [8] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/research/mhi/q1-2026 - [9] Publication 946 (2025), How To Depreciate Property (nonresidential real property, 39-year recovery period; hotel and motel units are not dwelling units) (Internal Revenue Service, accessed 2026-09-18): https://www.irs.gov/publications/p946 - [10] Real Estate Transfer Tax (Georgia Department of Revenue, accessed 2026-09-18): https://dor.georgia.gov/real-estate-transfer-tax - [11] 26 U.S. Code section 1031, Exchange of real property held for productive use or investment (Legal Information Institute, Cornell Law School, accessed 2026-09-18): https://www.law.cornell.edu/uscode/text/26/1031 - [12] Publication 537 (2025), Installment Sales (depreciation recapture income) (Internal Revenue Service, accessed 2026-09-18): https://www.irs.gov/publications/p537 ## What is my hotel worth, and who decides? ### What is my hotel worth, and who decides? URL: https://matthewshotelmarkets.com/hotel-valuation Last updated: 2026-09-18 Hotel value is stabilized NOI divided by a cap rate, cross-checked against comparable sales and per-key pricing. Two variables move it: the NOI itself, and the cap rate buyers apply to it. HVS reported in April 2026 that U.S. hotel trades averaged an 8.2 percent cap rate in 2025, with stabilized hotels typically selling at 8 to 9 percent.[1] Key takeaways: - Value equals stabilized NOI divided by a cap rate. Everything else is a cross-check on those two inputs. - A hotel is a going concern, so you are valuing an operating business attached to real estate. - Cap rates respond to interest rates, but not in lockstep.[2] NOI moves with operations. - A PIP is a direct deduction plus a risk premium. It costs more than its face amount. - A broker opinion of value and an appraisal answer different questions for different audiences. #### How is a hotel valued? Stabilized NOI divided by a cap rate, cross-checked against comparable sales, discounted cash flow, and per-key pricing. The table above ranks the five approaches by how often each one actually decides the number, not by textbook order. In our practice, income capitalization governs for stabilized transactions because it directly ties value to the cash flow a buyer is actually purchasing. Discounted cash flow takes over when the asset is not yet stabilized, mid-PIP, ramping up after a brand conversion, or otherwise not producing a representative trailing number. Sales comparison and per-key pricing serve as sanity checks rather than primary methods, because true hotel comps, same brand, same market, same PIP status, are rare. The full arithmetic, from occupancy and ADR down to a final value, is worked through at [How to value a hotel](/hotel-valuation/how-to-value-a-hotel) #### What is a cap rate and where does mine come from? A cap rate is the unlevered yield a buyer accepts for the asset's risk, and it comes from recent comparable trades in the same segment and market, published quarterly in the Matthews Hotel Index. The Matthews Hotel Index for Q1 2026 publishes cap-rate bands by segment across the 14 markets we cover.[3] Segment, market, brand strength, and PIP status all move the number for a specific asset within its band. Current bands, and what moves them, are broken out at [Hotel cap rates in 2026](/hotel-valuation/hotel-cap-rates) #### Why did my value drop when my NOI did not? Because cap rates expanded. The same NOI divided by a wider cap rate produces a lower value, with nothing about the hotel's operations changing. It is a common valuation surprise owners bring to us. Interest rates and buyer risk appetite move cap rates, but not one for one. In CBRE's H1 2026 survey, the all-property average cap rate was essentially flat even as the 10-year Treasury peaked at 4.67 percent in mid-May, while hotel cap rates compressed.[2] When cap rates do widen across a holding period, the value math moves independent of anything an operator did or did not do, shown with real numbers in the worked example below. #### What is going-concern value? The value of the real estate and the operating business together, since a hotel without staff, systems and a brand is worth less than one running as a business. Appraisers and brokers both value hotels as going concerns rather than as vacant real estate, because the franchise agreement, the trained staff, the reservation systems and the guest relationships are part of what a buyer is purchasing and what produces the NOI in the first place. This is a meaningful distinction from valuing an apartment building or an office property, where the real estate and the operating business are largely separable. #### How does a PIP change the number? A PIP is deducted from unencumbered value, plus a risk premium for scope uncertainty and displacement during the renovation. An open property improvement plan does not automatically kill a deal, but it does change the math. Buyers subtract the estimated PIP cost from the unencumbered value, then add a premium to compensate for the risk that scope grows once work starts, and account for displacement revenue lost while rooms are out of service. The full arithmetic is at [What is involved in selling a hotel?](/sell-a-hotel) #### Who produces a hotel valuation? A broker opinion of value for a seller deciding whether and how to sell, and a USPAP-compliant appraisal for a lender deciding whether to fund a loan.[4] The two documents answer different questions for different audiences, and neither substitutes for the other. A BOV is typically fast and often free; an appraisal is a paid engagement that, for a federally related loan, must conform to USPAP.[5] The full comparison, including why the two numbers can diverge widely on the same asset, is at [Hotel BOV vs appraisal](/hotel-valuation/broker-opinion-of-value) #### What is my hotel worth per key? Price divided by keys, useful as a sanity check and for quick comparison, but it ignores NOI entirely and should never be the primary method. Two hotels with the same key count and wildly different NOI are not worth the same amount, which is exactly what a pure per-key comparison misses. Per-key numbers are most useful for a fast gut check against known comparable sales in the same chain scale and market, not as a substitute for an income-based valuation. Table: Three approaches to hotel value, and when each one governs Approach | How it works | When it governs | Weakness Income capitalization | Stabilized NOI divided by a cap rate | Almost always, for stabilized assets | Garbage in: a wrong NOI produces a confident wrong answer Discounted cash flow | Project several years of cash flow, discount to present | Transitional assets, PIPs, ramp-ups | Every assumption is arguable Sales comparison | Recent comparable sales, adjusted | Cross-check, and thin markets | Hotel comps are rarely truly comparable Cost | Replacement cost less depreciation | New construction and insurance | Says little about what a buyer will pay Per-key | Price divided by keys | Sanity check and shorthand | Ignores NOI entirely First-party data point: The Matthews Hotel Index for Q1 2026 publishes cap-rate bands by segment across the 14 markets we cover.[3] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: why value fell while NOI held): Hypothetical. A 96-key hotel, NOI flat at $1.42 million across two years. Year one, cap rate 7.25 percent: value equals $1.42 million divided by 0.0725, or $19.59 million, $204,000 per key. Year two, cap rate 8.25 percent: value equals $1.42 million divided by 0.0825, or $17.21 million, $179,000 per key. The hotel lost $2.38 million, 12 percent, with identical operations. One hundred basis points of cap rate expansion did it. It is a common question owners bring to a valuation conversation, and the answer is often not about the hotel. FAQ: - Q: How do you value a hotel? A: Stabilized NOI divided by a cap rate, cross-checked against comparable sales and per-key pricing. Discounted cash flow governs for transitional or PIP-affected assets. - Q: What is a good hotel cap rate in 2026? A: There is no single good number; it depends on segment, market and PIP status. HVS put the 2025 U.S. transaction average at 8.2 percent.[1] See the current bands by segment at /hotel-valuation/hotel-cap-rates. - Q: Why did my hotel's value drop when NOI was flat? A: Cap rates expanded. The same NOI divided by a wider cap rate produces a lower value even though nothing about the hotel's operations changed. - Q: What is going-concern value? A: The combined value of the real estate and the operating business, staff, systems, brand agreement and guest relationships, that make a hotel function as a business, not just a building. - Q: How much does a PIP reduce hotel value? A: More than its face cost. Buyers deduct the PIP amount, then add a risk premium for scope uncertainty and a deduction for displacement during the renovation. - Q: Is RevPAR or NOI more important for valuation? A: NOI. RevPAR measures revenue per room, but value is set on the profit that flows through after expenses, which is what a cap rate is applied to. - Q: What is a hotel worth per key? A: Price divided by key count. It is a useful sanity check and shorthand for comparison, but it ignores NOI entirely and should not be used as a primary valuation method. - Q: Do I need an appraisal or a broker opinion of value? A: An appraisal if a lender requires one for financing. A broker opinion of value if you are deciding whether and how to sell. See the comparison at /hotel-valuation/broker-opinion-of-value. Sources: - [1] HVS U.S. Market Pulse: April 2026 (HVS, accessed 2026-09-18): https://www.hvs.com/article/10450-hvs-us-market-pulse-april-2026 - [2] U.S. Cap Rate Survey H1 2026 (CBRE Research, accessed 2026-09-18): https://www.cbre.com/insights/reports/us-cap-rate-survey-h1-2026 - [3] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-17): https://matthewshotelmarkets.com/research/mhi/q1-2026 - [4] Uniform Standards of Professional Appraisal Practice (USPAP) (The Appraisal Foundation, accessed 2026-09-18): https://appraisalfoundation.org/products/uspap - [5] 12 CFR 34.44, minimum appraisal standards (Legal Information Institute, Cornell Law School, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/12/34.44 ### Why did my hotel appraise for less than I expected? URL: https://matthewshotelmarkets.com/hotel-valuation/appraisal-lower-than-expected Last updated: 2026-09-18 Usually for four reasons. The appraiser valued the hotel as is, not as you plan it. The appraiser added a management fee and a reserve to your expenses. The cap rate was wider than yours. And renovation cost was deducted. Federal rules define the value an appraiser must estimate,[1] and HVS put a normal stabilized hotel cap rate near 8.0 to 8.5 percent in April 2026.[2] Key takeaways: - A bank appraisal estimates market value as federal rules define it: the most probable price in an open market, with a typically motivated buyer and seller.[1] It is not the best price a targeted sale process might reach. - For a loan funding a renovation, regulators expect an as-is value and, where it applies, prospective values on completion and on stabilization.[3] Owners often quote the last one. Lenders often size to the first. - Appraisals for federally related loans must analyze and report deductions for proposed renovation.[4] A PIP comes off the number. - In the hypothetical below, $294,000 of expense adjustments removes $3.68 million of value, more than the cap rate and the PIP combined. - You cannot order the appraisal yourself. A bank's use of a borrower-ordered appraisal violates the agencies' appraisal regulations.[3] #### What is the appraiser actually estimating? Market value under a federal definition: the most probable price in a competitive and open market, as of a specific date. For national banks the definition sits at 12 CFR 34.42. Market value is the most probable price a property should bring under all conditions requisite to a fair sale, with buyer and seller each acting prudently and knowledgeably, typically motivated, and with a reasonable time allowed for exposure in the open market.[1] The interagency guidelines that all the federal bank regulators issued together apply the same concept.[3] Notice what the definition leaves out. It does not ask what the most motivated buyer might pay. It does not give credit for a business plan that has not happened. Appraisals for federally related transactions must also conform to USPAP,[4] which The Appraisal Foundation describes as the national standards for real estate appraisal.[5] The appraiser's job is a supportable number for a lender's file, and the rules push it toward the probable case. #### Why is the appraiser's NOI lower than mine? Because the appraiser restates your income statement the way a buyer would, with a management fee and an FF&E reserve you may not be paying. An owner-operator's books often show no management fee, because the owner is the manager. They often show no reserve for replacing furniture, fixtures and equipment, because the owner pays for replacements when they come due. An appraiser values the hotel in the hands of a typical buyer, who will pay for both. One-time revenue, such as a construction crew that filled the hotel for a season, may be removed. Property tax may be restated. None of this is a judgment about how you run the hotel. It is the difference between your tax return and a buyer's underwriting. The full line-by-line build is at [Walk me through the math on valuing a select-service hotel](/hotel-valuation/how-to-value-a-hotel) #### Why did the appraiser use a higher cap rate than I did? Because the appraiser has to support the rate with evidence, and the published evidence sits higher than most owners assume. HVS wrote in April 2026 that U.S. hotel transactions averaged an 8.2 percent cap rate in 2025, that a normal rate for a stabilized or near-stabilized hotel remains near 8.0 to 8.5 percent, and that prevalent discount rates are 10 to 11 percent.[2] HVS also warned readers to be wary of valuations that use aggressively low exit cap rates and discount rates, and said an exit cap rate of 6 to 7 percent in a low-barriers market for a typical limited-service, select-service or full-service hotel should flash yellow lights.[2] The Matthews Hotel Index for Q1 2026 puts select-service at 7.50 to 8.75 percent across 14 markets.[6] An owner who capitalized at the rate from a 2021 purchase will see a lower number from any appraiser working from current evidence. #### What is the difference between as-is and as-stabilized value? As-is is the hotel today in its current condition. As-stabilized is a prospective value after a renovation or ramp-up is finished. The interagency guidelines define as-is market value as the value of the property in its current physical condition, use and zoning as of the appraisal's effective date.[3] For a loan that finances renovation, the guidelines say an institution would generally request the as-is value and, as applicable, the prospective market value upon completion and upon stabilization, and that it should consider the prospective value that corresponds to the credit decision and the phase of the project being funded.[3] Federal minimum standards also require an appraisal to analyze and report appropriate deductions and discounts for proposed construction or renovation.[4] So one report can hold three numbers. If you are comparing your expectation with the lowest of the three, read the other two before you conclude the appraiser missed something. How the renovation deduction is built is at [How does a PIP affect my hotel's value?](/hotel-valuation/pip-and-hotel-value) #### Why was my broker's BOV higher than the appraisal? They answer different questions. A BOV estimates what a marketed sale could achieve. An appraisal supports a lender's collateral decision. A broker opinion of value prices to the live buyer pool, including the buyer who will pay more because the hotel fits its portfolio. An appraisal prices to the typically motivated buyer in the definition.[1] Neither corrects the other, and the numbers can sit far apart on the same hotel. Bank regulators do not accept a broker price opinion in place of an appraisal or even as an evaluation.[7] The full comparison is at [What is a hotel broker opinion of value, and how is it different from an appraisal?](/hotel-valuation/broker-opinion-of-value) #### What can I do about a low appraisal? Read the report, correct facts, supply evidence through the lender, and if the number stands, change the loan or the plan. Start with the lender, because the lender is the appraiser's client. The guidelines bar a bank from using an appraisal the borrower ordered or provided, and they require the people who select appraisers to be independent of loan production.[3] That means you cannot shop for a second opinion and hand it in. You can ask the lender for the report, check the room count, revenue, expenses and PIP scope for errors, and send documented corrections and comparable sales through the lender. If the value holds, the choices are practical: more equity, a smaller loan, a different lender type, finishing the renovation before refinancing, or selling. For national banks the appraisal requirement applies to commercial real estate transactions above $500,000,[8] so a bank loan on a hotel will almost always need one. The financing side of that decision is at [Should I refinance my hotel or sell it instead?](/hotel-financing/refinance-or-sell) Table: Why an owner's number and a lender's appraisal differ Item | Owner's expectation | Lender's appraisal | Why Value definition | Best price a good sale process might reach | Most probable price, typically motivated parties[1] | 12 CFR 34.42 sets the definition Condition valued | After the renovation and ramp-up | As is, plus prospective values where the loan funds work[3] | The lender sizes to the phase it is funding NOI | As reported, often with no management fee or reserve | Restated to a typical buyer's expense load | The next owner will pay both Cap rate | Remembered from the purchase or a headline trade | Supported by current sales and surveys[2] | The report must conform to USPAP[4] Renovation or PIP | Ignored, or assumed to pay for itself | Deducted and reported[4] | 12 CFR 34.44(d) Who orders it | The owner | The lender, independent of loan production[3] | Borrower-ordered appraisals cannot be used First-party data point: The Matthews Hotel Index for Q1 2026, published by Matthews Hotel Markets, puts select-service cap rates at 7.50 to 8.75 percent and full-service at 6.50 to 8.25 percent across 14 markets. An expectation built on a rate below those bands needs its own evidence.[6] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: a $16.25M expectation and an $11.29M as-is appraisal): Hypothetical. An owner-operated hotel with $4,200,000 of revenue reports NOI of $1,300,000. The books carry no management fee and no FF&E reserve. The owner capitalizes at 8.00 percent and expects $1,300,000 divided by 0.08, or $16.25 million. The appraiser adds a 3 percent management fee, $126,000, and a 4 percent reserve, $168,000. Restated NOI is $1,006,000. The appraiser supports an 8.25 percent cap rate. Stabilized value equals $1,006,000 divided by 0.0825, or $12.19 million. A $900,000 PIP is outstanding, so the as-is value is $11.29 million. The gap is $4.96 million, 30 percent. Of that, $3.68 million comes from the two expense lines, $0.38 million from 25 basis points of cap rate, and $0.90 million from the PIP. The percentages used for the fee and the reserve are assumptions for this hypothetical. The point is the order of size. Most of the gap was in the owner's income statement, not in the appraiser's cap rate. FAQ: - Q: Can I order my own appraisal for the bank to use? A: No. The interagency guidelines say an institution's use of a borrower-ordered or borrower-provided appraisal violates the agencies' appraisal regulations.[3] The lender engages the appraiser. - Q: Is an appraisal the same as market price? A: It estimates the most probable price under a federal definition, with typically motivated parties and reasonable market exposure.[1] A marketed sale can beat it or miss it. - Q: Why did the appraiser deduct my PIP? A: Minimum federal appraisal standards require an appraisal to analyze and report appropriate deductions and discounts for proposed construction or renovation.[4] A buyer would deduct it too. - Q: What cap rate do hotel appraisers use in 2026? A: They support one from sales and surveys. HVS put a normal stabilized hotel near 8.0 to 8.5 percent in April 2026, with discount rates of 10 to 11 percent.[2] - Q: Can I challenge a low hotel appraisal? A: You can send factual corrections and comparable sales through the lender, who is the appraiser's client. You cannot substitute your own report.[3] Whether the lender asks for a revision is its decision. - Q: Does a low appraisal mean my hotel lost value? A: Not always. It may mean your expectation left out a management fee, a reserve or a PIP. Compare the appraiser's restated NOI with yours line by line before drawing a conclusion. - Q: Will a broker opinion of value help with the lender? A: Not as a valuation. Regulators say a broker price opinion is not acceptable even as an evaluation.[7] Its comparable sales can still be useful evidence to pass along. Sources: - [1] 12 CFR 34.42, definitions (market value) (Legal Information Institute, Cornell Law School, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/12/34.42 - [2] HVS U.S. Market Pulse: April 2026 (HVS, accessed 2026-09-18): https://www.hvs.com/article/10450-hvs-us-market-pulse-april-2026 - [3] Interagency Appraisal and Evaluation Guidelines, December 2010 (full text) (OCC, Federal Reserve, FDIC, OTS and NCUA, via FDIC, accessed 2026-09-18): https://www.fdic.gov/news/news/financial/2010/fil10082a.pdf - [4] 12 CFR 34.44, minimum appraisal standards (Legal Information Institute, Cornell Law School, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/12/34.44 - [5] Uniform Standards of Professional Appraisal Practice (USPAP) (The Appraisal Foundation, accessed 2026-09-18): https://appraisalfoundation.org/products/uspap - [6] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/research/mhi/q1-2026 - [7] Interagency Appraisal and Evaluation Guidelines (FIL-82-2010), summary letter (Federal Deposit Insurance Corporation, accessed 2026-09-18): https://www.fdic.gov/news/financial-institution-letters/2010/fil10082.html - [8] 12 CFR 34.43, appraisals required; transactions requiring a state certified or licensed appraiser (Legal Information Institute, Cornell Law School, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/12/34.43 ### How much is my branded select-service hotel worth? URL: https://matthewshotelmarkets.com/hotel-valuation/branded-select-service-hotel-value Last updated: 2026-09-18 Nobody can price a specific Hampton Inn or Holiday Inn Express from its flag and key count. The method is the same for every branded select-service hotel: buyer-ready NOI divided by a cap rate, less any change-of-ownership PIP. The Matthews Hotel Index for Q1 2026 puts select-service cap rates at 7.50 to 8.75 percent across 14 markets.[1] Key takeaways: - The flag does not set the value. NOI, the cap rate and the capital a buyer must spend after closing do. - Brand fees are public. Hilton's 2025 Hampton FDD lists a 6 percent royalty and a 4 percent program fee, both on gross rooms revenue.[2] - A sale is a change of ownership. Under the Hampton FDD the buyer applies for a new franchise, pays a $200,000 application fee and agrees to the brand's upgrade requests.[2] - In the hypothetical below, a 110-key hotel is worth $11.29 million to $13.17 million across the index band, before any PIP deduction. - We do not publish comparable sales by brand. Real comps need NOI and PIP status, which public records do not show. #### Why can't anyone tell me what a Hampton Inn is worth? Because two hotels under the same flag with the same room count can differ by millions in NOI and in required capital. A brand tells a buyer which reservation system fills the hotel and which standards it must meet. It does not tell the buyer the occupancy, the rate, the labor cost, the tax bill or the age of the rooms. Those set value. Any page or tool that quotes a price for your brand without your trailing twelve months is quoting an average of other people's hotels. The honest answer is a method and a range, then a number once the financials are on the table. The same point in per-key terms is at [What is my hotel worth per key?](/hotel-valuation/revpar-multiples-and-per-key) #### What NOI will a buyer use for my hotel? Your trailing twelve months, restated to include a management fee and an FF&E reserve whether or not you pay them today. A buyer rebuilds the income statement the way its lender will. That means a management fee even if you run the hotel yourself, and a reserve for furniture, fixtures and equipment even if you have not been funding one. It also means property tax at the buyer's likely assessed value where the state reassesses on sale. The line-by-line build is at [Walk me through the math on valuing a select-service hotel](/hotel-valuation/how-to-value-a-hotel). The worked example below uses expense ratios that are assumptions for illustration, not benchmarks. Replace every one with your own figures. #### How much do brand fees take out of my NOI? Read your own franchise agreement. For new Hilton select-service agreements in 2025, the royalty and program fee together run 9.5 to 10 percent of gross rooms revenue. Franchise Disclosure Documents are public, and Item 6 lists the fees. Hilton's 2025 Hampton FDD, issued March 30, 2025, lists a monthly royalty of 6 percent of gross rooms revenue and a monthly program fee of 4 percent.[2] The 2025 Hilton Garden Inn FDD lists 5.5 percent and 4 percent.[3] The 2025 Home2 Suites FDD lists 6 percent and 3.5 percent.[4] Hilton reserves the right to change the program fee, and says the Hampton rate will not rise by more than 1 percent of gross rooms revenue over the term.[2] Those two lines are not the full cost of the flag. Item 6 also lists loyalty program, distribution, technology and training charges that vary with how guests book. An older agreement may carry different rates than the current FDD, so a buyer will underwrite the agreement it will sign, not the one you have. #### What cap rate applies to a branded select-service hotel? Start with the select-service band for your market in the Matthews Hotel Index, then move within it for franchise term, PIP status and supply. Across the 14 markets in the index, select-service spans 7.50 to 8.75 percent for stabilized, PIP-current product.[1] HVS wrote in April 2026 that a normal cap rate for a stabilized or near-stabilized hotel remains near 8.0 to 8.5 percent, and that older limited-service, select-service and full-service hotels facing a big renovation will likely trend above that mark.[5] A long remaining franchise term, a recent renovation and limited new supply push toward the tight end. A short term, an open PIP or a new competitor under construction push toward the wide end. What moves the band itself is covered at [What is a good cap rate for a hotel in 2026?](/hotel-valuation/hotel-cap-rates) #### What happens to my franchise when I sell? The buyer does not inherit your agreement. It applies for its own, and the brand can attach a property improvement plan to the approval. Under the 2025 Hampton FDD, a sale is a Change of Ownership Transfer. The proposed buyer must submit a change of ownership application, pay the franchise application fee, sign the then-current form of franchise agreement and agree to Hilton's request for upgrades to the hotel.[2] The application fee for a change of ownership is $200,000, and the fee to prepare a PIP is $10,000, which Hilton may waive or credit.[2] A buyer treats the application fee and the PIP as part of its total cost, so both come out of what it can pay you. Other brands write their own terms. Read the FDD for your flag. How the PIP itself is priced is at [How does a PIP affect my hotel's value?](/hotel-valuation/pip-and-hotel-value) #### Why don't you publish comps for my brand? Because a real comp needs the NOI, the PIP status and the franchise term behind the price, and public records carry none of them. A deed or a press release shows a price and a key count. It does not show whether the buyer also took on a $2 million renovation, or whether the hotel was earning half of what yours earns. Subscriber databases fill some of that gap, and their licenses do not allow republication. So this page gives the method, the public fee facts and our own index band. A [broker opinion of value](/hotel-valuation/broker-opinion-of-value) applies real comparable trades to your hotel under a confidentiality agreement, which is the only setting where they are useful. Table: Franchise fees on gross rooms revenue, Hilton select-service brands, 2025 Franchise Disclosure Documents Brand | Monthly royalty fee | Monthly program fee | Change of ownership application fee Hampton by Hilton | 6%[2] | 4%[2] | $200,000[2] Hilton Garden Inn | 5.5%[3] | 4%[3] | $200,000[3] Home2 Suites by Hilton | 6%[4] | 3.5%[4] | $200,000[4] First-party data point: The Matthews Hotel Index for Q1 2026, published by Matthews Hotel Markets, puts select-service cap rates at 7.50 to 8.75 percent across the 14 markets we cover, for stabilized, PIP-current hotels.[1] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: a 110-key branded select-service hotel): Hypothetical. Every operating ratio here is an assumption for illustration. The two brand fee rates come from the 2025 Hampton FDD.[2] 110 keys, 72 percent occupancy, $135 ADR. RevPAR equals 0.72 times $135, or $97.20. Rooms revenue equals $97.20 times 110 times 365, or $3,902,580. Other revenue at 3 percent of rooms is $117,077. Total revenue is $4,019,657. Departmental expenses at 27 percent of revenue are $1,085,307. Undistributed expenses at 24 percent are $964,718. Royalty at 6 percent of rooms revenue is $234,155 and program fee at 4 percent is $156,103, together $390,258. Management fee at 3 percent of revenue is $120,590. Property tax and insurance are $310,000. FF&E reserve at 4 percent of revenue is $160,786. Total expenses are $3,031,659. NOI is $987,998, a 24.6 percent margin. At 7.50 percent, value is $13.17 million, about $119,800 per key. At 8.25 percent, $11.98 million, about $108,900 per key. At 8.75 percent, $11.29 million, about $102,600 per key. Now add a change-of-ownership PIP at a hypothetical $15,000 per key, or $1,650,000. At 8.25 percent the buyer's number falls to $10.33 million, about $93,900 per key. One point of program fee on this hotel is $39,026 a year, which is about $473,000 of value at 8.25 percent. Small lines matter at a cap rate. FAQ: - Q: How much is my Hampton Inn worth? A: Its buyer-ready NOI divided by a cap rate, less any PIP the brand attaches to the sale. The Matthews Hotel Index shows select-service at 7.50 to 8.75 percent for Q1 2026.[1] Without your financials, any single figure is a guess. - Q: Do Hampton Inns sell for more than other select-service brands? A: We do not publish brand rankings or brand-level comps. A stronger reservation system shows up in your RevPAR and NOI, and that is where a buyer pays for it. - Q: What franchise fees does a Hampton pay? A: Hilton's 2025 Hampton FDD lists a 6 percent royalty and a 4 percent program fee on gross rooms revenue, plus other program and technology charges in Item 6.[2] Your own agreement controls. - Q: Will the buyer take over my franchise agreement? A: Under the 2025 Hampton FDD, no. The buyer applies as a new franchisee, pays a $200,000 application fee, signs the then-current agreement and agrees to requested upgrades.[2] Other brands set their own terms. - Q: What cap rate should I use for a select-service hotel? A: The band for your market in the Matthews Hotel Index, 7.50 to 8.75 percent across 14 markets in Q1 2026,[1] adjusted for franchise term, PIP status and supply. HVS puts a normal stabilized hotel near 8.0 to 8.5 percent.[5] - Q: Does a management fee count if I manage the hotel myself? A: Yes. Buyers and appraisers add a market management fee and an FF&E reserve, because the next owner's lender will. Leaving them out overstates value. - Q: How do I get a real number for my hotel? A: Send trailing twelve month financials, the STR report if you have one, and the franchise agreement date. A broker opinion of value turns those into a range with stated comps and a stated cap rate. See /hotel-valuation/broker-opinion-of-value. Sources: - [1] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/research/mhi/q1-2026 - [2] 2025 Hampton Franchise Disclosure Document (issued March 30, 2025), Items 5, 6 and 17 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - [3] 2025 Hilton Garden Inn Franchise Disclosure Document (issued March 30, 2025), Items 5 and 6 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hilton-Garden-Inn.pdf - [4] 2025 Home2 Suites Franchise Disclosure Document (issued March 30, 2025), Items 5 and 6 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Home2.pdf - [5] HVS U.S. Market Pulse: April 2026 (HVS, accessed 2026-09-18): https://www.hvs.com/article/10450-hvs-us-market-pulse-april-2026 ### What is a hotel broker opinion of value, and how is it different from an appraisal? URL: https://matthewshotelmarkets.com/hotel-valuation/broker-opinion-of-value Last updated: 2026-09-18 A broker opinion of value is a broker's estimate of what a hotel would sell for today, produced for the owner. An appraisal is a USPAP-compliant valuation by a licensed or certified appraiser, usually ordered by a lender.[1] As of September 2026, federal banking rules generally require an appraisal on commercial real estate loans above $500,000,[2] and bank regulators do not accept a broker price opinion in its place.[3] Key takeaways: - A BOV answers what would this sell for. An appraisal answers what is this worth under a defined standard. - Lenders will not lend on a BOV. They order their own appraisal.[3] - In our practice, a BOV takes two to four weeks and carries no fee, because the broker is competing for the listing. - A CIM is a marketing document. A BOV is a pricing document. They are not the same thing. - Ask for the method. A BOV without comps, a cap rate and adjustments is a number, not an opinion. #### What is a broker opinion of value? A broker's written estimate of what a hotel would sell for in the current market, built from comps, a cap rate and a buyer-pool view, produced for the owner, often at no charge. A BOV exists to help an owner decide whether and how to sell, refinance, or bring in a partner. It is not a regulated appraisal product; it is a market-pricing opinion, and its value depends entirely on the broker's actual visibility into active buyers for that specific asset type and market, not just a desktop comp pull. #### How is it different from an appraisal? Governed by different rules entirely: a BOV follows state brokerage law, while an appraisal follows USPAP, the national standard that federal lending rules require.[4] This governance difference is the substantive one, more than the cost or turnaround differences in the table above. A BOV's content and the language a broker may use around it are constrained by state real estate license law, and those rules vary by state. Texas, for example, lets a licensed broker give a written price opinion only if it is not referred to as an appraisal.[5] An appraisal, by contrast, is governed by a single national standard, USPAP, regardless of which state the property sits in,[1] which is exactly why lenders can rely on it uniformly. #### What does an appraiser do that a broker does not? An appraiser develops the value under a defined professional standard, considering the income, sales comparison and cost approaches, and issues a report a lender can rely on for a federally related transaction.[4] A USPAP appraisal typically walks through income capitalization, sales comparison and cost approaches, states a highest-and-best-use conclusion, and documents every assumption in a way that can withstand a regulatory or legal challenge. A broker producing a BOV is not bound to that same documentation standard and is instead optimizing for a defensible, market-tested number delivered quickly. #### What is in a good BOV? Comparable sales with adjustments, a cap rate applied to stabilized NOI, a per-key cross-check, and a buyer-pool assessment specific to the asset. Every Matthews Hotel Markets BOV is built off the Matthews Hotel Index cap-rate band for the asset's segment and market, currently Q1 2026.[6] A BOV that hands an owner a single number with no comps and no stated cap rate is not an opinion an owner can evaluate; it is a guess dressed up as one. #### What does a BOV cost and how long does it take? In our practice, a BOV carries no fee and takes two to four weeks. An appraisal is a paid engagement whose fee and timing depend on the property and the appraiser. Brokers typically absorb the underwriting time on a BOV because it is part of pursuing the eventual listing engagement, which is why BOVs often carry no fee. An appraisal, ordered independently of any listing relationship, costs more, reflecting the additional documentation and liability standard behind it. Ask the appraiser for a written quote and timeline. #### Can I use a BOV for financing? No. Lenders order their own USPAP-compliant appraisal and will not accept a broker's opinion in its place. Federal banking rules generally require an appraisal by a state certified appraiser on commercial real estate loans above $500,000,[2] and the interagency guidelines say a broker price opinion is not acceptable even as the lighter evaluation used below that threshold.[3] A lender's collateral decision rests on that document, not on a document produced for the seller's own decision-making. An owner should never present a BOV to a lender expecting it to substitute for the required appraisal. #### BOV, appraisal or CIM: which do I need? A BOV to decide whether and how to sell, an appraisal when a lender requires one, and a CIM once you are ready to market the asset to buyers. These three documents answer three different questions for three different audiences, laid out side by side in the table above. Confusing them, treating a CIM's pricing guidance as an appraisal, for example, is a common and avoidable mistake. Table: BOV versus appraisal versus CIM | Broker opinion of value | Appraisal | CIM Who produces it | Licensed broker | Licensed or certified appraiser[2] | Broker Governed by | State brokerage law and license rules | USPAP[4] | Nothing; it is marketing Ordered by | Owner | Lender, usually | Owner, through the broker Purpose | What would this sell for today | Defined value under a defined standard | Present the asset to buyers Typical cost | Often no charge | Paid; quote varies by property | Included in the brokerage engagement Typical turnaround | 2 to 4 weeks in our practice | Varies; ask the appraiser | Weeks 1 to 2 in our playbook[7] Accepted for a loan | No[3] | Yes | No Contains | Comps, cap rate, adjustments, price conclusion | Three approaches, highest and best use, full narrative | Financials, market, photos, brand position First-party data point: Every Matthews Hotel Markets BOV is built off the Matthews Hotel Index cap-rate band for the asset's segment and market, currently Q1 2026.[6] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: why a BOV and an appraisal can differ by 19 percent): Hypothetical. A 96-key hotel, NOI $1.42 million, a $2.3 million PIP due in 18 months. The BOV prices to the live buyer pool: applies an 8.25 percent cap to reach $17.21 million, then deducts the PIP and a risk premium as buyers do, arriving at $14.30 million. The appraisal values the going concern under USPAP: it may reach a stabilized value that assumes the PIP is completed, then deducts the cost to complete. Stabilized NOI of $1.55 million at an 8.00 percent cap is $19.38 million, less the $2.3 million PIP, or $17.08 million. That is nineteen percent apart, and both are defensible, because they answer different questions. The BOV tells you what a check will be written for this quarter. The appraisal tells a lender what the collateral is worth. Do not treat one as a correction of the other. FAQ: - Q: What is a broker opinion of value? A: A broker's written estimate of what a hotel would sell for in the current market, built from comps, a cap rate and a buyer-pool view, produced for the owner, usually at no charge. - Q: How is a BOV different from an appraisal? A: A BOV follows state brokerage rules and reflects the live buyer pool; an appraisal follows USPAP, the national standard federal lending rules require, and is what lenders use for financing.[4] - Q: Does a BOV cost anything? A: Often no. Brokers typically produce a BOV at no charge as part of pursuing the listing engagement. - Q: How long does a hotel BOV take? A: In our practice, two to four weeks from the date the owner shares trailing financials, current STAR data and PIP status. Complex or portfolio BOVs can take longer. - Q: Can I get a loan using a BOV? A: No. Lenders order their own USPAP-compliant appraisal, and bank regulators do not accept a broker price opinion in its place.[3] - Q: Is a BOV the same as a CIM? A: No. A BOV is a pricing document produced before you decide to sell. A CIM is a marketing document produced to present the asset to buyers once you are on the market. - Q: Who can produce a BOV? A: A licensed real estate broker, subject to the pricing-opinion rules of the state where the property sits. Texas, for example, bars calling it an appraisal.[5] - Q: What should a hotel BOV include? A: Named comparable sales with adjustments, a cap rate applied to stabilized NOI, a per-key cross-check, and a specific buyer-pool assessment, not just a headline number. Sources: - [1] Uniform Standards of Professional Appraisal Practice (USPAP) (The Appraisal Foundation, accessed 2026-09-18): https://appraisalfoundation.org/products/uspap - [2] 12 CFR 34.43, appraisals required; transactions requiring a state certified or licensed appraiser (Legal Information Institute, Cornell Law School, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/12/34.43 - [3] Interagency Appraisal and Evaluation Guidelines (FIL-82-2010) (FDIC, OCC, Federal Reserve, OTS and NCUA, accessed 2026-09-18): https://www.fdic.gov/news/financial-institution-letters/2010/fil10082.html - [4] 12 CFR 34.44, minimum appraisal standards (Legal Information Institute, Cornell Law School, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/12/34.44 - [5] Texas Occupations Code section 1101.002, definitions (broker price analysis not referred to as an appraisal) (State of Texas, via Texas Public Law, accessed 2026-09-18): https://texas.public.law/statutes/tex._occ._code_section_1101.002 - [6] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-17): https://matthewshotelmarkets.com/research/mhi/q1-2026 - [7] How to sell a hotel: the 24-week transaction process (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/process ### What is a good cap rate for a hotel in 2026? URL: https://matthewshotelmarkets.com/hotel-valuation/hotel-cap-rates Last updated: 2026-09-18 There is no single good hotel cap rate. It depends on segment, market, PIP status and buyer pool. The Matthews Hotel Index for Q1 2026 puts select-service across its 14 covered markets at 7.50 to 8.75 percent, full-service at 6.50 to 8.25 percent, and resort and lifestyle at 6.00 to 7.75 percent.[1] Use the band that matches your asset, then adjust. Key takeaways: - A cap rate is an output of a buyer's risk view, not an input you choose. - Select-service prices in a narrower, more consistent band because the cash flow is more legible; top-tier full-service and resort assets can still price tighter in gateway and leisure markets. - Cap rates respond to the 10-year Treasury, but not one for one.[2] - Compression raises prices and expansion lowers them. Sellers care about the direction more than the level. - Sun Belt secondary markets and gateway markets price differently in our index, and the spread has not been stable.[1] #### What cap rate applies to my hotel? The band for your segment and market in the current Matthews Hotel Index, adjusted up or down for brand strength, PIP status and submarket supply. Start with the segment band in the table above, then move within it based on what makes your specific asset different from the median property in that band: a stronger brand and a clean franchise term push toward the tight end, an open PIP or a single-demand-driver local economy push toward the wide end. A broker opinion of value applies this adjustment explicitly, comp by comp, rather than picking a number from the middle of the range. For a public cross-check, HVS reported in April 2026 that U.S. hotel trades averaged an 8.2 percent cap rate in 2025, with stabilized hotels typically selling at 8 to 9 percent.[3] #### How do cap rates differ by segment? Select-service trades in a narrower band across the 14 markets we track; resort and lifestyle assets in supply-constrained leisure markets price the tightest of all three segments. The Matthews Hotel Index data is specific here rather than following the common shorthand that select-service always prices tighter than full-service. Across our 14 markets, select-service spans 7.50 to 8.75 percent, a 125-basis-point range,[1] reflecting the deep, standardized buyer pool for that product. Full-service spans 6.50 to 8.25 percent, a wider 175-basis-point range,[1] because it blends tight trophy urban assets in gateway markets like Miami and Charleston with wider secondary-metro full-service in markets like Atlanta and Denver. Resort and lifestyle assets, concentrated in supply-constrained leisure destinations, price the tightest of the three in aggregate, 6.00 to 7.75 percent.[1] The honest takeaway: select-service is the more predictable band, not always the lowest number. #### How do interest rates move cap rates? Cap rates respond to the 10-year Treasury, but the pass-through is partial, not one for one. CBRE's H1 2026 survey is a clean example. The 10-year Treasury peaked at 4.67 percent in mid-May, yet the all-property average cap rate was essentially flat, and hotel cap rates compressed.[2] HVS, writing in April 2026, credited declining interest rates with helping to narrow the gap between buyers and sellers.[3] Risk premiums specific to hospitality, PIP exposure, labor cost trends, brand standard changes, move independently of rates and can offset or amplify the rate effect in either direction. #### What is cap rate compression? A decline in the cap rate buyers accept, which raises price for the same NOI; expansion is the reverse and lowers price. Compression and expansion describe direction, not a specific number, and sellers should track the direction of the trend as closely as the current level. The worked example below shows exactly how much fifty basis points of movement, in either direction, is worth in dollars on a representative asset. #### What is the Sun Belt versus gateway spread? It is real but not stable: Sun Belt secondary markets can price wider on select-service while gateway and resort submarkets price tighter on trophy full-service and leisure assets. The Matthews Hotel Index shows Miami and Charleston full-service and resort product pricing at the tight end of the range, while select-service in Atlanta and Denver prices at the wide end.[1] That pattern has shifted over recent cycles and should not be assumed to hold indefinitely; check the current quarter's data before pricing off a remembered spread. #### How does a PIP change my cap rate? It does not change the cap rate itself so much as it adds a separate deduction and risk premium on top of the capitalized value, covered in full at the valuation hub. A cap rate reflects the market's view of stabilized, PIP-current cash flow. An open PIP is handled as a distinct line item, subtracted from the unencumbered value along with a risk premium and a displacement cost, rather than folded into a higher cap rate. The full mechanics are at [What is my hotel worth, and who decides?](/hotel-valuation) and [What is involved in selling a hotel?](/sell-a-hotel) #### Where do these numbers come from? The Matthews Hotel Index, reconciled quarterly against CBRE and HVS public research and STR press releases, never against subscriber-only STAR or CoStar tables. The methodology reconciles the CBRE H2 2025 U.S. Cap Rate Survey[4] with HVS U.S. Market Pulse commentary for April 2026[3] and Matthews' own underwriting on active mandates, with ADR, RevPAR and occupancy bands drawn from STR headline press releases rather than licensed subscriber tables.[1] The full methodology note is published at [/research/mhi/q1-2026](/research/mhi/q1-2026) Table: Hotel cap rate bands by segment, Matthews Hotel Index, Q1 2026 Segment | Cap rate band across 14 markets | What tightens it | What widens it Select-service, PIP current | 7.50% - 8.75%[1] | Brand strength, new supply constraints, clean franchise term | Open PIP, short franchise term, single-demand-driver market Full-service | 6.50% - 8.25%[1] | Group and convention base, barriers to entry, gateway location | F&B labor exposure, capex intensity, secondary-market location Resort and lifestyle | 6.00% - 7.75%[1] | Supply constraint, leisure demand durability | Seasonality, concentration risk First-party data point: The Matthews Hotel Index for Q1 2026 puts select-service cap rates in a 7.50 to 8.75 percent band across the 14 markets we cover.[1] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: what 50 basis points is worth): Hypothetical. NOI $1.42 million. At 7.75 percent: value equals $1.42 million divided by 0.0775, or $18.32 million. At 8.25 percent: value equals $1.42 million divided by 0.0825, or $17.21 million. At 8.75 percent: value equals $1.42 million divided by 0.0875, or $16.23 million. Fifty basis points is worth about $1.1 million, roughly 6 percent of value, on this asset. Nothing about the hotel changes across those three lines. That is why sellers watch the 10-year Treasury, and why the timing question is a real question rather than a rationalization. FAQ: - Q: What is a good hotel cap rate in 2026? A: There is no single good number. The Matthews Hotel Index for Q1 2026 shows select-service at 7.50 to 8.75 percent, full-service at 6.50 to 8.25 percent, and resort/lifestyle at 6.00 to 7.75 percent, across our 14 covered markets.[1] - Q: What cap rate do select-service hotels trade at? A: 7.50 to 8.75 percent across the Matthews Hotel Index's 14 covered markets in Q1 2026,[1] narrower than the full-service range, reflecting more consistent, legible cash flow. - Q: Do full-service hotels have higher cap rates? A: Not always. Full-service spans a wider band, 6.50 to 8.25 percent,[1] because it includes both tight trophy urban assets and wider secondary-market properties with heavier F&B exposure. - Q: How do interest rates affect hotel cap rates? A: They respond, but not one for one. In CBRE's H1 2026 survey, hotel cap rates compressed even as the 10-year Treasury peaked at 4.67 percent in mid-May.[2] - Q: What is cap rate compression? A: A decline in the cap rate buyers require, which raises price for the same NOI. Expansion is the reverse: a wider cap rate at the same NOI lowers price. - Q: Is there a Sun Belt cap rate premium? A: The spread exists but is not stable. Sun Belt secondary select-service can price wider than gateway or resort full-service and lifestyle assets, which is the opposite of a blanket premium. - Q: How does a PIP affect my cap rate? A: It does not change the cap rate itself. It adds a separate deduction from capitalized value plus a risk premium, covered at /hotel-valuation and /sell-a-hotel. - Q: Where can I see Matthews Hotel Markets' cap rate data? A: At /research/mhi/q1-2026, refreshed quarterly across our 14 covered markets, reconciled against CBRE, HVS and STR public releases.[1] Sources: - [1] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-17): https://matthewshotelmarkets.com/research/mhi/q1-2026 - [2] U.S. Cap Rate Survey H1 2026 (CBRE Research, accessed 2026-09-18): https://www.cbre.com/insights/reports/us-cap-rate-survey-h1-2026 - [3] HVS U.S. Market Pulse: April 2026 (HVS, accessed 2026-09-18): https://www.hvs.com/article/10450-hvs-us-market-pulse-april-2026 - [4] U.S. Cap Rate Survey H2 2025 (CBRE Research, accessed 2026-09-18): https://www.cbre.com/insights/reports/us-cap-rate-survey-h2-2025 ### Walk me through the math on valuing a select-service hotel URL: https://matthewshotelmarkets.com/hotel-valuation/how-to-value-a-hotel Last updated: 2026-09-18 Start with occupancy times ADR to get RevPAR, multiply by keys and 365 to get rooms revenue, add other revenue, subtract departmental and undistributed expenses, franchise fees, management fee, taxes, insurance and an FF&E reserve. That is NOI. Divide by a cap rate, using the Q1 2026 band for your segment.[1] Every normalization you make to that NOI has to survive a buyer's audit. Key takeaways: - RevPAR is the revenue driver. NOI is the value driver. They are not interchangeable. - The FF&E reserve belongs in NOI, at the percentage of revenue your franchise, management agreement or lender requires. - A management fee belongs in NOI even if you self-manage. Buyers underwrite one. - Normalizations are fine and they must be documented. Undocumented add-backs are re-trades waiting to happen. - Hotels are valued as operating businesses, which is why the expense line is longer than an apartment building's. #### How do I get from occupancy and ADR to revenue? Occupancy times ADR equals RevPAR; RevPAR times keys times 365 equals rooms revenue, and other revenue is added on top. This is the starting point of every hotel valuation. Occupancy and ADR are the two inputs that compress into a single revenue-per-available-room figure, which is then scaled by the number of keys and days in the year to reach total rooms revenue. Other revenue, food and beverage, meeting space, parking, and ancillary income, adds to that base, though for most select-service assets it is a small fraction of the total, shown as 6 percent of rooms revenue in the worked example below. #### How do I calculate hotel NOI? Total revenue minus departmental expenses, undistributed expenses, franchise and brand fees, management fee, property taxes, insurance, and an FF&E reserve. The line-by-line build follows the Uniform System of Accounts for the Lodging Industry, now in its 12th revised edition.[2] The table above walks through every line with the common owner error attached to it. The single biggest pattern in that error column: owners understate or omit costs that a buyer will reinsert during underwriting, which inflates the seller's reported NOI relative to what a buyer will actually pay against. #### What expenses do buyers insist on including? The management fee and the FF&E reserve, even when the current owner self-manages or skips the reserve, because a buyer underwrites the asset as it will actually operate. An owner who runs the hotel personally without a management contract often reports a P&L with no management fee line, which overstates NOI relative to how a buyer, who may hire a third-party operator, will actually run the asset. The same logic applies to an FF&E reserve an owner has been deferring. Both get added back into a buyer's underwriting whether or not the seller's own books reflect them. #### What can I legitimately normalize? One-time, non-recurring items with clear documentation. Anything a buyer's accountant cannot trace to a receipt is not a normalization; it is a re-trade waiting to happen. Legitimate normalizations include a one-time legal settlement, an insurance casualty recovery, or a genuinely non-recurring repair. Owner-paid personal expenses booked as business costs, undocumented related-party transactions, and one-off revenue spikes without a documented cause are the items that surface in diligence and cause the exact NOI disputes covered at [Documents needed to sell a hotel](/sell-a-hotel/documents-needed) #### What cap rate do I divide by? The band for your segment and market in the current Matthews Hotel Index, adjusted for what makes your specific asset different from the band's midpoint. The Matthews Hotel Index for Q1 2026 supplies the cap-rate band used in the final step of this calculation.[1] Brand strength, franchise term remaining, PIP status, and submarket supply all move a specific asset within its published band. The bands themselves, and what moves them, are broken out at [Hotel cap rates in 2026](/hotel-valuation/hotel-cap-rates) #### How do I cross-check with comparable sales? Recent trades in the same chain scale, market and PIP status, adjusted for the differences, used as a sanity check rather than the primary method. True hotel comps are rare because no two assets share identical brand, age, PIP status and submarket position. The sales comparison approach is most useful as a check against an income approach conclusion, flagging when a value looks out of line with what similar assets have actually traded for, rather than as the primary driver of the number. #### Why is this different from valuing an apartment building? A hotel's revenue reprices nightly and its expense structure includes an operating business, franchise fees, labor, and a reserve, none of which a leased apartment building carries. An apartment building's revenue is set by lease terms that run months or years, and its expense structure has no franchise royalty, no daily rate management, and no brand-mandated capital reserve. A hotel is valued as an operating business layered on real estate, which is why the expense stack above runs eight lines deep before reaching NOI, versus a handful for a residential asset. Table: Hotel NOI build, line by line Line | How it is calculated | Common owner error Rooms revenue | Occupancy x ADR x keys x 365 | Using a peak year instead of a trailing twelve Other revenue | F&B, meeting space, parking, ancillary | Including one-time items Departmental expenses | Rooms, F&B, other operated | Understating labor at current wage rates Undistributed expenses | A&G, sales and marketing, utilities, maintenance | Omitting owner-absorbed costs Franchise and brand fees | Royalty plus program, marketing and reservation fees, per the FDD. Hampton's 2025 FDD lists a 6% royalty and a 4% program fee on rooms revenue[3] | Using the royalty only Management fee | Percentage of revenue plus incentive | Excluding it because you self-manage Property taxes and insurance | Reassessed at the sale price in many places, as California requires, not the current bill[4] | Using the current assessment FF&E reserve | A percentage of revenue set by the franchise, management agreement or lender | Leaving it out entirely = NOI | | Each omission above inflates value by the omission divided by the cap rate First-party data point: The Matthews Hotel Index for Q1 2026 supplies the cap-rate band used in the final step of this calculation.[1] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: a 96-key select-service hotel, start to finish): Hypothetical. 96 keys, 71 percent occupancy, $148 ADR. RevPAR equals 0.71 times $148, or $105.08. Rooms revenue equals $105.08 times 96 times 365, or $3,682,000. Other revenue at 6 percent of rooms is $221,000. Total revenue is $3,903,000. Departmental expenses at 28 percent of revenue are $1,093,000. Undistributed expenses at 23 percent of revenue are $898,000. Franchise and brand fees at 11 percent of rooms revenue are $405,000. Management fee at 3 percent of revenue is $117,000. Property taxes and insurance are $285,000. FF&E reserve at 4 percent of revenue is $156,000. NOI equals $3,903,000 minus $2,954,000, or $949,000. At an 8.25 percent cap, value equals $949,000 divided by 0.0825, or $11.50 million, roughly $120,000 per key. Now remove the FF&E reserve and the management fee, as owners often do: NOI becomes $1,222,000 and value becomes $14.81 million. That $3.3 million difference is not a valuation disagreement. It is two different definitions of NOI. Agree on the definition first. Every percentage in this example is an assumption for the hypothetical, not a published benchmark. FAQ: - Q: How do I calculate hotel NOI? A: Total revenue minus departmental expenses, undistributed expenses, franchise fees, management fee, property taxes, insurance and an FF&E reserve. See the full line-by-line build above. - Q: What is the income approach to hotel valuation? A: Dividing stabilized NOI by a cap rate to reach a value conclusion. In our practice, it is the approach that governs stabilized hotel transactions. - Q: Should I include a management fee if I self-manage? A: Yes. Buyers underwrite a market management fee regardless of how the current owner operates, because the buyer may not self-manage after closing. - Q: Does the FF&E reserve come out of NOI? A: Yes. It is a percentage of revenue set by the franchise, management agreement or lender, and buyers add it back if a seller's statements omit it. - Q: What is the sales comparison approach for hotels? A: Using recent comparable sales in the same chain scale, market and PIP status, adjusted for differences, as a cross-check against the income approach rather than a primary method. - Q: Is RevPAR or NOI more important? A: NOI. RevPAR measures revenue per available room, but a cap rate is applied to profit, not revenue, which makes NOI the number that actually drives value. - Q: How do buyers verify my reported NOI? A: By reconciling the trailing twelve-month P&L to bank statements and vendor payments during due diligence, and by questioning any add-back that lacks documentation. - Q: Why is valuing a hotel different from an apartment building? A: A hotel's revenue reprices nightly and its NOI build includes franchise fees, a management fee and an FF&E reserve, none of which apply to a leased residential property. Sources: - [1] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-17): https://matthewshotelmarkets.com/research/mhi/q1-2026 - [2] HFTP, AHLA and GFC unveil the 12th Revised Edition of the Uniform System of Accounts for the Lodging Industry (adopted January 1, 2026) (American Hotel & Lodging Association, accessed 2026-09-18): https://www.ahla.com/news/hftp-ahla-and-gfc-unveil-groundbreaking-12th-revised-edition-uniform-system-accounts-lodging - [3] 2025 Hampton Franchise Disclosure Document (issued March 30, 2025), Items 5, 6 and 17 and Franchise Agreement section 12.2.2 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - [4] Change in ownership, frequently asked questions (Proposition 13 reassessment) (California State Board of Equalization, accessed 2026-09-18): https://www.boe.ca.gov/proptaxes/faqs/changeinownership.htm ### How do rising interest rates change what my hotel is worth? URL: https://matthewshotelmarkets.com/hotel-valuation/interest-rates-and-hotel-value Last updated: 2026-09-18 Higher rates lower what a leveraged buyer can pay, because the same NOI supports a smaller loan. They also put upward pressure on cap rates, but not one for one and not on a fixed schedule. The 10-year Treasury rose from 4.75 percent on August 31, 2026 to 4.94 percent on September 17.[1] In CBRE's H1 2026 survey, hotel cap rates compressed while Treasury yields rose.[2] Key takeaways: - Rates reach your value through two channels: the size of the loan a buyer can get, and the return buyers require, which is the cap rate. - The loan channel is arithmetic. In the hypothetical below, one point of loan rate cuts supportable loan proceeds by 8.4 percent on the same NOI. - The cap-rate channel is looser. CBRE reported the 10-year peaking at 4.67 percent in mid-May 2026 while the all-property average cap rate was essentially flat and hotel cap rates compressed.[2] - We do not publish a lag or a ratio between Treasury yields and hotel cap rates. The 2026 public evidence does not support one. - The 10-year Treasury rose 19 basis points between August 31 and September 17, 2026.[1][3] That move is too recent to show up in any published cap-rate survey. #### How do interest rates reach my hotel's value? Through the buyer's loan and through the buyer's required return. The first is mechanical. The second is a market judgment. Most hotel buyers borrow. A lender sizes the loan so that NOI covers the debt payments by some margin. When the loan rate rises, the payment on each dollar borrowed rises, so the same NOI supports fewer dollars of loan. If the buyer's equity is fixed, the price it can pay falls by about the amount of loan it lost. That is the first channel, and it starts working the week rates move. The second channel is the cap rate. Buyers compare a hotel's yield with what they can earn on Treasuries and on other property. When the risk-free rate rises, they want more from the hotel too. But hotel cap rates also carry premiums for operating risk, capital needs and the depth of the buyer pool, and those move on their own. #### Do hotel cap rates move one for one with the 10-year Treasury? No. The 2026 evidence shows cap rates holding or compressing through a period of higher and volatile Treasury yields. CBRE's U.S. Cap Rate Survey for H1 2026 reports that Treasury yields were volatile and increased substantially during the first half of the year. The 10-year fell below 4 percent in late February, then peaked at 4.67 percent in mid-May.[2] Over the same period the all-property average cap rate was essentially flat, and on average neighborhood retail compressed the most, followed by hotel and industrial.[2] The survey reflects more than 200 CBRE professionals responding in late June, informed by deals that closed in the first six months.[2] HVS, writing in April 2026, said transactions averaged an 8.2 percent cap rate in 2025 and that it expects average cap rates to trend downward in 2026.[4] With the 10-year at 4.94 percent on September 17,[1] that 2025 average sits more than three points above the Treasury. A spread that wide leaves room for buyers to absorb part of a rate move, which may be one reason the pass-through has been partial. The two figures are from different dates, so read the gap as rough. #### Is there a lag between rates and cap rates? Hotel pricing takes time to show up in data, but we have found no public primary source that measures a dependable lag, so we do not state one. Some delay is built into how the evidence is made. A hotel sale takes months from pricing to closing, and surveys are published after that. CBRE's H1 2026 survey was completed in late June from deals closed through June.[2] It cannot reflect a Treasury move in September. That is a delay in the data. It is not proof that cap rates will follow by a set amount after a set number of months. The first half of 2026 is a caution: yields rose and hotel cap rates compressed anyway.[2] Anyone who tells you that a 50 basis point rise in the 10-year means a specific cap-rate change by a specific quarter is guessing. What you can observe directly is the debt market, which reprices daily. Current benchmarks are on our [rate sheet](/rates) #### What happened to rates in September 2026? The 10-year Treasury rose 19 basis points in under three weeks, from 4.75 percent on August 31 to 4.94 percent on September 17. Treasury's daily par yield curve shows the 10-year at 4.75 percent on August 31, 2026 and 4.94 percent on September 17, with the 5-year moving from 4.49 to 4.78 percent.[1] The Matthews Hotel Markets September 2026 rate sheet records the same move, along with SOFR at 3.85 percent and Prime at 7.00 percent.[3] The September 17 reading is 27 basis points above the mid-May peak CBRE cited.[2] For an owner, the near-term effect is on loan quotes, since fixed-rate hotel loans are priced as a spread over the matching Treasury. Lenders do not publish those spreads, so the way to learn the all-in rate is to get quotes. See [What are current hotel loan interest rates?](/hotel-financing/hotel-loan-rates) #### Why did my value fall when my NOI held up? Because value is NOI divided by a cap rate, and a wider cap rate lowers value with no change at the hotel. On $1.42 million of NOI, moving the cap rate from 8.25 to 8.50 percent lowers value from $17.21 million to $16.71 million. That is about $510,000, or 2.9 percent, for 25 basis points. The Matthews Hotel Index shows a 125 basis point spread inside the select-service band alone, 7.50 to 8.75 percent in Q1 2026,[5] so where a hotel sits in the band matters more than most single rate moves. The full treatment of compression and expansion, with a 50 basis point example, is at [What is a good cap rate for a hotel in 2026?](/hotel-valuation/hotel-cap-rates) #### Should I wait for rates to fall before I sell or refinance? Only if your loan lets you. Timing a rate move is a bet, and a maturity date is not. HVS wrote in April 2026 that sales activity was picking up and that declining interest rates were helping bridge the gap between buyers and sellers.[4] Since then the 10-year has moved up.[1] Nobody knows the next move. What an owner can control is NOI, the condition of the hotel and the time left on the loan. If your loan matures within 18 months, the rate on the day you must refinance matters more than the rate you hope for. If you have years of term left, waiting costs you little beyond the risk that operations soften. The decision framework is at [Should I refinance my hotel or sell it instead?](/hotel-financing/refinance-or-sell) and for a lender's view of value see [Why did my hotel appraise for less than I expected?](/hotel-valuation/appraisal-lower-than-expected) Table: Two channels from interest rates to hotel value Channel | How it works | How fast | 2026 public evidence Buyer's loan | A higher loan rate means the same NOI supports a smaller loan, so a leveraged buyer can pay less | Immediate. Loan quotes reprice with the index | 10-year Treasury 4.75% on August 31, 4.94% on September 17[1] Cap rate | Buyers want a higher yield when the risk-free rate rises, offset or amplified by hotel-specific risk | Uneven. No dependable lag is published | H1 2026: 10-year peaked at 4.67% in mid-May, all-property cap rate essentially flat, hotels compressed[2] Transaction volume | Lower rates narrow the gap between what buyers bid and sellers accept. Higher rates widen it | Over quarters | HVS, April 2026: declining rates were helping bridge the buy-sell gap[4] First-party data point: Matthews Hotel Markets' September 2026 rate sheet shows the 10-year Treasury at 4.94 percent on September 17, 2026, up 19 basis points from 4.75 percent on August 31, with SOFR at 3.85 percent and Prime at 7.00 percent.[3] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: one point of loan rate on $1.42M of NOI): Hypothetical. A hotel produces $1,420,000 of NOI. A lender sizes to a 1.40x coverage test on a 25-year amortization. The 1.40x figure and both loan rates are assumptions for illustration. Lenders do not publish their tests or their spreads. Allowed annual debt service equals $1,420,000 divided by 1.40, or $1,014,286. At a 7.00 percent loan rate the annual payment constant is 8.48 percent, so the loan is $1,014,286 divided by 0.0848, or $11.96 million. At 8.00 percent the constant is 9.26 percent, and the loan is $10.95 million. One point of rate removed $1.01 million of proceeds, 8.4 percent, with no change in NOI. A buyer with $6.0 million of equity could pay $17.96 million at the lower rate, a 7.91 percent cap rate. At the higher rate it can pay $16.95 million, an 8.38 percent cap rate. The cap rate moved 47 basis points because the loan rate moved 100. That is one buyer's arithmetic, not a market law. A cash buyer, or one who accepts a lower return, would not move as far. FAQ: - Q: Do higher interest rates lower hotel values? A: They lower what leveraged buyers can pay, and they pressure cap rates upward. The size of the effect is not fixed. In H1 2026, hotel cap rates compressed while Treasury yields rose.[2] - Q: How much does a 1 percent rate increase reduce my hotel's value? A: There is no fixed ratio. In this page's hypothetical, one point of loan rate cuts loan proceeds 8.4 percent and moves one buyer's price about 5.6 percent. Your result depends on the buyer pool and the leverage used. - Q: Do hotel cap rates follow the 10-year Treasury? A: Loosely. CBRE's H1 2026 survey found the all-property cap rate essentially flat as the 10-year peaked at 4.67 percent in mid-May.[2] Hotel-specific risk premiums move independently. - Q: How long do cap rates take to react to rates? A: We have found no public primary source that measures a dependable lag, so we do not state one. Surveys trail the market because deals take months to close and reports follow. - Q: Where is the 10-year Treasury now? A: 4.94 percent on September 17, 2026, up from 4.75 percent on August 31, per Treasury's daily par yield curve.[1] The current reading is on /rates. - Q: Should I sell before rates rise more? A: Nobody can time rates. Decide from your loan maturity, your NOI trend and your capital needs. If a maturity is within 18 months, start now either way. See /hotel-financing/refinance-or-sell. - Q: What cap rates does the Matthews Hotel Index show? A: For Q1 2026: select-service 7.50 to 8.75 percent, full-service 6.50 to 8.25 percent, resort and lifestyle 6.00 to 7.75 percent, across 14 markets.[5] Sources: - [1] Daily Treasury Par Yield Curve Rates (readings for August 31 and September 17, 2026) (U.S. Department of the Treasury, accessed 2026-09-18): https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve - [2] U.S. Cap Rate Survey H1 2026 (CBRE Research, accessed 2026-09-18): https://www.cbre.com/insights/reports/us-cap-rate-survey-h1-2026 - [3] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates - [4] HVS U.S. Market Pulse: April 2026 (HVS, accessed 2026-09-18): https://www.hvs.com/article/10450-hvs-us-market-pulse-april-2026 - [5] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/research/mhi/q1-2026 ### How does a PIP affect my hotel's value? URL: https://matthewshotelmarkets.com/hotel-valuation/pip-and-hotel-value Last updated: 2026-09-18 A property improvement plan lowers value three ways: the cost of the work, the income lost while rooms are out of service, and a premium for the risk that scope grows. Buyers deduct all three from stabilized value. HVS wrote in April 2026 that older hotels facing a big renovation will likely trade above the normal 8.0 to 8.5 percent cap rate.[1] Key takeaways: - As-is value equals stabilized value, less PIP cost, less displaced income, less a risk premium. The deduction is larger than the contractor's bid. - A sale usually triggers a PIP. Under Hilton's 2025 Hampton FDD the buyer must agree to the brand's request for upgrades as a condition of the transfer.[2] - Appraisers make the same deduction. Federal minimum standards require appraisals to analyze and report deductions for proposed renovation.[3] - A PIP only adds value if the NOI it produces, divided by the cap rate, exceeds what it cost. In the hypothetical below the break-even is a 12.4 percent NOI lift. - How to pay for the work is a separate question, answered at /hotel-financing/pip-and-renovation-loans. #### How do buyers price an open PIP? They value the hotel as if the work were done, then subtract everything it takes to get there. The starting point is stabilized NOI divided by a cap rate. From that, a buyer subtracts the estimated cost of the PIP. Then it subtracts the income it expects to lose while floors are closed and the lobby is under construction. Then it adds a cushion, because renovation budgets tend to grow once walls are open and because the brand, not the owner, decides when the work passes. The size of that cushion is a negotiation, and no public source publishes it. The worked example below assumes 10 percent of PIP cost to show the arithmetic. A seller who treats the PIP as a dollar-for-dollar credit will be surprised by the offer. #### Why does selling my hotel trigger a PIP? Because the buyer signs a new franchise agreement, and the brand can condition its approval on bringing the hotel to current standards. Hilton's 2025 Hampton Franchise Disclosure Document is a clear example. A sale is a Change of Ownership Transfer. The proposed buyer must apply, pay the franchise application fee, sign the then-current franchise agreement and agree to Hilton's request for upgrades to the hotel, which may include paying a PIP fee.[2] The fee to prepare the PIP is $10,000, which Hilton may waive or credit toward the application fee.[2] So a hotel with no open PIP today can still have one at the closing table. Ordering the brand's change-of-ownership PIP before going to market replaces a buyer's guess with a scope. What the process looks like from the seller's side is at [What is involved in selling a hotel?](/sell-a-hotel) #### Do I face PIPs even if I never sell? Yes. Brands can require renovations during the franchise term, on their own schedule. The 2025 Hampton FDD says Hilton may periodically require a franchisee to replace, modernize or upgrade furniture, fixtures, finishes and equipment to meet current standards, may use renovation schedules under its Fixed Renovation Cycle Management program, and that the franchisee bears the cost.[2] A buyer reads your renovation history against that cycle. A hotel that is early in its cycle carries less near-term capital than one that is due, and the second one is worth less at the same NOI. Deadlines and scope vary by brand and by agreement, so read your own. The definition and typical scope categories are at [/glossary/pip](/glossary/pip) #### Does a PIP change my cap rate or my NOI? Mostly neither. It is a capital deduction. But a large, uncertain renovation can also push a buyer toward a wider cap rate. The Matthews Hotel Index cap-rate bands describe stabilized, PIP-current hotels, 7.50 to 8.75 percent for select-service in Q1 2026.[4] The clean way to value a hotel with an open PIP is to use a band rate on post-renovation NOI and then deduct the capital. Some buyers instead apply a higher rate to current NOI. HVS describes the pattern in its April 2026 Market Pulse: older limited-service, select-service and full-service hotels facing a big renovation will likely trend above the 8.0 to 8.5 percent mark.[1] Be careful not to do both in full. Deducting the whole PIP and also widening the cap rate for the same PIP counts the cost twice, and a seller should push back when an offer does. #### How does an appraiser treat a PIP? As a required deduction, often shown as separate as-is and prospective values. Federal minimum appraisal standards say an appraisal for a federally related transaction must analyze and report appropriate deductions and discounts for proposed construction or renovation.[3] The interagency appraisal guidelines add that for a loan financing renovation, a lender would generally request the as-is value and, as applicable, prospective values upon completion and upon stabilization.[5] For a hotel with a PIP, the as-is figure carries the deduction and the as-stabilized figure assumes the work is done and the hotel has recovered. Which one a lender sizes to depends on what it is funding. More on reading those numbers is at [Why did my hotel appraise for less than I expected?](/hotel-valuation/appraisal-lower-than-expected) #### When does a PIP add value instead of subtracting it? When the NOI it produces, capitalized, is worth more than the work cost. Many PIPs protect value more than they add to it. The test is arithmetic. Multiply the PIP cost by the cap rate. The result is the permanent NOI increase needed just to break even. A $2.4 million PIP at 8.25 percent needs $198,000 of new NOI every year. Some renovations clear that bar, usually when the hotel has been losing rate to newer competitors. Many do not, because much of a PIP replaces worn items the guest already expected. The honest case for those PIPs is defensive: the work keeps the flag, and losing the flag would cost more. Whether to do the work yourself or sell and let the buyer do it turns on your cost of capital, which is covered at [How do I finance a hotel PIP or renovation?](/hotel-financing/pip-and-renovation-loans) Table: How a PIP moves hotel value, line by line Component | Direction | How it is estimated | Who has the evidence PIP cost | Deduction | Contractor bids against the brand's written scope | Seller, if the PIP was ordered before marketing Displaced income | Deduction | Rooms out of service times expected occupancy and rate, less saved variable cost | Buyer's model, from the construction schedule Risk premium | Deduction | Negotiated. No public source publishes it | Neither side. A firm bid shrinks it Post-renovation NOI lift | Addition, if real | New NOI divided by the cap rate | STR index history before and after similar renovations Franchise application and PIP fees | Deduction | From the brand's FDD, $200,000 and $10,000 for Hampton in 2025[2] | Public First-party data point: The cap-rate bands in the Matthews Hotel Index for Q1 2026, published by Matthews Hotel Markets, describe stabilized, PIP-current hotels: 7.50 to 8.75 percent for select-service across 14 markets. A hotel with an open PIP prices below what that band implies by the amount of the deduction.[4] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: a $2.4M PIP on a 120-key hotel): Hypothetical. 120 keys, stabilized NOI of $1,600,000, an 8.25 percent cap rate. Stabilized value equals $1,600,000 divided by 0.0825, or $19.39 million, about $161,600 per key. The brand's PIP is bid at $2,400,000, which is $20,000 per key in this hypothetical and not a market figure. The buyer models $180,000 of NOI lost during the work and adds a risk premium of 10 percent of PIP cost, $240,000. Both are assumptions. Total deduction is $2,820,000, which is 1.18 times the bid. As-is value equals $19.39 million minus $2.82 million, or $16.57 million, about $138,100 per key. Now the upside test. If the renovation lifts NOI 8 percent, to $1,728,000, value after the work is $20.95 million. That is a gain of $1.55 million for $2.4 million spent. Break-even needs $198,000 of new NOI, a 12.4 percent lift. Below that, the PIP is the price of keeping the flag, not an investment that pays for itself. FAQ: - Q: How much does a PIP reduce my hotel's value? A: By more than its cost. Buyers deduct the bid, the income lost during the work and a risk premium. In the hypothetical on this page the total deduction is 1.18 times the bid. - Q: Does an open PIP kill a hotel sale? A: No. It changes the price. Buyers of branded hotels expect a change-of-ownership PIP, and a written scope with bids makes the deduction smaller and the process faster. - Q: Who pays for the PIP when a hotel sells? A: It is negotiated. Either the price falls and the buyer does the work, or the seller completes or escrows it before closing. See /hotel-financing/pip-and-renovation-loans for both structures. - Q: Should I complete the PIP before I sell? A: Compare your cost to fund the work with the larger deduction a buyer will take. Owners with liquidity often come out ahead doing it. Owners without it usually should not borrow expensively to renovate for someone else. - Q: Does a renovation always raise NOI enough to pay for itself? A: No. Multiply the PIP cost by the cap rate to get the NOI lift needed to break even. At 8.25 percent, a $2.4 million PIP needs $198,000 a year. - Q: How does an appraiser handle a PIP? A: Federal minimum standards require the appraisal to analyze and report deductions for proposed renovation.[3] Expect an as-is value with the deduction and, where the loan funds the work, prospective values after it.[5] - Q: Will the brand require a PIP when I sell my Hampton Inn? A: Under the 2025 Hampton FDD, the buyer must agree to Hilton's request for upgrades as a condition of a change of ownership, and Hilton charges $10,000 to prepare the PIP.[2] Sources: - [1] HVS U.S. Market Pulse: April 2026 (HVS, accessed 2026-09-18): https://www.hvs.com/article/10450-hvs-us-market-pulse-april-2026 - [2] 2025 Hampton Franchise Disclosure Document (issued March 30, 2025), Items 5, 8 and 17 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - [3] 12 CFR 34.44, minimum appraisal standards (Legal Information Institute, Cornell Law School, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/12/34.44 - [4] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/research/mhi/q1-2026 - [5] Interagency Appraisal and Evaluation Guidelines, December 2010 (full text) (OCC, Federal Reserve, FDIC, OTS and NCUA, via FDIC, accessed 2026-09-18): https://www.fdic.gov/news/news/financial/2010/fil10082a.pdf ### What is my hotel worth per key? URL: https://matthewshotelmarkets.com/hotel-valuation/revpar-multiples-and-per-key Last updated: 2026-09-18 Price per key is sale price divided by room count. It is a check on a valuation, not a way to produce one, because it ignores NOI. LW Hospitality Advisors counted 107 U.S. hotel sales over $10 million in Q2 2026 at an average of about $218,000 per room.[1] That average says little about a 90-key select-service hotel. Your NOI and cap rate do. Key takeaways: - Per key equals price divided by keys. It describes a sale after the fact. It does not explain the price. - Two hotels with the same key count and different NOI are not worth the same per key. The worked example below shows a $59,000 per key gap on identical room counts. - Public per-key averages skew high. The LW Hospitality Advisors survey only counts sales above $10 million.[1] - The best known shortcut is Stephen Rushmore's: value per room is roughly ADR times 1,000, for stabilized occupancy of 60 to 75 percent. He calls it no substitute for a real valuation.[2] - The Matthews Hotel Index publishes cap-rate and RevPAR bands, not per-key prices, because per key is an output of NOI and cap rate.[3] #### How do I calculate price per key? Divide the price by the number of guest rooms. A $12.0 million hotel with 100 keys is $120,000 per key. That is the whole formula, which is why brokers, lenders and buyers all use it as shorthand. It lets you compare a 78-key hotel and a 140-key hotel on one line. It is also why it misleads. The number carries no information about occupancy, rate, margin, franchise term, deferred capital or the land under the building. Per key is a description of a price somebody already reached another way. For the way they reached it, see [Walk me through the math on valuing a select-service hotel](/hotel-valuation/how-to-value-a-hotel) #### Where does a per-key number actually come from? From NOI per key divided by a cap rate. Per key is the income approach, restated per room. If value equals NOI divided by a cap rate, then value per key equals NOI per key divided by the same cap rate. The table below runs that arithmetic across the select-service band in the Matthews Hotel Index for Q1 2026, 7.50 to 8.75 percent across 14 markets.[3] A hotel that clears $10,000 of NOI per key is worth about $133,000 per key at the tight end of that band and about $114,000 at the wide end. A hotel that clears $15,000 per key is worth $171,000 to $200,000. The spread between those rows comes from operations, not from the building. That is the reason a per-key comp from down the street can be right for that hotel and wrong for yours. #### What do public per-key averages tell me? The direction of the market, and not much about a single asset. LW Hospitality Advisors publishes a quarterly survey of major U.S. hotel sales. For Q2 2026 it counted 107 trades, about $3.8 billion and roughly 17,300 rooms, an average of about $218,000 per room, down about 17 percent from Q1 2026.[1] Two things limit how far an owner can take that figure. First, the survey only includes single-asset sales above $10 million, so smaller select-service and economy trades are left out by design.[1] Second, one quarter's average moves with the mix of what sold. A few resort or gateway trades move it more than any change in what a given hotel is worth. Use public averages to see whether pricing is rising or falling. Do not use them to price a specific hotel. #### What is a RevPAR multiple, and is ADR times 1,000 real? A RevPAR multiple is value per key divided by RevPAR. The ADR rule is a published rule of thumb with stated limits. Stephen Rushmore, the founder of HVS, wrote in May 2024 that a hotel's total economic value per room can be estimated by multiplying its average daily rate by 1,000, and that the rule is fairly accurate for stabilized occupancy of 60 to 75 percent with a normal set of amenities.[2] In the same piece he says rules of thumb are no substitute for a market analysis, financial projections and a valuation by a skilled consultant.[2] A RevPAR multiple works the same way with occupancy folded in. We do not publish a RevPAR multiple, and we could not find a public primary source that does. Both shortcuts assume a normal margin. A hotel with heavy labor cost, a high property tax bill or a ground lease breaks the assumption, and the shortcut overstates value without showing why. #### When is per key the right tool? As a cross-check on an income value, as a screen against replacement cost, and as shorthand between people who already know the NOI. A cross-check works like this. Run the income approach first. Convert the answer to per key. Then compare it with recent sales of the same chain scale in the same market. If your number sits far above every comparable sale, the NOI or the cap rate probably needs a second look. If it sits far below, the hotel may be under-managed, which is a finding in itself. Buyers also compare per-key price with what it would cost to build the same hotel new. HVS notes that a normal cap rate for a stabilized or near-stabilized hotel remains near 8.0 to 8.5 percent,[4] so a per-key figure that implies something far outside that range deserves a question. #### What does per key miss? Everything that makes one room worth more than another: margin, brand, capital needs, land and lease terms. An open property improvement plan is a deduction from value that a per-key comp does not show. See [How does a PIP affect my hotel's value?](/hotel-valuation/pip-and-hotel-value) Food and beverage, meeting space and parking add revenue that a room count ignores. A ground lease or a property tax reassessment lowers NOI without touching the key count. A short remaining franchise term narrows the buyer pool. Each of these moves real value by more than the typical spread between two per-key comps. That is why a [broker opinion of value](/hotel-valuation/broker-opinion-of-value) states NOI, cap rate and per key together, and treats the third as the check on the first two. Table: Value per key implied by NOI per key, at the Matthews Hotel Index select-service cap-rate band, Q1 2026 NOI per key | Value per key at 7.50%[3] | Value per key at 8.75%[3] | What the row does not tell you $8,000 | $106,667 | $91,429 | Whether the low NOI is the market or the management $10,000 | $133,333 | $114,286 | Whether NOI is after a management fee and an FF&E reserve $12,000 | $160,000 | $137,143 | Whether an open PIP still has to be deducted $15,000 | $200,000 | $171,429 | Whether the trailing year is repeatable First-party data point: The Matthews Hotel Index for Q1 2026, published by Matthews Hotel Markets, puts select-service cap rates at 7.50 to 8.75 percent across 14 markets. At that band, each $1,000 of NOI per key is worth about $11,400 to $13,300 of value per key.[3] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: two 96-key hotels, one per-key comp): Hypothetical. Two 96-key select-service hotels in the same market. A broker quotes a recent comparable sale at $150,000 per key, which would put both at $14.40 million. Hotel A produces $1,420,000 of NOI, or $14,792 per key. At an 8.25 percent cap rate, value equals $1,420,000 divided by 0.0825, or $17.21 million, about $179,000 per key. Hotel B produces $949,000 of NOI, or $9,885 per key. At the same cap rate, value equals $11.50 million, about $120,000 per key. Pricing both at the $150,000 comp would mean selling Hotel A at a 9.86 percent cap rate and Hotel B at a 6.59 percent cap rate. No informed buyer pays the second and no informed seller accepts the first. The per-key comp was not wrong. It belonged to a third hotel. The ADR shortcut has the same problem. Hotel B runs a $148 ADR, so ADR times 1,000 gives $148,000 per key, or $14.21 million, about $2.7 million above what its NOI supports. FAQ: - Q: What is a hotel worth per key? A: Whatever its NOI per key divided by a market cap rate says. At the Q1 2026 Matthews Hotel Index select-service band of 7.50 to 8.75 percent, $10,000 of NOI per key implies about $114,000 to $133,000 per key.[3] - Q: What is the average hotel price per key in 2026? A: LW Hospitality Advisors reported about $218,000 per room across 107 U.S. sales above $10 million in Q2 2026.[1] The survey excludes smaller trades, so it overstates what a typical select-service hotel sells for. - Q: Is ADR times 1,000 a good way to value a hotel? A: It is a rule of thumb. Stephen Rushmore says it is fairly accurate at 60 to 75 percent stabilized occupancy and no substitute for a full valuation.[2] It assumes a normal margin, which many hotels do not have. - Q: What is a RevPAR multiple? A: Value per key divided by RevPAR. It is a shortcut like ADR times 1,000 with occupancy included. We do not publish one, because it hides the expense side, where hotels differ most. - Q: Why did a similar hotel sell for more per key than mine is worth? A: Usually because it earns more NOI per key, has a longer franchise term, or has no open PIP. Per key reports the result of those differences without naming them. - Q: Do lenders use price per key? A: As a reasonableness check. Loan sizing runs on NOI, through tests like DSCR and debt yield. Lenders do not publish their thresholds, so ask for them in writing. See /glossary/dscr and /glossary/debt-yield. - Q: Does the Matthews Hotel Index publish price per key? A: No. It publishes cap-rate, ADR, RevPAR and occupancy bands for 14 markets.[3] Per key follows from NOI and cap rate, so we publish the inputs. Sources: - [1] LW Hospitality Advisors Q2/Midyear 2026 Major U.S. Hotel Sales Survey and Lodging Sector Overview (published August 5, 2026) (LW Hospitality Advisors, via Hospitality Net, accessed 2026-09-18): https://www.hospitalitynet.org/report/4133813/lw-hospitality-advisors-lwha-q2midyear-2026-major-us-hotel-sales-survey-lodging-sector-overview - [2] How to Determine a Hotel's Feasibility and Land Value in 60 Seconds, by Stephen Rushmore (May 30, 2024) (Stephen Rushmore, via Hospitality Net, accessed 2026-09-18): https://www.hospitalitynet.org/opinion/4122159.html - [3] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/research/mhi/q1-2026 - [4] HVS U.S. Market Pulse: April 2026 (HVS, accessed 2026-09-18): https://www.hvs.com/article/10450-hvs-us-market-pulse-april-2026 ### What is the difference between select-service and full-service hotel investment? URL: https://matthewshotelmarkets.com/hotel-valuation/select-service-vs-full-service Last updated: 2026-09-18 Select-service hotels carry higher margins and simpler operations, so they price in a narrower cap-rate band than full-service. In our Q1 2026 index that is 7.50 to 8.75 percent versus 6.50 to 8.25 percent.[1] Full-service adds F&B, meeting space and labor, which adds revenue and volatility together. Select-service is easier to underwrite, finance and sell; full-service has more levers to pull. Key takeaways: - Select-service margins run higher because there is less non-rooms revenue and far less labor. - Full-service revenue is more diversified and more cyclical at the same time. - Financing is easier on select-service, because the trailing twelve is easier for a lender to believe. - The select-service buyer pool is deeper and more standardized, which is most of why the band is narrower, not always lower. - Capex intensity is the quiet difference: full-service renovations are larger and more disruptive. #### What actually separates the two segments? Revenue mix. Select-service is rooms-dominant with minimal F&B; full-service adds food and beverage, meeting space and more labor to the same room count. The table above lines up the two segments on the metrics that actually decide a deal: revenue mix, labor intensity, margin, cap rate band, buyer pool, financing, capex cycle, and underwriting time. Every other difference between the two segments traces back to that first line. #### Which has better margins? Select-service, because a shorter expense stack and lower labor intensity let more of each revenue dollar reach NOI. A select-service hotel with minimal or no F&B carries far fewer departmental cost centers than a full-service property running a restaurant, bar, banquet operation and room service. Fewer cost centers means fewer places for margin to leak, and it means fewer people on the payroll relative to rooms revenue. Food and beverage is labor-heavy: in CBRE's sample of full-service, resort and convention hotels, labor was 59.4 percent of F&B department expenses in the first half of 2025.[2] #### Why do select-service hotels trade tighter? Not always in absolute terms, but consistently in range: the buyer pool is deeper and the cash flow is more standardized, which narrows the band even when top-tier full-service prices lower. The Matthews Hotel Index for Q1 2026 publishes the select-service and full-service cap-rate bands side by side across the 14 markets we cover.[1] Select-service spans 7.50 to 8.75 percent, a 125-basis-point range. Full-service spans a wider 6.50 to 8.25 percent,[1] because it blends tight trophy urban assets in gateway markets with wider secondary-metro properties. The honest takeaway, detailed further at [Hotel cap rates in 2026](/hotel-valuation/hotel-cap-rates), is that select-service is the more predictable band, not the uniformly lower one. #### Which is easier to finance? Select-service, because more lender types compete for a trailing twelve months that is easier to underwrite and verify. In our experience, banks, life companies, CMBS conduits, SBA lenders and debt funds all actively lend against select-service collateral because the revenue and expense pattern is standardized and comparable across a large universe of similar assets. Full-service financing pulls from a smaller lender pool willing to underwrite F&B volatility and larger PIP exposure, which typically means more scrutiny and a longer process. #### Which is easier to sell, and how fast? Select-service, on average, because the buyer pool is broader and the underwriting period is shorter. In our experience, family offices, high-net-worth individuals, private equity roll-ups and REITs all actively bid on select-service assets, which is the deep buyer pool referenced throughout this cluster. Full service draws a narrower set of institutional and specialist operators comfortable underwriting group pace and F&B, which typically extends the marketing period, covered in general terms at [How long does it take to sell a hotel?](/sell-a-hotel/how-long-it-takes) #### How do the capex cycles differ? Full-service PIPs are larger, longer and more disruptive to operations than the contained scope typical of a select-service renovation. Brands can require upgrades on a set renovation schedule; Hilton's 2025 Hampton FDD, for example, describes a Fixed Renovation Cycle Management program.[3] A select-service PIP usually touches guest rooms, corridors and the lobby. A full-service PIP can also require restaurant, banquet and meeting-space renovations, materially larger in dollar terms and disruptive to F&B revenue during the work, which is one reason full-service financing carries more scrutiny. #### Which one should I own? It depends on what an owner is optimizing for: predictable margin and liquidity favor select-service, and upside from operating improvements favors full-service. Neither segment is categorically better. An owner prioritizing a shorter underwriting cycle, a deeper buyer pool at exit, and simpler day-to-day management should lean select-service. An owner comfortable managing F&B and group business, and positioned to capture upside from operational improvements a passive owner could not extract, may find full-service the better fit for their specific capital and operating capability. Table: Select-service versus full-service, on the lines that decide a deal | Select-service | Full-service Revenue mix | Rooms dominant | Rooms plus F&B, meeting space, ancillary Labor intensity | Lower | Materially higher Margin | Higher | Lower, with more variability Cap rate band, Q1 2026 | 7.50% - 8.75%, narrower[1] | 6.50% - 8.25%, wider, spans trophy urban to secondary[1] Buyer pool | Broad: family offices, HNW, PE, REITs | Narrower: institutional and specialist operators Financing | Easier; more lender types compete | Harder; fewer lenders, more scrutiny Capex cycle | PIPs on the brand's renovation schedule, contained scope[3] | Larger, longer, more disruptive Underwriting time | Weeks | Months, with F&B and group pace analysis First-party data point: The Matthews Hotel Index for Q1 2026 publishes the select-service and full-service cap-rate bands side by side across the 14 markets we cover.[1] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: same revenue, two segments): Hypothetical. Two 140-key hotels, both producing $6.0 million of total revenue. Select-service: rooms is 94 percent of revenue. Total operating expenses run 62 percent of revenue. NOI equals $6.0 million times 38 percent, or $2.28 million. At a 7.90 percent cap, value equals $28.86 million, $206,000 per key. Full-service: rooms is 63 percent of revenue, F&B is 30 percent. Total operating expenses run 73 percent of revenue. NOI equals $6.0 million times 27 percent, or $1.62 million. At an 8.60 percent cap, value equals $18.84 million, $135,000 per key. Same top line, a $10.0 million difference in value. The margin gap does most of the work and the cap-rate gap does the rest. The expense ratios above are assumptions for this hypothetical, not published benchmarks. Use your own. FAQ: - Q: What is the difference between select-service and full-service hotels? A: Select-service is rooms-dominant with minimal food and beverage and lower labor intensity. Full-service adds F&B, meeting space and materially more staff to the same room count. - Q: Why do select-service hotels have tighter cap rates? A: Not always in absolute terms. The select-service band is narrower and more consistent because the buyer pool is deeper and the cash flow is more standardized, even though top-tier full-service can still price lower. - Q: Which segment has higher margins? A: Select-service. Less non-rooms revenue and lower labor intensity mean more of each revenue dollar reaches NOI. - Q: Is select-service the same as limited-service? A: Roughly the same tier, though limited-service usually implies even fewer amenities. Select-service typically includes a small food offering or a fitness center; the terms overlap and vary by user. - Q: Which segment is easier to finance? A: Select-service. A shorter, more standardized expense structure is easier for a lender to underwrite, which brings more lender types into competition for the loan. - Q: Which segment sells faster? A: Select-service, on average, because the buyer pool is broader and, in our experience, underwriting takes weeks rather than the months a full-service asset requires for F&B and group-pace analysis. - Q: Are full-service hotels riskier? A: More variable, not simply riskier. Full-service revenue is more diversified across rooms, F&B and events, which can help in strong demand periods and hurt more in downturns. - Q: Which segment should a first-time buyer choose? A: Select-service, generally, because the shorter underwriting cycle, deeper financing market and simpler operations reduce the number of things a first-time owner has to get right at once. Sources: - [1] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-17): https://matthewshotelmarkets.com/research/mhi/q1-2026 - [2] Hotel Food and Beverage: A Bright Spot in 2025 (CBRE, accessed 2026-09-18): https://www.cbre.com/insights/articles/hotel-food-and-beverage-a-bright-spot-in-2025 - [3] 2025 Hampton Franchise Disclosure Document (issued March 30, 2025), Items 5, 6 and 17 and Franchise Agreement section 12.2.2 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf ## How do I buy a hotel? ### How do I buy a hotel? URL: https://matthewshotelmarkets.com/buy-a-hotel Last updated: 2026-09-18 Buying a hotel takes three approvals and one contract: a lender, a brand if the hotel is flagged, an operator the brand accepts, and a purchase agreement that gives you time to test the numbers. As of September 2026, SBA 504 requires at least 15 percent down on a hotel,[1][2] and Hilton's 2025 Hampton agreement requires 60 days' written notice of a change of ownership.[3] Key takeaways: - A hotel is an operating business inside a building. You are underwriting both, and so is your lender. - The one equity minimum in federal regulation is SBA 504: 15 percent of project cost on a hotel, 20 percent if the business has operated two years or less.[1][2] - You do not inherit the seller's franchise. You apply for your own, pay the fee and accept the brand's upgrade list.[3] - Our published sale playbook puts offers in weeks 8 to 12 and due diligence through closing in weeks 12 to 24, typically 60 to 90 days.[4] - A 1031 exchange can buy a hotel, but only the real property qualifies, and the 45-day and 180-day clocks do not move.[5][6] #### What are the steps to buy a hotel? Seven, in order: set your criteria and capital, line up the operator and lender, find the hotel, make an offer, sign the purchase agreement, run due diligence with the franchise application alongside it, and close. The common mistake is to start at step three. A seller choosing between offers picks the buyer who can show equity, a lender conversation already under way and an operator the brand will accept. Get those ready before you tour anything. Hotels reach the market two ways: a marketed process run by a broker, which ends in a call for offers on a fixed date, and quiet conversations with owners who would sell at a price. Our published sale playbook shows the seller's side of the first path. Offers and buyer selection run from week 8 to week 12, and due diligence through closing runs from week 12 to week 24, typically 60 to 90 days.[4] Current listings are on the [hotels for sale](/listings) page, and buyer representation is described at [acquisition advisory](/services/acquisition-advisory). #### How much money do I need? The down payment plus the brand's fees, the PIP, closing costs and reserves. Only one of those has a minimum written into federal regulation. SBA 504 requires a hotel buyer to contribute at least 15 percent of project cost, or 20 percent if the business has operated two years or less.[1][2] Banks, CMBS lenders, life companies and debt funds set their own equity requirements and do not publish them, which our September 2026 rate sheet records as not yet published.[7] On top of equity, a branded purchase carries an application fee, $200,000 for a change of ownership on Hilton's 2025 Hampton schedule, and a property improvement plan.[3] The full stack, with a worked example, is at [How much money do I need to buy a hotel?](/buy-a-hotel/how-much-money-do-you-need). #### How do I finance it? With an SBA loan on a smaller hotel, or a bank, CMBS, life company or debt fund loan on a larger or more stable one. Each type reads the same hotel differently. As of September 17, 2026, the 10-year Treasury is 4.94 percent, SOFR is 3.85 percent and Prime is 7.00 percent. The SBA 7(a) maximum allowable rate is 10.00 percent, and the 25-year SBA 504 debenture priced at 6.54 percent on September 10.[7] Spreads over those indexes are not published by any lender type, so the only real quote is a written one. Start at [How does hotel financing work?](/hotel-financing), compare the SBA programs at [SBA 7(a) versus 504](/hotel-financing/sba-7a-vs-504), and test a purchase price against a loan with the [DSCR calculator](/tools/dscr-calculator). #### What due diligence do I need? Financials restated to the USALI format, the STR report, a property condition assessment, a survey, a Phase I, the franchise application, the liquor license and the staffing plan. Each item has a public standard behind it, and several have outside parties who set their own pace. The checklist, with the standard and the owner of each item, is at [What due diligence do I need before buying a hotel?](/buy-a-hotel/due-diligence-checklist). The one to start on the day the purchase agreement is signed is the franchise application. Hilton's 2025 Hampton agreement requires 60 days' written notice of a change of ownership, and the buyer must meet the brand's requirements for new franchisees, sign the current form of agreement and agree to the requested upgrades.[3] #### Can I buy a hotel with no hotel experience? Yes, if someone qualified runs it. The brand approves the operator as well as the owner. Hilton's 2025 Hampton disclosure requires the hotel to be operated by the owner or by a management company Hilton has approved, and it lists operations experience among the requirements a buyer must meet.[3] Lenders do not publish an experience requirement. What the public documents say, and how a management company fills the gap, is at [How do I buy my first hotel with no hotel experience?](/buy-a-hotel/first-hotel-no-experience). #### Should I buy a branded or an independent hotel? A brand charges a share of rooms revenue for demand you would otherwise have to create. Whether that is a good trade depends on the market. Hilton's 2025 Hampton disclosure lists a 6 percent royalty and a 4 percent program fee on gross rooms revenue.[3] An independent keeps that money and carries its own marketing, distribution and reinvestment decisions. The fee schedules, the performance Hilton reports, and the cost of leaving a flag are at [Should I buy a branded or independent hotel?](/buy-a-hotel/branded-vs-independent). #### Can I use a 1031 exchange to buy a hotel? Yes. A hotel's real property is like-kind to other real property held for business or investment, and the exchange runs on two fixed deadlines.[5][6] You have 45 days from the sale of the property you gave up to identify the replacement, and the exchange must be completed within 180 days.[5] Since January 1, 2018, Section 1031 applies only to real property, so the furniture, fixtures and equipment in a hotel purchase do not qualify.[6] Those two facts shape a hotel exchange more than any other: the calendar is short for an asset that needs franchise approval, and part of the price falls outside the exchange. We keep the full answer on one page, with the statute, the regulations and a worked example: [Can I use a 1031 exchange to buy or sell a hotel?](/hotel-financing/1031-exchange-hotels). Talk to a tax adviser and a qualified intermediary before you sell. #### What is the hotel worth? What its income supports at the cap rate buyers are paying for that segment and market, less the capital the building needs. The Matthews Hotel Index for Q1 2026 publishes cap-rate bands by segment across the 14 markets we cover.[8] Run the seller's income through your own adjustments before you apply any of them, because an owner-operated statement often leaves out a management fee and a reserve. The method is at [What is my hotel worth, and who decides?](/hotel-valuation), and the terms are defined at [cap rate](/glossary/cap-rate) and [NOI](/glossary/noi). Table: Buying a hotel, step by step, and what is public about each step (September 2026) Step | What happens | What is public 1. Criteria and capital | Set size, segment, market and how much equity you have | SBA 504 minimum: 15% of project cost on a hotel, 20% for a business two years old or less[1][2] 2. Operator and lender | Pick a management company if needed. Open lender conversations | Brand must approve the operator.[3] Lender terms are not published[7] 3. Find the hotel | Marketed listings and direct owner conversations | Cap-rate bands by segment and market[8] 4. Offer | Letter of intent: price, deposit, diligence period, closing date | Marketed sales take offers in weeks 8 to 12 of our playbook[4] 5. Purchase agreement | Binding contract. File the franchise application at signing | Hampton: 60 days' written notice, $200,000 application fee, $10,000 PIP fee[3] 6. Due diligence | Financials, STR report, PCA, survey, Phase I, PIP scope, liquor license, staffing | Standards listed on the due diligence page 7. Close | Loan funds, title transfers, new franchise agreement takes effect | Diligence through close: weeks 12 to 24, typically 60 to 90 days[4] First-party data point: Matthews Hotel Markets' September 2026 rate sheet gives a buyer the indexes every quote is struck against: the 10-year Treasury at 4.94% on September 17, 2026, SOFR at 3.85% for the same day, and Prime at 7.00%. It marks the spreads over them as not yet published.[7] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: when the franchise application is filed decides when you close): Hypothetical. A buyer signs a purchase agreement on a Hampton Inn with a 45-day due diligence period and a closing 30 days after that, so closing is planned for day 75. Both periods are assumptions. Every contract sets its own. Path one. The seller gives Hilton notice and the buyer files the change of ownership application on day 0. The Hampton agreement requires 60 days' written notice,[3] so the notice period ends on day 60. Closing on day 75 holds, with 15 days to spare. Path two. The buyer waits until due diligence clears on day 45 to file. The notice period ends on day 105. Closing slips from day 75 to day 105 at the earliest, which is 30 days. Those 30 days are not free. The rate lock, the seller's patience and the deposit are all exposed for an extra month. The application fee is refundable, less a $7,500 processing charge, if the change of ownership does not occur,[3] so filing early puts $7,500 at risk to protect the whole calendar. FAQ: - Q: How much money do I need to buy a hotel? A: Under SBA 504, at least 15 percent of project cost, or 20 percent for a business two years old or less.[1][2] Conventional equity is set by the lender and not published. Add franchise fees, the PIP, closing costs and reserves. - Q: Can I buy a hotel with an SBA loan? A: Yes. SBA's procedures classify hotels as limited or special purpose property under 504, which sets the 15 percent minimum contribution.[1][2] As of September 2026 the 7(a) maximum allowable rate is 10.00 percent.[7] - Q: How long does it take to buy a hotel? A: From a signed purchase agreement, our published sale playbook budgets 60 to 90 days for due diligence and closing.[4] Franchise approval and a liquor license can take longer, so start both at signing. - Q: Do I take over the seller's franchise agreement? A: No. Under Hilton's 2025 Hampton agreement the buyer files a change of ownership application, pays the fee, signs the current form of franchise agreement and agrees to the brand's requested upgrades.[3] - Q: Can I use a 1031 exchange to buy a hotel? A: Yes, for the real property. You have 45 days to identify the hotel and 180 days to close.[5] Furniture, fixtures and equipment have not qualified since January 1, 2018.[6] - Q: Do I need a broker to buy a hotel? A: No. In a marketed sale the listing broker represents the seller. A buyer can hire its own adviser to source hotels, underwrite them and run the offer. Ask who pays that adviser before you sign anything. - Q: How do I find off-market hotels? A: Through people who talk to owners every week: brokers, lenders and management companies. Owners respond to buyers who can show equity, a lender and an operator, so have all three ready. Sources: - [1] 13 CFR 120.910, How much must the Borrower contribute? (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/13/120.910 - [2] SOP 50 10 8, Lender and Development Company Loan Programs (effective June 1, 2025), Section C, Ch. 1: Limited or Special Purpose Property, which lists hotels (pp. 354-355) (U.S. Small Business Administration, accessed 2026-09-18): https://legacy.sba.gov/document/sop-50-10-lender-development-company-loan-programs - [3] 2025 Hampton Franchise Disclosure Document (issued March 30, 2025), Items 5, 6, 15 and 17 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - [4] How to sell a hotel: the 24-week transaction process (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/process - [5] 26 U.S.C. Section 1031 (Legal Information Institute, Cornell Law School, accessed 2026-09-18): https://www.law.cornell.edu/uscode/text/26/1031 - [6] Like-kind exchanges, real estate tax tips (Internal Revenue Service, accessed 2026-09-18): https://www.irs.gov/businesses/small-businesses-self-employed/like-kind-exchanges-real-estate-tax-tips - [7] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates - [8] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/research/mhi/q1-2026 ### Should I buy a branded or independent hotel? URL: https://matthewshotelmarkets.com/buy-a-hotel/branded-vs-independent Last updated: 2026-09-18 A brand sells you demand and charges a share of rooms revenue for it. Hilton's 2025 Hampton disclosure lists a 6 percent royalty plus a 4 percent program fee, and reports an average RevPAR index of 121.0 for comparable Hamptons in 2024.[1] An independent keeps those fees and carries its own marketing. As of September 2026, no lender publishes different terms for either.[2] Key takeaways: - The fees are public. Hampton: 6 percent royalty plus 4 percent program fee on gross rooms revenue. Tapestry: 5 plus 4. Spark: 5.5 plus 3.0 to 3.5.[1][3][4] - There is more than the headline. Hampton also charges 4.9 percent of the eligible folio on Hilton Honors stays, and Hilton may raise the program fee by up to 1 point over the term.[1] - Hilton reports that comparable Hamptons averaged a RevPAR index of 121.0 in 2024, with a range from 39.5 to 334.4. A flag is not a guarantee.[1] - Leaving early costs money. If Hilton terminates a Hampton agreement after year two, damages are the hotel's average monthly royalty times 60.[1] - Lenders do not publish separate terms for branded and independent hotels.[2] #### What does a hotel brand actually cost? On Hilton's 2025 Hampton schedule, 10 percent of gross rooms revenue before any other charge: a 6 percent monthly royalty and a 4 percent monthly program fee.[1] Item 6 of a Franchise Disclosure Document lists every recurring fee, and it is the first thing a buyer of a branded hotel should read. For Hampton, the royalty is 6 percent of gross rooms revenue and the program fee, which pays for the reservation system, marketing and related programs, is 4 percent.[1] Hilton may change the program fee, but not by more than 1 percent of gross rooms revenue above the current rate over the term of the agreement.[1] The list goes on past those two lines. Hampton charges 4.9 percent of the total eligible guest folio on Hilton Honors stays, monthly technology fees, and other program charges.[1] The disclosure also says Hilton occasionally reduces the royalty for multi-unit or more experienced franchisees and for conversions, and that it agreed to modify the royalty in 66 instances in 2024. For some buyers the schedule is a starting point.[1] Other Hilton brands price differently. Tapestry Collection lists a 5 percent royalty and a 4 percent program fee.[3] Spark, which Hilton describes as competing in the economy segment, lists a 5.5 percent royalty and a program fee of 3.0 to 3.5 percent.[4] We cite Hilton's documents because Hilton posts them publicly. Other franchisors prepare a disclosure document in the same item-by-item format, so ask the brand's development team for the current one and compare Item 6 line by line. #### What do I get for the fees? A reservation system, a loyalty program and a name travelers already know. Hilton's own disclosure puts a number on it for Hampton, with a wide range around it.[1] Item 19 of the Hampton disclosure reports results for comparable hotels. In 2024 the average occupancy index was 109.8 and the average RevPAR index was 121.0, where 100 means a hotel takes its fair share against its competitive set.[1] Average occupancy for comparable hotels was 71.7 percent.[1] Read the range as closely as the average. RevPAR index across comparable Hamptons ran from 39.5 to 334.4 in 2024, and occupancy ran from 30.5 percent to 96.6 percent.[1] Hilton states that individual results may differ and that there is no assurance a franchisee will reach those levels.[1] A flag raises the odds of a full house. It does not fix a bad location or a tired building. The disclosure does not publish the share of room nights that comes from Hilton Honors members or from Hilton's reservation channels. If that number matters to your underwriting, ask the seller for the hotel's own channel mix report. The index terms are defined at [RevPAR](/glossary/revpar). #### What does a brand require from a buyer? A new application, a new franchise agreement, the upgrades the brand asks for, and management the brand approves.[1] A buyer does not inherit the seller's franchise. Under Hilton's 2025 Hampton agreement, the buyer submits a change of ownership application, pays the application fee, signs the current form of franchise agreement and agrees to the brand's request for upgrades, which arrive as a property improvement plan.[1] The schedule lists a $200,000 application fee for a change of ownership. Tapestry lists $150,000 and Spark lists $75,000.[1][3][4] In a change of ownership, the term is generally the remaining term of the existing agreement, or another term Hilton approves.[1] The PIP is usually the biggest number on this list, and it is specific to the building. It is explained at [PIP](/glossary/pip), and paying for it is covered at [How do I finance a hotel PIP or renovation?](/hotel-financing/pip-and-renovation-loans). An independent hotel has no PIP. It also has no one requiring the owner to reinvest, which is how independents fall behind. #### What does it cost to leave a brand? Under Hilton's 2025 Hampton disclosure, liquidated damages after the second year equal the hotel's average monthly royalty fees multiplied by 60.[1] The formula matters to a buyer who plans to reflag. If Hilton terminates the agreement after the second anniversary of opening and before the last 60 months of the term, damages are the hotel's average monthly royalty multiplied by 60. Inside the last 60 months, the multiplier is the number of months remaining.[1] The worked example below puts dollars on it. If your plan is to buy a branded hotel and convert it, price the exit from the old flag, the application fee for the new one and the conversion PIP before you bid. #### What does an independent hotel have to do for itself? Everything the program fee pays for: distribution, marketing, a booking engine, revenue management and guest loyalty. An independent keeps the royalty and the program fee, and it spends part of that money replacing what they bought. It pays commissions to online travel agencies on the bookings it cannot generate directly, and it builds its own reputation one review at a time. Independents tend to work where the location or the building is the draw: a resort town, a historic downtown, a destination a traveler searches for by name. They are hardest to run in highway and suburban markets, where travelers book by brand and by points. No public dataset reports what independents spend on distribution, so ask the seller for the actual channel mix and commission expense. #### Do lenders treat branded and independent hotels differently? No lender publishes separate terms. Underwriting turns on the hotel's income history, its market and who operates it.[2] Our September 2026 rate sheet marks conventional spreads and leverage as not yet published for every hotel segment, because lenders do not print them.[2] In practice a brand helps the credit story in two ways: the lender can see index data against a competitive set, and the reservation system gives it some comfort about demand if the operator changes. A branded loan also brings the franchisor into the file. Hilton issues a lender comfort letter only on request and only if the request meets its qualifications, for a $3,500 processing fee.[1] An independent with a long record of stable income and a proven operator can be financed. A first-time owner buying an independent with thin records should expect a harder conversation. SBA's procedures list hotels, motels and other lodging facilities as limited or special purpose property and draw no line between flagged and unflagged.[6] The options are compared at [Which lenders finance hotels?](/hotel-financing/hotel-lenders-by-type). Table: Branded versus independent hotel ownership, with published 2025 Hilton fee schedules Category | Branded | Independent Royalty | Hampton 6%, Tapestry 5%, Spark 5.5% of gross rooms revenue[1][3][4] | None Program or marketing fee | Hampton 4%, Tapestry 4%, Spark 3.0% to 3.5% of gross rooms revenue[1][3][4] | None. The owner funds its own marketing and distribution Loyalty program charge | Hampton: 4.9% of total eligible folio on Hilton Honors stays[1] | None, and no loyalty program unless the owner builds one Fee at purchase | Change of ownership application: Hampton $200,000, Tapestry $150,000, Spark $75,000[1][3][4] | None Capital required by a third party | A PIP on change of ownership, scope set by the brand[1] | None required. Reinvestment is the owner's call Published performance | Hampton 2024 average RevPAR index 121.0, range 39.5 to 334.4[1] | No public dataset Who can operate it | The owner or a management company the brand approves[1] | Anyone the owner and lender accept Cost to exit | Hampton after year two: average monthly royalty times 60[1] | None Lender terms | Not published[2] | Not published[2] First-party data point: Matthews Hotel Markets tracks pricing by segment, not by flag. The Matthews Hotel Index for Q1 2026 puts select-service cap rates in a 7.50 to 8.75 percent band across the 14 markets we cover.[5] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: what a Hampton flag costs on $3.0M of rooms revenue): Hypothetical. An 80-key Hampton Inn with $3,000,000 of gross rooms revenue. Royalty at 6 percent is $180,000. Program fee at 4 percent is $120,000. Together that is $300,000 a year, or 10 percent of rooms revenue, before the Hilton Honors charge, technology fees and other Item 6 lines.[1] Now the comparison. Suppose the same building as an independent would produce $2,600,000 of rooms revenue. That figure is an assumption for the arithmetic. The flag then adds $400,000 of revenue and costs $300,000 in the two main fees. Revenue is not profit: the extra room nights also carry housekeeping, supplies and credit card costs. On these assumptions the flag roughly pays for itself and no more. If the independent would do $2,200,000, the flag adds $800,000 for the same $300,000 and the answer is clear. The whole decision rests on that one estimate, which is why the competitive set in the STR report deserves more time than the fee table. The exit. Average monthly royalty is $180,000 divided by 12, or $15,000. If Hilton terminated the agreement after year two, liquidated damages would be $15,000 times 60, or $900,000.[1] FAQ: - Q: How much are hotel franchise fees? A: They vary by brand. Hilton's 2025 disclosures list a 6 percent royalty plus a 4 percent program fee for Hampton, 5 plus 4 for Tapestry Collection, and 5.5 plus 3.0 to 3.5 for Spark, all on gross rooms revenue.[1][3][4] - Q: Is a branded hotel easier to finance? A: No lender publishes separate terms.[2] A brand gives the lender index data and a reservation system behind the income. An independent with a long, stable record and a proven operator can also be financed. - Q: Can I keep the seller's franchise agreement? A: Not under Hilton's 2025 Hampton agreement. The buyer applies, pays the application fee, signs the current form of agreement and agrees to requested upgrades. The term is generally the remaining term of the existing agreement.[1] - Q: Does a brand guarantee better performance? A: No. Hilton reports an average 2024 RevPAR index of 121.0 for comparable Hamptons, with individual hotels from 39.5 to 334.4, and states there is no assurance a franchisee will reach those levels.[1] - Q: What does it cost to drop a flag? A: Under the 2025 Hampton disclosure, if Hilton terminates after year two and before the last 60 months, damages are the hotel's average monthly royalty times 60. In the last 60 months, it is the months remaining.[1] - Q: Can I buy a branded hotel and convert it to a different brand? A: Yes, at a cost. Price the old brand's termination damages, the new brand's application fee and the conversion PIP before you bid. Each figure comes from the two brands' own disclosure documents. - Q: When does an independent hotel make sense? A: When the location or the building is what guests search for, such as a resort town or a historic downtown, and the owner can run distribution and marketing well. It is harder in highway and suburban markets, where travelers book by brand. Sources: - [1] 2025 Hampton Franchise Disclosure Document (issued March 30, 2025), Items 5, 6, 15, 17 and 19 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - [2] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates - [3] 2025 Tapestry Collection by Hilton Franchise Disclosure Document (issued March 30, 2025), Items 5 and 6 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Tapestry.pdf - [4] 2025 Spark by Hilton Franchise Disclosure Document (issued March 30, 2025), Items 1, 5 and 6 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Spark.pdf - [5] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/research/mhi/q1-2026 - [6] SOP 50 10 8, Lender and Development Company Loan Programs (effective June 1, 2025), Section C, Ch. 1: Limited or Special Purpose Property, which lists hotels (pp. 354-355) (U.S. Small Business Administration, accessed 2026-09-18): https://legacy.sba.gov/document/sop-50-10-lender-development-company-loan-programs ### What due diligence do I need before buying a hotel? URL: https://matthewshotelmarkets.com/buy-a-hotel/due-diligence-checklist Last updated: 2026-09-18 Eight workstreams, run at the same time: the STR report, financials restated to the USALI format, a property condition assessment under ASTM E2018-24, an ALTA/NSPS survey, a Phase I under ASTM E1527-21, the franchise application, the liquor license and the staffing plan.[1][2][3][4] As of September 2026, Hilton's Hampton agreement requires 60 days' written notice of a change of ownership.[5] Key takeaways: - A hotel is real estate and an operating business. Diligence has to cover both. - The standards are public: ASTM E2018-24 for the building, ASTM E1527-21 for the ground, the 2026 ALTA/NSPS standards for the survey, USALI for the books.[1][2][3][4] - You do not inherit the franchise. Under Hilton's 2025 Hampton agreement the buyer applies, pays the fee, signs a new agreement and agrees to the upgrades.[5] - A liquor license is a separate approval. California says most transfer investigations take about 55 to 65 days.[6] - Our published sale playbook budgets 60 to 90 days for due diligence and closing together, so start every third-party report in week one.[7] #### How do I verify the hotel's income? Rebuild the trailing twelve months from source documents, in the USALI format, and tie it to bank statements and tax returns. The Uniform System of Accounts for the Lodging Industry is the standard format for hotel financial statements. Its 12th revised edition was adopted on January 1, 2026.[2] Ask for three years of monthly profit and loss statements plus the trailing twelve months, then map every line to USALI departments so the hotel can be compared with others. An owner-operated hotel often shows no management fee, a family payroll that a new owner cannot match, and no reserve for replacing furniture and equipment. Each one overstates the income a buyer or lender will underwrite, and the worked example below shows how much that can move price. Then test the revenue. Tie monthly room revenue to the property management system's night audit reports, to occupancy tax filings and to bank deposits. Revenue that appears in the P&L and in none of those three is the red flag that matters most. Net operating income is defined at [NOI](/glossary/noi). #### What does the STR report tell me? How the hotel performs against its competitors on occupancy, rate and RevPAR, expressed as an index where 100 is fair share. Hilton's Hampton disclosure defines the measure plainly: RevPAR index is the hotel's RevPAR divided by its competitive set's RevPAR, times 100, and an index above 100 means the hotel takes more than its fair share.[5] Ask the seller for the monthly STAR reports covering the same three years as the financials. Look at the trend, not one month. A falling index with stable market RevPAR points at the hotel itself: condition, management or reviews. Check which hotels are in the competitive set too, because a set of weaker hotels flatters the index. The terms are defined at [RevPAR](/glossary/revpar) and [ADR](/glossary/adr). STR data is licensed, so the seller shares it under the confidentiality agreement and you cannot republish it. #### What physical and site reports do I need? A property condition assessment, an ALTA/NSPS land title survey and a Phase I environmental site assessment. Most lenders will ask for all three. ASTM E2018-24 is the current standard guide for a baseline property condition assessment of commercial real estate.[1] The report lists physical deficiencies and the cost to cure them, which gives you a capital plan alongside the brand's PIP. The 2026 ALTA/NSPS Land Title Survey standards took effect on February 23, 2026 and replaced the 2021 version.[3] Title insurers and lenders use the survey to evaluate title matters such as boundaries, easements, encroachments and access.[3] ASTM E1527-21 is the standard practice for a Phase I environmental site assessment.[4] EPA's rule on all appropriate inquiries names E1527-21 as a standard that may be used to comply.[8] ASTM says the practice is meant to let a buyer satisfy one of the requirements for the landowner liability protections under the federal Superfund law.[4] Hotels near former gas stations, dry cleaners or industrial sites need the closest reading. #### What do I have to do about the franchise? Apply for your own franchise agreement the day the purchase agreement is signed. You cannot assume the seller's. Hilton's 2025 Hampton disclosure sets out what a change of ownership takes. The seller gives 60 days' written notice. The buyer must meet the brand's current requirements for new franchisees, which the document lists as credit, a background investigation, operations experience and prior business dealings. The buyer submits a change of ownership application, pays the application fee, signs the current form of franchise agreement and agrees to the brand's request for upgrades.[5] The schedule lists a $200,000 application fee and a $10,000 PIP fee.[5] Two more items from the same document. Hilton may require an independent survey by an ADA consultant in a change of ownership.[5] If your lender needs a comfort letter from the brand, Hampton charges $3,500 to process one, and issues it only if the request meets its qualifications.[5] Other brands differ, so read Items 5, 6 and 17 of the current disclosure document for your brand. The PIP itself is explained at [PIP](/glossary/pip). #### What about the liquor license? It is a separate government approval on its own clock, and the rules are set state by state. A hotel with a bar, a restaurant or a market that sells beer and wine cannot serve under the seller's license once the seller is gone, unless the state has approved the change. California is one example of how long that takes. The state's Department of Alcoholic Beverage Control says most investigations for the issuance or transfer of a license take about 55 to 65 days, and that by law a license cannot be issued for at least 30 days.[6] It also allows the buyer to operate during the transfer under a 120-day temporary permit, if the premises are currently licensed and have been operating within the past 30 days.[6] Other states work differently. Ask a local liquor license attorney in the first week, because this approval can outlast every other item on the list. #### What do I owe the employees? If the hotel has 100 or more employees, the federal WARN Act can require 60 days' notice before a mass layoff or closing, and the sale splits that duty between seller and buyer. WARN covers employers with 100 or more employees, not counting part-time employees.[9] It requires at least 60 days' notice of a plant closing or mass layoff.[10] In a sale, the seller is responsible for notice of any covered event up to and including the effective date of the sale, and the buyer is responsible after that.[11] Many smaller hotels fall under the threshold. A large full-service or resort hotel may not, and some states have notice laws of their own. If you plan to change the management company or re-staff, settle who gives notice in the purchase agreement. #### How long does all this take? Our published sale playbook budgets 60 to 90 days for due diligence and closing together, from week 12 to week 24.[7] The length of the diligence period is a negotiated term of the purchase agreement, so the contract you sign sets your real deadline. The slow items are the ones with outside parties: the brand, the liquor authority, the lender's appraisal and the third-party reports. Order the property condition assessment, the survey and the Phase I in the first week, file the franchise application at signing, and leave the last weeks for negotiating what the reports found. The seller's view of the same calendar is at [How long does it take to sell a hotel?](/sell-a-hotel/how-long-it-takes), and the documents a seller should hand over are listed at [Documents needed to sell a hotel](/sell-a-hotel/documents-needed). Table: Hotel buyer due diligence checklist, with the public standard behind each item (September 2026) Item | What it answers | Standard or rule | Who orders it Financials: 3 years plus trailing twelve months | Is the income real and repeatable? | USALI, 12th revised edition, adopted January 1, 2026[2] | Buyer, from the seller STR STAR reports | Is the hotel gaining or losing share? | Index of 100 equals fair share[5] | Seller provides under NDA Property condition assessment | What is broken and what will it cost? | ASTM E2018-24[1] | Buyer or lender ALTA/NSPS land title survey | Boundaries, easements, encroachments, access | 2026 standards, effective February 23, 2026[3] | Buyer, with the title company Phase I environmental site assessment | Is there contamination risk? | ASTM E1527-21, named in 40 CFR 312.11[4][8] | Buyer or lender Franchise application and PIP | Will the brand approve me, and at what cost? | Brand FDD. Hampton: 60 days' notice, $200,000 application fee, $10,000 PIP fee[5] | Buyer, at signing Lender comfort letter | Will the brand recognize my lender? | Hampton: $3,500 processing fee[5] | Buyer, for the lender Liquor license | Can I serve on day one? | State law. California: most investigations take 55 to 65 days[6] | Buyer, with local counsel Employees and WARN | Who gives notice if staffing changes? | 100 or more employees, 60 days' notice[9][10][11] | Buyer and seller, in the contract Title, contracts, permits, taxes | What comes with the property? | Title commitment and the documents themselves | Buyer's counsel First-party data point: Matthews Hotel Markets publishes the cap-rate bands a diligence adjustment gets priced at. The Matthews Hotel Index for Q1 2026 puts select-service cap rates in a 7.50 to 8.75 percent band across the 14 markets we cover.[12] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: what restating the seller's NOI does to price): Hypothetical. An owner-operated, 90-key select-service hotel with $4,000,000 of total revenue. The seller's P&L shows net operating income of $1,500,000, with no management fee and no reserve. The buyer restates it the way a lender will. A management fee assumed at 3 percent of revenue is $120,000. A reserve for furniture, fixtures and equipment assumed at 4 percent of revenue is $160,000. Both percentages are assumptions for the arithmetic. Restated NOI is $1,500,000 minus $120,000 minus $160,000, or $1,220,000. At an 8.00 percent cap rate, inside the select-service band in the Matthews Hotel Index,[12] the seller's number implies $1,500,000 divided by 0.08, or $18,750,000. The restated number implies $1,220,000 divided by 0.08, or $15,250,000. The gap is $3,500,000, and it comes from two lines that were never on the seller's statement. Nothing was hidden. The statement was simply not built the way a buyer's lender reads it. The method is at [How do I value a hotel?](/hotel-valuation/how-to-value-a-hotel), and the ratio is defined at [cap rate](/glossary/cap-rate). FAQ: - Q: How long is due diligence when buying a hotel? A: As long as the purchase agreement says. Our published sale playbook budgets 60 to 90 days for due diligence and closing together.[7] Franchise approval and a liquor license transfer are the items most likely to set the pace. - Q: Can I take over the seller's franchise agreement? A: Not under Hilton's 2025 Hampton agreement. The buyer submits a change of ownership application, pays the fee, signs the current form of franchise agreement and agrees to requested upgrades.[5] Check Item 17 of your own brand's disclosure document. - Q: What is a T-12 and why do buyers ask for one? A: It is the profit and loss statement for the trailing twelve months. Buyers and lenders use it because it shows current earning power, where a calendar-year statement can be many months stale. - Q: Do I need a Phase I on a hotel? A: Almost always, and most lenders require one. ASTM E1527-21 is the current standard, and EPA's all appropriate inquiries rule names it as a standard that may be used to comply.[4][8] - Q: What is a PCA? A: A property condition assessment. ASTM E2018-24 is the current standard guide.[1] An engineer walks the building, lists physical deficiencies and estimates the cost to fix them. - Q: Does the WARN Act apply to a hotel sale? A: Only if the employer has 100 or more employees, not counting part-time staff.[9] If it does, the seller owes notice for covered layoffs through the sale date and the buyer owes it afterward.[11] - Q: What are the red flags in a hotel's financials? A: Revenue that does not tie to bank deposits or occupancy tax filings, no management fee, no reserve, family payroll below market, and repairs booked as capital. Each one makes reported income higher than a lender will underwrite. Sources: - [1] E2018-24 Standard Guide for Property Condition Assessments: Baseline Property Condition Assessment Process (ASTM International, accessed 2026-09-18): https://store.astm.org/e2018-24.html - [2] HFTP, AHLA and GFC unveil the 12th Revised Edition of the Uniform System of Accounts for the Lodging Industry (adopted January 1, 2026) (American Hotel & Lodging Association, accessed 2026-09-18): https://www.ahla.com/news/hftp-ahla-and-gfc-unveil-groundbreaking-12th-revised-edition-uniform-system-accounts-lodging - [3] ALTA/NSPS Land Title Survey Standards (2026 standards, effective February 23, 2026) (American Land Title Association, accessed 2026-09-18): https://www.alta.org/topics/topic-land-survey-standards - [4] E1527-21 Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process (ASTM International, accessed 2026-09-18): https://store.astm.org/e1527-21.html - [5] 2025 Hampton Franchise Disclosure Document (issued March 30, 2025), Items 5, 6, 7, 17 and 19 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - [6] Frequently asked questions: licensing (transfer timing and the 120-day temporary permit) (California Department of Alcoholic Beverage Control, accessed 2026-09-18): https://www.abc.ca.gov/licensing/frequently-asked-questions/ - [7] How to sell a hotel: the 24-week transaction process (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/process - [8] 40 CFR 312.11, References (standards for conducting all appropriate inquiries) (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/40/312.11 - [9] 20 CFR 639.3, WARN Act definitions (employer) (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/20/639.3 - [10] 20 CFR 639.2, What does WARN require? (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/20/639.2 - [11] 20 CFR 639.4, who must give notice (including in a sale of a business) (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/20/639.4 - [12] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/research/mhi/q1-2026 ### How do I buy my first hotel with no hotel experience? URL: https://matthewshotelmarkets.com/buy-a-hotel/first-hotel-no-experience Last updated: 2026-09-18 You can, but someone qualified has to run it. Hilton's 2025 Hampton disclosure requires qualified and experienced management, by you or by a management company the brand has approved.[1] A first-time owner must complete owner education within 90 days of a change of ownership.[1] Lenders do not publish an experience minimum. As of September 2026, SBA's rule leaves that to the lender's own credit process.[2] Key takeaways: - No public rule says a first-time buyer cannot own a hotel. The brand and the lender each decide, deal by deal. - Hilton's 2025 Hampton disclosure lists operations experience among the requirements a buyer must meet in a change of ownership.[1] - The same document lets the brand require an approved management company if it finds the owner is not qualified to operate the hotel.[1] - SBA's lending criteria name credit history, cash flow, and equity or collateral. They set no hotel experience minimum, and they tell lenders to use their own commercial credit process.[2] - Under SBA 504, a business that has operated two years or less contributes at least 20 percent on a hotel, not 15.[3][4] #### Will a brand approve me with no hotel experience? It can, if the management is qualified. The brand approves the operator as well as the owner. Hilton's 2025 Hampton disclosure is the clearest public statement we have read. In a change of ownership, the buyer must meet the brand's current requirements for new franchisees, which the document lists as credit, a background investigation, operations experience, prior business dealings and other relevant factors.[1] Item 15 of the same document covers who runs the hotel. The franchisee must provide qualified and experienced management. The hotel must be operated by the franchisee or by a third-party management company that Hilton has approved. Hilton may refuse to approve an owner or a management company that it judges inexperienced or unqualified. An owner who wants to manage directly needs Hilton's written approval and must complete its training program, unless Hilton waives that.[1] Other brands write their own rules, so read Items 11, 15 and 17 of the current disclosure document for the brand you are buying. #### Do I have to hire a management company? Not always, but the brand can require it, and for a first-time owner it is the most direct way to supply the experience the brand is asking about. Under the Hampton disclosure, if Hilton determines at any time that the owner is not qualified to operate the hotel, it may require the owner to retain a management company that is acceptable to it.[1] For a newly developed hotel, the document says that if Hilton does not approve the proposed management, the owner must hire a professional hotel management company for at least the first year, and Hilton will reevaluate after that year if asked.[1] Hiring a manager does not transfer the owner's obligations. The disclosure says the owner remains solely responsible for the management and operation of the hotel, and that engaging a management company does not reduce the owner's obligations under the franchise agreement. If the management company resigns or is terminated, the owner has 90 days to retain a replacement the brand accepts.[1] Management fees are set by contract between the owner and the manager. They are not published, so get proposals from more than one company. #### What training does the brand require from a new owner? Under Hilton's 2025 Hampton disclosure, an owner education course within 90 days of the change of ownership and an owner orientation within 180 days.[1] The disclosure describes a program called New to Hospitality Owner Education. It is a virtual course for franchisees without prior hospitality or comparable brand experience, and it covers revenue management, asset management, sales generation and talent management. It must be taken within 90 days after a change of ownership, at least one person in the organization must complete it, and the listed cost is up to $2,500 per participant, paid to the vendor.[1] Owner orientation is separate. When a change of ownership takes place and the buyer is a first-time franchisee of the brand, the buyer must attend within 180 days of the transfer. The document lists no separate fee for it.[1] After approving a management company, Hilton can also require the general manager and other key staff to attend training for their roles.[1] #### Will a lender finance a first-time hotel buyer? Some will. No lender publishes an experience requirement, and SBA's rule does not set one. SBA's regulation on lending criteria says the applicant must be creditworthy and the loan must be so sound as to reasonably assure repayment. It tells lenders to use the same prudent commercial credit analysis they use on similar non-SBA loans, and it names the criteria they may consider: credit score or credit history, earnings or cash flow, and equity or collateral.[2] Hotel experience is not on that list, which means it comes in through each lender's own credit policy. One lender may accept a first-time owner with an approved management company and strong liquidity. Another may not. The only way to know is to ask, early, and in writing. Banks, CMBS lenders, life companies and debt funds do not publish sponsor requirements either. Our September 2026 rate sheet marks their leverage and pricing terms as not yet published for the same reason: nobody prints them.[5] The lender types are compared at [Which lenders finance hotels?](/hotel-financing/hotel-lenders-by-type). #### Does being new change how much I need to put down? Under SBA 504 it can. A hotel buyer contributes at least 15 percent of project cost, and at least 20 percent if the business has operated two years or less.[3][4] The 504 regulation sets the higher minimum when two conditions are both true: the building is limited or single purpose, which SBA says a hotel is, and the borrower has operated for two years or less.[3][4] Ask the Certified Development Company how SBA will classify your acquisition before you budget. Under both SBA programs, holders of at least a 20 percent ownership interest generally must guarantee the loan.[6] The full cash picture is at [How much money do I need to buy a hotel?](/buy-a-hotel/how-much-money-do-you-need). #### What should a first-time buyer do first? Line up the three approvals a hotel purchase depends on, in this order: the operator, the lender, the brand. Start with the operator, because the other two will ask who it is. Interview management companies that already run the brand and the size of hotel you are looking at, and ask each for the list of hotels it manages today. Then talk to lenders with the operator's name in hand and ask each one, in writing, whether it lends to first-time hotel owners and on what conditions. Then read the brand's disclosure document before you make an offer, so the application fee, the training and the PIP are in your budget. Only then go shopping. The [hotels for sale](/listings) page shows current listings, and the diligence list for the one you pick is at [What due diligence do I need before buying a hotel?](/buy-a-hotel/due-diligence-checklist). Table: What public documents say about a hotel buyer's experience (September 2026) Who decides | What the public document says | Source The brand, on the buyer | Buyer must meet current requirements for new franchisees: credit, background investigation, operations experience, prior business dealings | 2025 Hampton FDD, Item 17[1] The brand, on the operator | Hotel must be run by the owner or an approved management company. Brand may refuse one it finds inexperienced or unqualified | 2025 Hampton FDD, Item 15[1] The brand, on training | New to Hospitality Owner Education within 90 days of a change of ownership, up to $2,500 per participant. Owner orientation within 180 days | 2025 Hampton FDD, Item 11[1] The brand, if the manager leaves | Owner has 90 days to retain a replacement the brand accepts | 2025 Hampton FDD, Item 15[1] SBA lenders | Criteria named: credit history, cash flow, equity or collateral. No experience minimum. Lender uses its own commercial credit process | 13 CFR 120.150[2] SBA 504, on equity | At least 15% on a hotel, 20% if the business has operated two years or less | 13 CFR 120.910 and SOP 50 10 8[3][4] Banks, CMBS, life companies, debt funds | Not published | Rate sheet[5] First-party data point: Matthews Hotel Markets' September 2026 rate sheet shows what a first-time buyer's most likely loan costs today: the SBA 7(a) maximum allowable rate is 10.00%, with Prime at 7.00% since September 17, 2026, and the 25-year SBA 504 debenture priced at 6.54% on September 10, 2026.[5] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: what a management fee does to loan coverage): Hypothetical. A first-time buyer is looking at a 70-key branded hotel with $3,000,000 of total revenue and net operating income of $900,000 on the seller's statement. The seller ran the hotel personally, so the statement has no management fee. The buyer plans to hire an approved management company. Assume a fee of 3 percent of revenue, which is $90,000. That percentage is an assumption for the arithmetic, not a market figure. Income after the fee is $900,000 minus $90,000, or $810,000. Assume annual debt service of $600,000. Before the fee, coverage is $900,000 divided by $600,000, or 1.50x. After the fee it is $810,000 divided by $600,000, or 1.35x. The owner training adds little by comparison: two participants at up to $2,500 each is $5,000.[1] The point is that the experience gap has a price, and it shows up in coverage, which is the number that sizes the loan. Run your own figures in the [DSCR calculator](/tools/dscr-calculator). The ratio is defined at [DSCR](/glossary/dscr). FAQ: - Q: Can I buy a hotel with no experience? A: Yes, if qualified management runs it. Hilton's 2025 Hampton disclosure requires the hotel to be operated by the owner or by a management company Hilton has approved, and it may refuse an operator it finds inexperienced.[1] - Q: Do lenders require hotel experience? A: No lender publishes a requirement. SBA's lending criteria name credit history, cash flow and equity or collateral, and leave the rest to the lender's own commercial credit process.[2] Ask each lender in writing. - Q: Can I get an SBA loan for my first hotel? A: Yes. SBA's procedures classify hotels as limited or special purpose property under 504, and a buyer whose business has operated two years or less contributes at least 20 percent of project cost.[3][4] - Q: Can I manage the hotel myself? A: Under the 2025 Hampton disclosure, only with Hilton's prior written approval and after completing its training program, unless Hilton waives it. Hilton can later require a management company if it finds the owner is not qualified.[1] - Q: What training does a new hotel owner have to take? A: For Hampton, a New to Hospitality Owner Education course within 90 days of the change of ownership, at up to $2,500 per participant, and an owner orientation within 180 days if you are new to the brand.[1] - Q: Does a management company take over my obligations to the brand? A: No. The Hampton disclosure says the owner stays solely responsible for the hotel, and that hiring a management company does not reduce the owner's obligations under the franchise agreement.[1] - Q: Will I have to personally guarantee the loan? A: On an SBA loan, holders of at least a 20 percent ownership interest generally must guarantee it.[6] Conventional recourse terms are set by each lender and are not published. Sources: - [1] 2025 Hampton Franchise Disclosure Document (issued March 30, 2025), Items 11, 15 and 17 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - [2] 13 CFR 120.150, What are SBA's lending criteria? (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/13/120.150 - [3] 13 CFR 120.910, How much must the Borrower contribute? (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/13/120.910 - [4] SOP 50 10 8, Lender and Development Company Loan Programs (effective June 1, 2025), Section C, Ch. 1: Limited or Special Purpose Property, which lists hotels (pp. 354-355) (U.S. Small Business Administration, accessed 2026-09-18): https://legacy.sba.gov/document/sop-50-10-lender-development-company-loan-programs - [5] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates - [6] 13 CFR 120.160, Loan conditions (guarantees) (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/13/120.160 ### How much money do I need to buy a hotel? URL: https://matthewshotelmarkets.com/buy-a-hotel/how-much-money-do-you-need Last updated: 2026-09-18 There is no single number. As of September 2026, the one equity minimum written into federal regulation for a hotel purchase is SBA 504: at least 15 percent of project cost, or 20 percent for a business two years old or less.[1][2] Conventional lenders set their own and do not publish it. Then add the brand's application fee, $200,000 on Hilton's 2025 Hampton schedule.[3] Key takeaways: - SBA 504 requires at least 15 percent of project cost from a hotel buyer, and 20 percent if the business has operated two years or less.[1][2] - Banks, CMBS lenders, life companies and debt funds do not publish an equity requirement. Get it in writing from the lender you are talking to.[4] - The down payment is not the check. Franchise fees, a PIP, closing costs and reserves sit on top of it. - Hilton's 2025 Hampton disclosure lists a $200,000 change of ownership application fee and a $10,000 PIP fee. Franchisees paid $0 to $200,000 in 2024.[3] - Anyone holding 20 percent or more of an SBA borrower generally signs a personal guarantee.[5] #### What is the minimum down payment on a hotel? Under SBA 504 it is 15 percent of project cost, or 20 percent if the business has operated two years or less. No other lender type publishes a minimum.[1][2] The 504 rule comes from two documents read together. The regulation sets the borrower's contribution at 15 percent when the project is a limited or single purpose building, and at 20 percent when the borrower has also operated for two years or less.[1] SBA's operating procedures list hotels, motels and other lodging facilities as limited or special purpose property.[2] An ordinary building with an established operator needs 10 percent, so a hotel always sits above that floor.[1] These are minimums. A lender or Certified Development Company can ask for more. If you are buying through a newly formed company, ask the CDC early whether SBA will treat the borrower as a business that has operated two years or less, because that one answer moves the minimum from 15 to 20 percent. #### How much do conventional lenders want down? They do not say in public. No bank, CMBS lender, life company or debt fund publishes its loan-to-value ceiling for hotels.[4] Our September 2026 rate sheet marks maximum loan-to-value as not yet published for every lender type except SBA, because no lender type prints one.[4] What is public is the cost of the money. The 10-year Treasury was 4.94 percent on September 17, 2026, SOFR was 3.85 percent for the same day, and Prime has been 7.00 percent since September 17, 2026.[4] A lender's equity requirement follows from its own sizing tests on the hotel's income, so two lenders can look at the same hotel and ask for different down payments. The way to find your number is to ask for it in a written term sheet. The comparison of lender types is at [Which lenders finance hotels?](/hotel-financing/hotel-lenders-by-type), and the sizing tests are explained at [What do lenders require for a hotel loan?](/hotel-financing/loan-requirements). #### What does SBA 7(a) require? A 7(a) loan caps at $5 million, and SBA's program page gives no single equity percentage for it.[6] SBA describes 7(a) interest rates as negotiated between borrower and lender, subject to SBA maximums.[6] With Prime at 7.00 percent, the maximum on a variable-rate 7(a) loan over $350,000 is 10.00 percent.[4] The detailed 7(a) underwriting rules, including how much of the borrower's own money must go in, live in SBA's operating procedures, and the lender applies them alongside its own credit policy.[2] Treat any 7(a) down payment figure you hear as one lender's answer, and get it in writing. The two programs are compared side by side at [SBA 7(a) versus 504 for a hotel](/hotel-financing/sba-7a-vs-504). #### What does the brand charge a buyer? An application fee and a PIP fee up front, both listed in the brand's Franchise Disclosure Document. On Hilton's 2025 Hampton schedule that is $200,000 and $10,000.[3] A buyer does not take over the seller's franchise agreement. The buyer applies for a new one. Hilton's 2025 Hampton disclosure lists a $200,000 Franchise Application Fee for a change of ownership, due with the application, and a $10,000 fee to prepare the property improvement plan.[3] The same document says the fee is sometimes reduced, and that franchisees paid between $0 and $200,000 for change of ownership applications in 2024.[3] If the sale does not close, Hilton refunds the fee less a $7,500 processing charge.[3] If your lender wants a comfort letter from the brand, Hampton charges $3,500 to process it.[3] Other brands publish different schedules. Hilton's 2025 disclosures list a $150,000 change of ownership application fee for Tapestry Collection and $75,000 for Spark.[7][8] Read Item 5 of the current disclosure document for the brand you are buying. Do not carry one brand's fee over to another. #### How much should I hold back for a PIP? Whatever the brand's written scope says, priced by a contractor. No public source gives a reliable per-room figure for a change of ownership PIP. Hilton's Hampton disclosure says a buyer in a change of ownership may be required to upgrade the hotel to current standards, on deadlines the brand sets in the PIP.[3] The scope is specific to the building, so the cost is too. Order the PIP inspection early in due diligence, get the scope in writing, and have a contractor price it before your deposit goes hard. The financing side, including loans that fund the work after closing, is covered at [How do I finance a PIP or renovation?](/hotel-financing/pip-and-renovation-loans). The worked example below uses a hypothetical per-room figure only to show the arithmetic. #### What closing costs and reserves come on top? Title insurance, a survey, legal fees, an appraisal, a property condition assessment, a Phase I environmental report, lender fees, and working capital for the first months. None of these has a published national price. Each comes from a quote: the title company, the surveyor, your attorney, the lender's fee letter. Ask for the quotes during due diligence so the closing statement holds no surprises. The third-party reports are described at [What due diligence do I need before buying a hotel?](/buy-a-hotel/due-diligence-checklist). Reserves are the item first-time buyers skip. A hotel pays staff, utilities and franchise fees from the first day, while receivables and seasonal swings work against the new owner. Lenders often require a reserve at closing as well. Neither amount is published, so ask the lender for its requirement and set your own working capital target on top of it. #### Can I buy a hotel with no money down? Not with SBA 504, because the borrower contribution is a regulatory minimum.[1] The 504 regulation requires the borrower to contribute at least 15 percent of project cost on a hotel.[1][2] Conventional lenders size to the hotel's income and to value, which leaves a gap the buyer fills. Partners can fill part of it, and so can a seller note where the senior lender allows one, but both come with conditions. Under SBA rules, holders of at least a 20 percent ownership interest generally must guarantee the loan, so bringing in partners spreads the guarantee along with the equity.[5] Table: Where the cash goes when you buy a hotel, and what is public about each item (September 2026) Item | Who sets it | What is public Equity, SBA 504 | Federal regulation | At least 15% of project cost for a hotel, 20% if the business has operated two years or less[1][2] Equity, SBA 7(a) | SBA procedures and the lender | Loan maximum of $5 million. No single equity percentage on SBA's program page[6] Equity, conventional loan | The lender | Not published by any lender type[4] Franchise application fee | The brand's FDD, Item 5 | Change of ownership: $200,000 Hampton, $150,000 Tapestry, $75,000 Spark (2025 disclosures)[3][7][8] PIP fee | The brand's FDD | $10,000 on Hampton's 2025 schedule[3] PIP work | The brand's written scope | Property specific. Not published Lender comfort letter | The brand's FDD, Item 6 | $3,500 on Hampton's 2025 schedule[3] Closing costs | Title company, surveyor, counsel, lender, state | Quotes only. No national figure Reserves and working capital | The lender and you | Not published First-party data point: Matthews Hotel Markets' September 2026 rate sheet publishes the one hotel leverage ceiling that is written down anywhere: SBA rules cap a 504 hotel structure at 85% of project cost. It marks maximum LTV as not yet published for every other lender type, and it puts the 25-year 504 debenture at 6.54% as of September 10, 2026.[4] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: cash to close on an $8.0M, 80-key Hampton under SBA 504): Hypothetical. An 80-key Hampton Inn at an $8,000,000 purchase price, financed under SBA 504. The stack. The bank's first lien must be at least 50 percent of project cost on a hotel, so $4,000,000.[9] The borrower contributes 15 percent, or $1,200,000.[1] The CDC debenture covers the remaining 35 percent, $2,800,000, which is under the $5 million hotel cap.[2] The brand. Hampton's 2025 schedule lists a $200,000 change of ownership application fee, a $10,000 PIP fee and a $3,500 comfort letter fee, for $213,500.[3] Assumptions for the rest. Closing costs at 2 percent of price, $160,000. Working capital of $150,000. A PIP at $10,000 per room, $800,000. All three are assumptions for the arithmetic, not market figures. Total cash: $1,200,000 plus $213,500 plus $160,000 plus $150,000 plus $800,000 equals $2,523,500. That is 2.1 times the down payment. If SBA treats the borrower as a business that has operated two years or less, the contribution rises to 20 percent, $1,600,000, and the total to $2,923,500.[1] Ask the lender whether the PIP can be included in project cost, because that changes how much of it you fund in cash. FAQ: - Q: How much do I need to put down on a hotel? A: Under SBA 504, at least 15 percent of project cost, or 20 percent if the business has operated two years or less.[1][2] Conventional lenders set their own requirement and do not publish it, so ask for it in a written term sheet. - Q: Can I buy a hotel with 10 percent down? A: Not under SBA 504. The 10 percent minimum applies to ordinary buildings with an established operator. A hotel is limited or special purpose property, so the minimum is 15 percent.[1][2] - Q: What is the franchise application fee when I buy a branded hotel? A: It depends on the brand. Hilton's 2025 Hampton disclosure lists $200,000 for a change of ownership and says franchisees paid $0 to $200,000 in 2024.[3] Read Item 5 of the current disclosure document for your brand. - Q: Does the seller or the buyer pay for the PIP? A: The brand requires the buyer to agree to the upgrades as a condition of the new franchise agreement.[3] Who bears the cost is a price negotiation. Buyers usually deduct a priced PIP from their offer. - Q: Do I have to personally guarantee a hotel loan? A: On an SBA loan, holders of at least a 20 percent ownership interest generally must guarantee it.[5] Conventional lenders set their own recourse terms, and those terms are not published. - Q: What interest rate should I budget for? A: As of September 17, 2026, the 10-year Treasury is 4.94 percent, SOFR is 3.85 percent and Prime is 7.00 percent. The SBA 7(a) maximum is 10.00 percent and the 25-year 504 debenture priced at 6.54 percent.[4] Conventional spreads are not published. - Q: How large a hotel can an SBA loan finance? A: A 7(a) loan caps at $5 million.[6] A 504 debenture on a hotel caps at $5 million, with a bank first lien alongside it, so the total project can be larger.[2] Sources: - [1] 13 CFR 120.910, How much must the Borrower contribute? (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/13/120.910 - [2] SOP 50 10 8, Lender and Development Company Loan Programs (effective June 1, 2025), Section C, Ch. 1: debenture limits (p. 350) and Limited or Special Purpose Property, which lists hotels (pp. 354-355) (U.S. Small Business Administration, accessed 2026-09-18): https://legacy.sba.gov/document/sop-50-10-lender-development-company-loan-programs - [3] 2025 Hampton Franchise Disclosure Document (issued March 30, 2025), Items 5, 6, 7 and 17 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - [4] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates - [5] 13 CFR 120.160, Loan conditions (guarantees) (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/13/120.160 - [6] 7(a) loan program: terms, conditions, and eligibility (U.S. Small Business Administration, accessed 2026-09-18): https://www.sba.gov/sba-lenders/#7a-terms - [7] 2025 Tapestry Collection by Hilton Franchise Disclosure Document (issued March 30, 2025), Item 5 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Tapestry.pdf - [8] 2025 Spark by Hilton Franchise Disclosure Document (issued March 30, 2025), Item 5 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Spark.pdf - [9] 13 CFR 120.920, Required participation by Third Party Lenders (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/13/120.920 ## How much does a hotel franchise cost? ### How much does a hotel franchise cost? URL: https://matthewshotelmarkets.com/hotel-franchise-costs Last updated: 2026-09-18 A hotel franchise costs an application fee up front, a percentage of rooms revenue every month, and the cost of building or renovating to the brand's standard. Hilton's Hampton disclosure document issued March 30, 2026 lists a $100,000 application fee, a 6 percent royalty, a 4 percent program fee, and an estimated initial investment of $17,043,739 to $24,732,532 for an 89-room hotel, before land.[1] Key takeaways: - The numbers live in each brand's Franchise Disclosure Document (FDD). Items 5 and 6 list fees, Item 7 estimates the initial investment, Item 17 covers term and transfer, and Item 19 holds any performance figures.[1] - Across the eight Hilton brands covered here, Item 7 estimates run from $3,251,531 for a 100-room Spark conversion[2] to $126,260,147 for a 225-room DoubleTree Suites,[3] all excluding real estate. - Monthly royalties in those eight FDDs run from 5 to 6 percent of gross rooms revenue, with Homewood Suites starting new hotels at 3.5 percent, and program fees run from 2.5 to 4 percent.[1][3][4] - A buyer of an existing franchised hotel applies for a new franchise. Hampton's change of ownership application fee is $200,000, plus a $10,000 PIP fee, before the cost of the PIP itself.[1] - The FDD is the franchisor's document and fees change every year. Get the current FDD from the franchisor before you rely on any figure here. #### Where do hotel franchise costs come from? From the Franchise Disclosure Document, which federal rules require a franchisor to give a prospective franchisee before a sale. The Federal Trade Commission's Franchise Rule sets the contents of the FDD item by item at 16 CFR 436.5.[5] Hilton's own guide at the front of the 2026 Hampton FDD points a reader to the items that carry the money: Items 5 and 6 list the fees paid to the franchisor or at its direction, Item 7 lists the initial investment to open, and Item 19 may give information about sales, costs, profits or losses. The cover page says a prospective franchisee must receive the document at least 14 calendar days before signing a binding agreement or paying anything.[1] The term is defined at [franchise disclosure document](/glossary/franchise-fdd). The FDD is written by the franchisor. It is a disclosure, not an offer, and it is reissued every year. Every figure in this cluster is quoted from the document named in the sources, with the item and the printed page. These are neutral fee guides. They do not rank brands or recommend one. Ask the franchisor for the current FDD before you sign anything. #### What does Item 5 of a hotel FDD cover? Item 5 lists the initial fees paid to the franchisor before the hotel opens, and the conditions under which they are refundable.[5] In a hotel FDD the main Item 5 fee is the franchise application fee, and it depends on the kind of deal. Hampton's 2026 FDD charges $100,000 plus $400 per guest room over 150 for a new development or conversion, $200,000 for a change of ownership and $100,000 for re-licensing an existing franchisee. A $10,000 fee pays for Hilton to prepare the property improvement plan, or [PIP](/glossary/pip), on a conversion, change of ownership or re-licensing.[1] Item 5 also holds the brand's computer system, training and opening charges. The rule requires a franchisor whose initial fees are not uniform to disclose the range or formula for fees paid in the prior fiscal year.[5] That sentence is worth finding. Hampton's says franchisees paid application fees from $0 to $100,000 for new development or conversion and $25,000 to $200,000 for a change of ownership in 2025, which tells you the printed fee is sometimes negotiated.[1] #### What does Item 6 cover? Item 6 is the table of every other fee paid to the franchisor or its affiliates, including the formula used to compute each one.[5] For a hotel, the two large lines are the royalty and the program or marketing fee, both charged as a percentage of gross rooms revenue. In Hilton's 2026 FDDs the monthly royalty is 6 percent for Hampton and Home2 Suites, 5.5 percent for Hilton Garden Inn, Tru and Spark, and 5 percent for Tapestry Collection and DoubleTree.[1][2][3][6][7][8][9] Homewood Suites steps a new hotel's royalty from 3.5 percent in year one to 4.5 percent in year two and 5.5 percent after that.[4] Program fees run from 2.5 percent at Homewood Suites to 4 percent at Hampton.[1][4] Item 6 also carries the loyalty program charge, which Hilton bills on total eligible guest folio, not on rooms revenue: 4.6 percent at Hampton and 1.7 percent at Homewood Suites, for example.[1][4] Because the bases differ, the percentages cannot be added into one rate. Technology fees, transfer and lender comfort letter fees, and the liquidated damages formula for early termination are in the same table. Hampton's formula after the second year is the hotel's average monthly royalty fees multiplied by 60.[1] #### What does Item 7 cover, and what does it leave out? Item 7 is the franchisor's low-to-high estimate of the initial investment to open, laid out in a required table that includes a line for additional funds during the initial period.[5] Hotel Item 7 tables are built around a prototype of a stated size, which lets a reader divide by rooms. Hampton's 2026 estimate is $17,043,739 to $24,732,532 for an 89-room hotel, about $191,500 to $277,900 per room by our arithmetic.[1] Three cautions apply. First, Hilton's Item 7 totals exclude real estate, market studies, insurance and interest. Second, they do not separately identify the cost of improvements under a conversion, re-licensing or change of ownership, so a buyer of an existing hotel cannot use them to price a PIP.[1] Third, ranges can be very wide: the Tapestry Collection estimate for 125 rooms runs from $2,861,047 to $70,253,147 because construction is shown as $0 to $45,954,000.[9] Spark by Hilton is the exception on conversions. It is offered for conversions only, and its Item 7 prices a standard 100-room conversion at $3,251,531 to $5,906,193, with mechanical, electrical, roofing, HVAC, life safety and structural work outside the estimate.[2] Per-room pricing is defined at [price per key](/glossary/per-key). #### What does Item 17 tell a buyer or a seller? Item 17 is the table of renewal, termination, transfer and dispute resolution terms, cross-referenced to the franchise agreement.[5] Three rows matter most in a hotel deal. The term: Hampton's is generally 22 years from the effective date for new construction and 10 to 20 years from opening for a conversion, and Spark's conversion term is generally 10 to 15 years.[1][2] Renewal: Hilton's franchisees do not have the right to renew or extend, and a re-licensing is at Hilton's discretion on the then-current contract.[1] Transfer: a sale that changes control requires 60 days' written notice, and the buyer must qualify as a new franchisee, pay the application fee, sign the then-current [franchise agreement](/glossary/franchise-agreement) and agree to the brand's requested upgrades.[1] That last row is why a franchised hotel sale runs on the brand's calendar as well as the lender's. The seller's side is at [What is involved in selling a hotel?](/sell-a-hotel), and the buyer's side is at [How do I buy a hotel?](/buy-a-hotel). #### What can Item 19 tell me, and what can it not? Item 19 holds any financial performance representation the franchisor chooses to make, and a franchisor that makes one must have a reasonable basis and written substantiation for it.[5] Seven of the eight Hilton FDDs covered here make a representation. Hampton's reports a 2025 average room rate of $149.08, average occupancy of 71.0 percent, average RevPAR of $105.90 and an average RevPAR index of 120.8 for 1,893 comparable U.S. hotels, with the median, the range and the share of hotels that met each average.[1] Spark's reports only a RevPAR index.[2] Tapestry Collection makes no representation at all and carries the statement the rule requires in that case: "We do not make any representations about a franchisee's future financial performance or the past financial performance of company-owned or franchised outlets."[5][9] Read what is absent. Hilton's Item 19 tables are rooms revenue measures. They contain no expenses, no profit and no return on investment, and none can be derived from them. Each one ends with Hilton's statement that individual results may differ and that there is no assurance a hotel will achieve the results shown.[1] The measures are defined at [RevPAR](/glossary/revpar). #### Is key money in the FDD? The possibility is, in Item 10. The amount is not. Item 10 discloses financing the franchisor offers.[5] Hilton's 2026 Hampton FDD says Hilton generally does not offer financing but may, in its sole discretion, offer a development incentive on a new hotel. The incentive is documented by a note, bears no interest, and does not have to be repaid unless the franchise terminates before the end of the term or the hotel is transferred. The repayable amount falls by an equal share each year, and on a sale the seller repays the balance unless Hilton lets the buyer assume the note.[1] The term is defined at [key money](/glossary/key-money). #### How do I pay for franchise fees, a PIP or a conversion? With equity and a loan sized to the hotel's income. The franchise costs sit inside the project budget your lender underwrites. As of September 17, 2026, Prime is 7.00 percent, SOFR is 3.85 percent and the SBA 7(a) maximum allowable rate is 10.00 percent.[10] Lenders do not publish their spreads or leverage limits, so the only real quote is a written one. The loan structures are at [How do I finance converting my hotel to a new brand?](/hotel-financing/brand-conversion-financing) and [How do I finance a hotel PIP or renovation?](/hotel-financing/pip-and-renovation-loans). The trade between a flag and independence is at [Should I buy a branded or independent hotel?](/buy-a-hotel/branded-vs-independent). Flagged hotels on the market are listed at [Hampton Inn hotels for sale](/hotels-for-sale/hampton-inn) and [Hilton hotels for sale](/hotels-for-sale/hilton). Table: Hotel franchise costs by brand, from each brand's 2026 FDD. Hilton-family FDDs were issued March 30, 2026; the other issue dates are in the sources. Item 7 estimates cover the hotel type and room count shown, and the Hilton and Hyatt figures exclude real estate. Columns read across franchisors that define fees differently, so compare within the FDDs before relying on a row. Brand guide | Application fee: new or conversion / change of ownership | Monthly royalty | Monthly program fee | Loyalty charge | Item 7 estimate [Hampton Inn](/hotel-franchise-costs/hampton-inn) | $100,000 / $200,000[1] | 6% of gross rooms revenue[1] | 4%[1] | 4.6% of eligible folio[1] | $17,043,739 to $24,732,532, 89 rooms[1] [Hilton Garden Inn](/hotel-franchise-costs/hilton-garden-inn) | $100,000 / $200,000[6] | 5.5%[6] | 4%[6] | 3.3% of eligible folio[6] | $25,499,320 to $37,352,033, 134 rooms[6] [Home2 Suites](/hotel-franchise-costs/home2-suites) | $100,000 / $200,000[7] | 6%[7] | 3.5%[7] | 2.0% of eligible folio[7] | $18,075,688 to $26,550,592, 107 suites[7] [Homewood Suites](/hotel-franchise-costs/homewood-suites) | $100,000 / $200,000[4] | 3.5% year 1, 4.5% year 2, then 5.5%. 5.5% on a change of ownership[4] | 2.5%[4] | 1.7% of eligible folio[4] | $23,757,245 to $34,728,465, 131 suites[4] [Tru by Hilton](/hotel-franchise-costs/tru-by-hilton) | $100,000 / $150,000[8] | 5.5%[8] | 4%[8] | 2% of eligible folio[8] | $14,258,164 to $20,659,558, 98 rooms[8] [Spark by Hilton](/hotel-franchise-costs/spark-by-hilton) | $75,000 conversion / $75,000[2] | 5.5%[2] | 3.5%[2] | 2% of eligible folio[2] | $3,251,531 to $5,906,193, 100-room conversion[2] [Tapestry Collection](/hotel-franchise-costs/tapestry-collection) | $100,000 / $150,000[9] | 5%[9] | 4%[9] | 4% of eligible folio[9] | $2,861,047 to $70,253,147, 125 rooms[9] [DoubleTree](/hotel-franchise-costs/doubletree) | $85,000 / $175,000[3] | 5%[3] | 4%[3] | 4% of eligible folio[3] | $31,454,554 to $108,661,784, 225 rooms[3] [Hyatt Place](/hotel-franchise-costs/hyatt-place) | $75,000 plus $500 per room over 150 / $150,000[11] | 5%[11] | 3.5% commercial services fee[11] | World of Hyatt, 4% of eligible member revenue[11] | $23,431,820 to $29,885,898, 127 rooms, excluding real estate[11] [Comfort Inn and Comfort Suites](/hotel-franchise-costs/comfort-inn) | $500 per room, $50,000 minimum / $750 per room, $65,000 minimum[12] | 6%[12] | 3.5% marketing and reservation fee[12] | Choice Privileges, 4.5% to 5.5% of member room revenue[12] | $822,951 to $3,335,295, 80-room conversion[12] [Days Inn](/hotel-franchise-costs/days-inn) | Greater of $35,000 or $350 per room[13] | 5.5%[13] | 3.8% system assessment[13] | Wyndham Rewards, 4.25% to 5.5%[13] | $248,324 to $3,627,625, 100-room conversion[13] [Super 8](/hotel-franchise-costs/super-8) | Greater of $25,000 or $250 per room[14] | 5.5%[14] | 3% system assessment[14] | Wyndham Rewards, 4.25% to 5.5%[14] | $285,156 to $2,626,641, 100-room conversion[14] [La Quinta](/hotel-franchise-costs/la-quinta) | Greater of $55,000 or $550 per room[15] | 5.5% for 24 months, then 6%[15] | 3.5% system assessment[15] | Wyndham Rewards, 4.25% to 5.5%[15] | $1,670,705 to $7,399,531, 100-room conversion[15] [Best Western](/hotel-franchise-costs/best-western) | $4,000 evaluation fee plus $45,000 and $200 per room over 50 (membership entrance fee)[16] | 5% of property room revenue (monthly fees)[16] | 2.10% marketing and technology fees, plus per-room advertising and annual dues[16] | Best Western Rewards, 5.5% on point-earning stays[16] | $581,925 to $2,557,075, 75-room conversion[16] First-party data point: Matthews Hotel Markets' September 2026 rate sheet records Prime at 7.00% effective September 17, 2026 and the SBA 7(a) maximum allowable rate at 10.00%, the indexes a loan for a franchise fee, a PIP or a conversion is priced against.[10] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: what a buyer of an existing Hampton Inn pays the brand in year one): Hypothetical. A buyer closes on an existing Hampton Inn that then earns $3,000,000 of gross rooms revenue in its first year under the new franchise agreement. The revenue figure is an assumption for arithmetic, not a forecast and not a figure from the FDD. At application: a $200,000 change of ownership application fee and a $10,000 PIP fee, together $210,000.[1] If the sale does not close, Hilton refunds the application fee less a $7,500 processing fee.[1] During the year: a royalty at 6 percent, $3,000,000 x 0.06 = $180,000, and a program fee at 4 percent, $3,000,000 x 0.04 = $120,000, together $300,000.[1] Year-one total of those lines: $510,000. The PIP itself, Hilton Honors charges, technology fees, distribution charges and training come on top. The PIP is set by Hilton's inspection of the building and is not estimated in the FDD, so it is not estimated here. FAQ: - Q: How much does a Hampton Inn franchise cost? A: Hilton's 2026 Hampton FDD, issued March 30, 2026, lists a $100,000 application fee, a 6 percent royalty, a 4 percent program fee, and an estimated initial investment of $17,043,739 to $24,732,532 for an 89-room hotel, excluding real estate.[1] - Q: What percent of revenue goes to the brand? A: In Hilton's 2026 FDDs, royalty plus program fee runs from 8 percent of gross rooms revenue at Homewood Suites after year two to 10 percent at Hampton. Loyalty, technology and distribution charges are billed on other bases on top.[1][4] - Q: Does the Item 7 figure include the land? A: No. Hilton's 2026 Item 7 totals state that they do not include real estate costs, market studies, insurance or interest.[1] - Q: Does a buyer pay a franchise fee when buying an existing branded hotel? A: Yes. The buyer applies for a new franchise. Hampton's 2026 FDD lists a $200,000 change of ownership application fee and a $10,000 PIP fee, and the buyer agrees to the brand's requested upgrades.[1] - Q: Does the FDD tell me how much profit a hotel makes? A: No. Hilton's Item 19 tables report room rate, occupancy, RevPAR and RevPAR index for comparable hotels. They report no expenses or profit, and the Tapestry Collection FDD makes no performance representation at all.[1][9] - Q: Do franchise fees change? A: Yes. The FDD is reissued every year. Hilton's 2026 documents say the program fee may change at any time, up to the current rate plus 1 percent of gross rooms revenue over the term. Get the current FDD from the franchisor.[1] - Q: Can I renew a hotel franchise agreement? A: Not as of right under Hilton's 2026 FDDs. Item 17 says the franchisee has no right to renew or extend. Hilton may agree to re-license the hotel, on a contract that may differ materially and with PIP conditions.[1] Sources: - [1] 2026 Hampton Franchise Disclosure Document (issued March 30, 2026): cover page and How to Use This FDD; Item 5, pp. 15-17; Item 6, pp. 20-32; Item 7, pp. 33-36; Item 10, pp. 44-45; Item 17, pp. 69-74; Item 19, pp. 77-84 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2026/03/2026-US-FDD-Hampton.pdf - [2] 2026 Spark by Hilton Franchise Disclosure Document (issued March 30, 2026): Item 1, p. 6; Item 5, pp. 15-16; Item 6, pp. 20-24; Item 7, pp. 33-35; Item 17, p. 71; Item 19, pp. 80-82 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2026/03/2026-US-FDD-Spark.pdf - [3] 2026 DoubleTree by Hilton Franchise Disclosure Document (issued March 30, 2026): Item 5, p. 17; Item 6, pp. 23-26; Item 7, pp. 36-39 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2026/03/2026-US-FDD-DoubleTree.pdf - [4] 2026 Homewood Suites by Hilton Franchise Disclosure Document (issued March 30, 2026): Item 5, p. 15; Item 6, pp. 20-24; Item 7, pp. 34-36 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2026/03/2026-US-FDD-Homewood.pdf - [5] 16 CFR 436.5, Disclosure items (FTC Franchise Rule): Items 5, 6, 7, 10, 17 and 19 (Code of Federal Regulations, via Legal Information Institute, accessed 2026-09-18): https://www.law.cornell.edu/cfr/text/16/436.5 - [6] 2026 Hilton Garden Inn Franchise Disclosure Document (issued March 30, 2026): Item 5, p. 17; Item 6, pp. 21-25; Item 7, pp. 35-37 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2026/03/2026-US-FDD-HGI.pdf - [7] 2026 Home2 Suites by Hilton Franchise Disclosure Document (issued March 30, 2026): Item 5, p. 16; Item 6, pp. 21-25; Item 7, pp. 36-37 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2026/03/2026-US-FDD-Home2.pdf - [8] 2026 Tru by Hilton Franchise Disclosure Document (issued March 30, 2026): Item 5, p. 15; Item 6, pp. 20-23; Item 7, pp. 33-34 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2026/03/2026-US-FDD-Tru.pdf - [9] 2026 Tapestry Collection by Hilton Franchise Disclosure Document (issued March 30, 2026): Item 5, p. 17; Item 6, pp. 22-26; Item 7, pp. 36-38; Item 19, pp. 91-92 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2026/03/2026-US-FDD-Tapestry.pdf - [10] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates - [11] Hyatt Place Franchise Disclosure Document, issued March 27, 2026, amended August 5, 2026 (Hyatt Franchising, L.L.C., via Wisconsin DFI (file 640505), accessed 2026-09-18): https://apps.dfi.wi.gov/apps/FranchiseSearch/details.aspx?id=640505&hash=1054368882&search=external&type=GENERAL - [12] Comfort Franchise Disclosure Document, issued April 1, 2026 (Choice Hotels International, via Minnesota Commerce CARDS (document 35771-202604-09), accessed 2026-09-18): https://www.cards.commerce.state.mn.us/documents/%7BB0A9219E-0000-C61B-8F69-FDCF9E1C6035%7D/download?documentClass=FRANCHISE_REGISTRATIONS&contentSequence=0 - [13] Days Inn Franchise Disclosure Document, issued March 31, 2026 (Days Inns Worldwide, Inc., via Wisconsin DFI (file 640621), accessed 2026-09-18): https://apps.dfi.wi.gov/apps/FranchiseSearch/details.aspx?id=640621&hash=1766667238&search=external&type=GENERAL - [14] Super 8 Franchise Disclosure Document, issued March 31, 2026 (Super 8 Worldwide, Inc., via Wisconsin DFI (file 640628), accessed 2026-09-18): https://apps.dfi.wi.gov/apps/FranchiseSearch/details.aspx?id=640628&hash=1250533202&search=external&type=GENERAL - [15] La Quinta Franchise Disclosure Document, issued March 31, 2026 (La Quinta Franchising LLC, via Wisconsin DFI (file 640629), accessed 2026-09-18): https://apps.dfi.wi.gov/apps/FranchiseSearch/details.aspx?id=640629&hash=1899216290&search=external&type=GENERAL - [16] Best Western 2026 Membership Disclosure Document, issued February 27, 2026 (Best Western International, Inc., via Wisconsin DFI (file 640279), accessed 2026-09-18): https://apps.dfi.wi.gov/apps/FranchiseSearch/details.aspx?id=640279&hash=1862337841&search=external&type=GENERAL ### How much does a Best Western franchise cost in 2026? URL: https://matthewshotelmarkets.com/hotel-franchise-costs/best-western Last updated: 2026-09-18 Best Western is a membership association, and its disclosure document issued February 27, 2026 prices a membership, not a standard franchise. The entrance fee for a 75-room Best Western is $54,000. Monthly fees are 5 percent of property room revenue, marketing and technology fees 2.10 percent, plus per-room dues and advertising. Item 7 estimates $581,925 to $2,557,075 to convert a 75-room hotel.[1] Key takeaways: - Entrance fee: a $4,000 evaluation fee plus an affiliation fee of $45,000 and $200 per room over 50.[1] - Monthly fees: 5 percent of property room revenue, or 3.5 percent for a member controlled by owners who were members on July 1, 2016.[1] - Marketing and technology fees: 2.10 percent of property room revenue. Advertising assessment: $16.86 per room per month.[1] - Term: 20 years, renewing automatically for 10-year terms. Membership terminates on a sale of the hotel unless it is transferred with Best Western's approval.[1] - Fees change every year. Best Western's current FDD and membership documents govern, not this page. #### Is Best Western a franchise or a membership? Best Western International, Inc. describes itself in its 2026 FDD as an Arizona nonprofit corporation that operates as a membership association and licensor, and the hotel owner signs a membership agreement as a member.[1] The FDD says Best Western began granting memberships under a franchise disclosure document in April 2020, that certain state actions have alleged its memberships are franchises, and that it neither admits nor denies those allegations (Item 1, p. 1).[1] For an owner comparing flags, the practical differences are in the fee structure and the governance. Several Best Western fees are set per room in dollars, not as a percentage of revenue, and the FDD marks some fees as subject to amendment by a majority vote of member hotels. The board's annual increase in dues is capped at the lesser of 5 percent or the prior year's consumer price inflation unless a majority of hotels vote for more (Item 6, pp. 18-19).[1] The same document covers Best Western, Best Western Plus, Best Western Premier, Executive Residency, @Home, GLo and Aiden. SureStay hotels are franchised by a subsidiary, SureStay, Inc., and the BW Premier and BW Signature collections are offered under a separate disclosure document, so this page does not cover them (Item 1, pp. 1-2).[1] The general term is defined at [franchise disclosure document](/glossary/franchise-fdd). #### What does Best Western charge up front? Best Western's 2026 Item 5 sets an entrance fee made of a non-refundable $4,000 evaluation fee plus an affiliation fee of $45,000, with $200 added for each guest room over 50, up to 1,000 rooms.[1] The FDD works the affiliation fee out as $50,000 for a 75-room Best Western, $53,000 for a 90-room Best Western Plus and $59,000 for a 120-room Best Western Premier. If the board does not approve the application, the affiliation fee is refunded. An optional $4,000 impact study fee is credited toward the affiliation fee on approval. Best Western says it accepted decreased entrance fees of $0 to $25,000 in fiscal 2025 after arm's-length negotiation (Item 5, pp. 14-17).[1] An approved new-build applicant must start construction within 12 months. Extensions come in six-month increments at $5,000 for the first and $10,000 for each later one, to a maximum of three years and $35,000. An extension of the opening date costs one quarter of the entrance fee per three months, which the FDD states as $13,500 for a 75-room Best Western. Set-up charges include $1,500 for the AutoClerk property management system, $1,500 for the two-way reservation interface, $550 for interface hardware, $2,100 to $3,500 for the managed security service, and a photography package from $1,200 (Item 5, pp. 15-17).[1] #### What are the ongoing Best Western fees? Best Western's 2026 Item 6 lists monthly fees of 5 percent of property room revenue, marketing and technology fees of 2.10 percent, an advertising assessment of $16.86 per room per month, and annual dues on a per-room scale.[1] The monthly fees are 3.5 percent, not 5 percent, for a member whose ownership is at least 50 percent held by owners who were Best Western members on July 1, 2016. Annual dues are $2,345.45 for the first 20 rooms, $78.85 per room for rooms 21 to 50, $30.66 per room for rooms 51 to 400, and $3.07 per room above 400. Property room revenue includes revenue from loyalty redemptions, guaranteed no-show revenue, and the breakfast share of a rate that includes breakfast (Item 6, pp. 18-19, 34).[1] The Best Western Rewards fee is 5.5 percent of property room revenue on stays that earn points, at 10 points per dollar and $0.0055 per point. It is 2.75 percent for Executive Residency and @Home. On a newly enrolled member's stay the fee is rebated, in full with a valid email address and at half without one, up to five nights and $500 (Item 6, pp. 20-21).[1] Distribution is charged per booking or as commission: $7.90 per global distribution system booking, $4.60 per third-party internet booking, and 10 percent of property room revenue on reservations from performance-based digital marketing. New hotels also pay $15,000 for the on-boarding program over 12 months. Property management and guest messaging support is $3.97 per room per month, the security service $130 per month, and the annual convention $949 whether or not attended (Item 6, pp. 19, 23, 25-26).[1] These charges apply to different bases, so they cannot be added into one rate. #### How much does it cost to convert to or build a Best Western? Best Western's 2026 Item 7 estimates $581,925 to $2,557,075 to convert a 75-room hotel to a Best Western, and $6,130,275 to $12,658,075 to build one.[1] In the 75-room conversion table, renovation work runs $0 to $677,250 and furniture, fixtures and equipment $0 to $934,500, because Best Western says an existing hotel may or may not need work to conform. The computer system is $117,250 to $118,650, and three months of additional funds $270,900 to $291,900. The tables carry no line for land or a purchase price, and the FDD says the estimates do not include debt service or lease costs (Item 7, pp. 35-37, 55-57).[1] Best Western does not state per-room totals, so none is printed here. For a 90-room Best Western Plus the estimates are $671,325 to $3,209,625 for a conversion and $7,795,575 to $15,802,375 for new construction. For a 120-room Best Western Premier they are $962,225 to $7,441,025 and $17,000,975 to $32,499,275 (Item 7, pp. 38-42).[1] Financing for this work is covered at [brand conversion financing](/hotel-financing/brand-conversion-financing) and [PIP and renovation loans](/hotel-financing/pip-and-renovation-loans). A design visit to create a property improvement plan is $2,650 (Item 6, p. 29).[1] The plan itself is defined at [PIP](/glossary/pip). #### How long does a Best Western membership last? The initial Best Western term starts when the hotel is activated on the reservations system and ends on the last day of the fiscal year in which the 240th month falls, and the membership agreement then renews automatically for successive 10-year terms.[1] Either party can stop the renewal by giving written notice at least 12 months before the end of the current term. The member does not sign a new membership agreement on renewal (Item 17, p. 84).[1] A member may resign from the membership. After opening, resignation or termination carries liquidated damages equal to the lesser of 48 months of average monthly fees and assessments, or those fees and assessments for the months remaining in the term, based on the prior 12 months. Before opening, the figure is $2,000 per authorized guest room. Continued use of the marks more than 15 days after the membership ends costs 15 percent of the hotel's average room rate times its total rooms, per day (Item 6, pp. 30-31; Item 17, pp. 85-86).[1] #### What happens to the Best Western membership when I sell the hotel? The Best Western membership agreement terminates on a sale or lease of the hotel or a transfer of control, unless the membership is transferred to the buyer with Best Western's prior approval.[1] To transfer a membership with a sale, the hotel must have passed its past two inspections and comply with the current design program, the seller must give the buyer the required documents, and the seller must be current on all dues, fees, assessments and conditions of membership (Item 17, pp. 85-87).[1] The transfer fee for a change of 50 percent or more of the ownership is one half of the then current entrance fee, due within 20 days of the sale. Item 7 says a new member buying a membership from an existing member pays that transfer fee in place of an entrance fee. A buyout of existing partners of 50 percent or more is one quarter of the entrance fee (Item 6, p. 27; Item 7, p. 53).[1] The FDD lists no right of first refusal and no option for Best Western to buy the hotel (Item 17, p. 87).[1] Best Western hotels on the market are listed at [Best Western hotels for sale](/hotels-for-sale/best-western), and the flag decision is weighed at [Should I buy a branded or independent hotel?](/buy-a-hotel/branded-vs-independent). #### Does Best Western publish hotel performance in Item 19? No. Best Western's 2026 Item 19 states that it makes no representations about a member's future financial performance or the past financial performance of company-owned or member-owned hotels.[1] The FDD adds that Best Western does not authorize its employees or representatives to make such representations, and that a buyer of an existing hotel may be given that hotel's actual records (Item 19, p. 89).[1] So this page reports no occupancy, rate or revenue figures for Best Western hotels. Item 20 does report the count: 1,748 licensed and 2 company-owned hotels at the end of 2025, down from 1,768 and 2 a year earlier (Item 20, pp. 89-90).[1] Table: Best Western membership fees, 2026 Membership FDD issued February 27, 2026 Fee | Amount | Where in the FDD Evaluation fee | $4,000, non-refundable[1] | Item 5, p. 15 Affiliation fee | $45,000 plus $200 per room over 50, up to 1,000 rooms; $50,000 at 75 rooms[1] | Item 5, p. 15 Monthly fees | 5% of property room revenue; 3.5% for qualifying pre-July 2016 member ownership[1] | Item 6, p. 18 Marketing and technology fees | 2.10% of property room revenue[1] | Item 6, p. 19 Advertising assessment | $16.86 per room per month[1] | Item 6, p. 18 Annual dues | $2,345.45 for 20 rooms, plus $78.85 per room for rooms 21 to 50 and $30.66 per room for rooms 51 to 400[1] | Item 6, p. 18 Best Western Rewards fee | 5.5% of property room revenue on point-earning stays[1] | Item 6, p. 20 GDS and third-party internet booking fees | $7.90 and $4.60 per booking[1] | Item 6, p. 19 Performance-based marketing commission | 10% of property room revenue on reservations from a digital opportunity[1] | Item 6, p. 19 Property management and guest messaging support | $3.97 per room per month[1] | Item 6, p. 23 On-boarding program, new hotels | $15,000, billed over 12 months[1] | Item 6, p. 25 Transfer fee, 50% or more change of ownership | One half of the then current entrance fee[1] | Item 6, p. 27 Design visit, including to create a PIP | $2,650[1] | Item 6, p. 29 Liquidated damages, after opening | Lesser of 48 months of average monthly fees and assessments, or the months remaining in the term[1] | Item 6, pp. 30-31 Estimated initial investment, 75-room Best Western conversion | $581,925 to $2,557,075[1] | Item 7, p. 37 Estimated initial investment, new 75-room Best Western | $6,130,275 to $12,658,075[1] | Item 7, p. 36 First-party data point: Matthews Hotel Markets' September 2026 rate sheet records Prime at 7.00% effective September 17, 2026 and the SBA 7(a) maximum allowable rate at 10.00%, the indexes a loan for an entrance fee, a PIP or a conversion is priced against.[2] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: a year of Best Western fees on assumed room revenue): Hypothetical. Assume a 75-room Best Western earns $2,000,000 of property room revenue in a year. The revenue figure and the loyalty share below are assumptions for arithmetic. They are not forecasts and they are not figures from the FDD. Monthly fees at 5 percent: $2,000,000 x 0.05 = $100,000.[1] Marketing and technology fees at 2.10 percent: $2,000,000 x 0.021 = $42,000.[1] Advertising assessment: $16.86 x 75 rooms x 12 months = $15,174.[1] Annual dues: $2,345.45 + (30 x $78.85) + (25 x $30.66) = $2,345.45 + $2,365.50 + $766.50 = $5,477.45.[1] Together: $162,651.45, or about 8.13 percent of room revenue. At the 3.5 percent monthly fee rate the first line would be $70,000. If $600,000 of that revenue is on stays that earn Best Western Rewards points, the 5.5 percent rewards fee is $33,000.[1] Booking fees, commissions, technology support, training and convention charges come on top and depend on the hotel, so they are not estimated here. FAQ: - Q: How much does a Best Western franchise cost? A: For a 75-room hotel, the 2026 FDD lists a $54,000 entrance fee, monthly fees of 5 percent of room revenue, marketing and technology fees of 2.10 percent, and per-room dues and advertising. Item 7 estimates $581,925 to $2,557,075 for a conversion.[1] - Q: Is Best Western a franchise? A: Best Western's FDD describes it as an Arizona nonprofit membership association and licensor. Owners sign a membership agreement. The FDD notes that certain state actions have alleged the memberships are franchises, which Best Western neither admits nor denies.[1] - Q: I'm buying a Best Western. Does the membership come with the hotel? A: Not automatically. The membership agreement terminates on a sale unless Best Western approves a transfer. The hotel must have passed its past two inspections, and the transfer fee is one half of the then current entrance fee.[1] - Q: How long is a Best Western agreement? A: About 20 years from activation on the reservations system, then automatic 10-year renewals unless either party gives 12 months' written notice. No new agreement is signed on renewal.[1] - Q: What does it cost to leave Best Western early? A: After opening, the lesser of 48 months of average monthly fees and assessments, or those fees for the months remaining in the term. Before opening, $2,000 per authorized guest room.[1] - Q: Does Best Western disclose what its hotels earn? A: No. The 2026 Item 19 states that Best Western makes no financial performance representations. A buyer of an existing hotel may be given that hotel's actual records.[1] - Q: Will these Best Western fees be the same next year? A: Not necessarily. The FDD says its Item 6 fees apply to fiscal year 2026 and that fees, dues and assessments are subject to change, some only within stated caps or by member vote. The current documents govern.[1] Sources: - [1] Best Western International, Inc. 2026 Membership Franchise Disclosure Document (issued February 27, 2026): Item 1, pp. 1-2; Item 5, pp. 14-17; Item 6, pp. 18-34; Item 7, pp. 35-57; Item 17, pp. 84-88; Item 19, p. 89; Item 20, pp. 89-90. Wisconsin DFI franchise registration file 640279 (Best Western International, Inc., filed with the Wisconsin Department of Financial Institutions, accessed 2026-09-18): https://apps.dfi.wi.gov/apps/FranchiseSearch/details.aspx?id=640279&hash=1862337841&search=external&type=GENERAL - [2] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates ### How much does a Comfort Inn or Comfort Suites franchise cost in 2026? URL: https://matthewshotelmarkets.com/hotel-franchise-costs/comfort-inn Last updated: 2026-09-18 Choice Hotels' Comfort disclosure document, issued April 1, 2026, estimates $822,951 to $3,335,295 to convert an 80-room hotel to a Comfort Inn or Comfort Suites, and $10,318,405 to $16,302,115 to build an 89-room Comfort Inn, both before real estate. The affiliation fee is $500 per room with a $50,000 minimum. The royalty is 6 percent and the marketing and reservation fee 3.5 percent of gross room revenues.[1] Key takeaways: - Affiliation fee: $500 per room, $50,000 minimum, for a new franchise. $750 per room, $65,000 minimum, for a transfer or renewal.[1] - Royalty: 6.0 percent of gross room revenues. Marketing and reservation fee: 3.5 percent.[1] - Choice Privileges fee: 4.5 to 5.5 percent of room revenue from rewards members.[1] - Term: 20 years with no renewal provision. Either side may terminate on set anniversaries with 12 months' notice.[1] - Fees change every year. Choice's current FDD and the signed franchise agreement govern, not this page. #### What does Choice charge up front for a Comfort franchise? Choice's 2026 Comfort FDD lists an affiliation fee of $500 per room with a $50,000 minimum for a new franchise, and $750 per room with a $65,000 minimum for a transfer or renewal.[1] A non-refundable $5,000 application fee is credited toward the affiliation fee. If Choice does not grant the franchise, it refunds the affiliation fee less that $5,000. Choice states that affiliation fees in the 12 months ending December 31, 2025 ranged from $0 to $75,000, and that it has reduced the fee for multi-unit owners, larger properties and owners leaving other chains, without any obligation to do so (Item 5, pp. 22-23).[1] The mandatory Brand in a Box program costs about $15,150 to $30,000 and covers the choiceADVANTAGE property management system license, its hardware and other pre-opening items. Required training runs $3,345 to $5,295 per person before travel. An extension of the construction or renovation deadline is $5,000 per three months. A waiver from the approved interior design schemes is $20,000, and a non-prototype building design review is another $20,000, payable whether or not the waiver is granted (Item 5, pp. 23-24).[1] #### What are the ongoing Comfort Inn franchise fees? Choice's 2026 Item 6 lists a 6.0 percent royalty and a 3.5 percent marketing and reservation fee, both on the preceding month's gross room revenues.[1] Gross room revenues include sleeping rooms, meeting rooms and banquet rooms, guaranteed no-show revenue, early departure and late checkout fees, and business interruption proceeds. Food and beverage sales and taxes are excluded. Choice may raise the marketing and reservation fee for inflation or cost increases if the increase applies to all or most of its U.S. hotels. The royalty and liquidated damages are the only fees Choice says are not subject to change (Item 6, pp. 25, 38-39).[1] Loyalty and distribution charges sit on other bases. The Choice Privileges fee is 4.5 to 5.5 percent of room revenue from rewards members, varying with the hotel's enrollment performance. Choice Accelerate is 3 percent of gross room revenue from stays booked through direct online channels. Third-party distribution is $4.00 per consumed reservation from directly connected online travel agents, and global distribution system reservations are currently $7.70 each (Item 6, pp. 26-28).[1] Technology and revenue management are mandatory. The property technology and service fee is $10.10 per room per month, with a $650 minimum and a $950 maximum. ChoiceROCS revenue management runs $970 to $1,900 per month, bundled with the ChoiceMAX pricing software at $400 to $525 per month, and ChoiceMAX set-up is $2,500 (Item 6, pp. 29-31).[1] These charges apply to different bases, so they cannot be added into one rate. #### How much does it cost to convert to or build a Comfort Inn? Choice's 2026 Item 7 estimates $822,951 to $3,335,295 to convert an 80-room hotel to a Comfort brand, which Choice states as $10,287 to $41,691 per room.[1] Property improvements are the largest conversion line at $600,000 to $2,411,000. Choice bases that on a typical property improvement plan and says it excludes deferred maintenance such as the parking lot, HVAC and exterior, and excludes the labor for the improvements. Choice issues a customized plan on application and says actual costs may fall outside the range (Item 7, pp. 39-41).[1] For new construction, Choice estimates $10,318,405 to $16,302,115 for an 89-room Comfort Inn or Comfort Inn and Suites, or $115,937 to $183,170 per room, and $11,478,095 to $18,328,875 for an 89-room Comfort Suites, or $128,967 to $205,942 per room. Both exclude real estate, sitework, general conditions and general contractor fees (Item 7, pp. 42-48).[1] Financing for this work is covered at [brand conversion financing](/hotel-financing/brand-conversion-financing) and [PIP and renovation loans](/hotel-financing/pip-and-renovation-loans). The plan itself is defined at [PIP](/glossary/pip). #### How long is a Comfort Inn franchise agreement, and can I get out early? The Comfort franchise term is 20 years from the opening date, the FDD lists no renewal provision, and both parties hold termination rights on set anniversaries.[1] For a hotel that is not newly built, either the franchisee or Choice may terminate on the 5th, 10th and 15th anniversaries of the opening date. For a newly built hotel the windows are the 10th and 15th anniversaries. Either side must give at least 12 months' written notice, and the franchisee must keep paying all fees through the end. An owner who takes Choice's developer incentive waives the 5th anniversary window unless the incentive note is a five-year note, and Choice waives its own in the same case. For a replacement agreement on an existing Comfort hotel, Choice may offer a term shorter than 20 years (Item 17, pp. 77-78).[1] If Choice terminates for the franchisee's default after opening, liquidated damages are the greater of $85 per room per month, or the average monthly gross room revenues for the last 12 months times the royalty rate, in each case multiplied by the months until the next penalty-free termination date, capped at 36 months. Before opening, the amount is the room count times 36 months times $85. Continued use of the marks after termination costs $2,500 per day (Item 6, p. 38).[1] #### What happens to the Comfort franchise when I sell the hotel? Choice must approve any transfer of more than 5 percent of the ownership, and a buyer of a controlling interest signs Choice's then current franchise agreement and pays a relicensing fee.[1] Item 6 sets the transfer fee for 50 percent or more of the equity at the then current affiliation fee or $65,000, whichever is greater. The buyer also pays a $3,000 property improvement plan fee for the inspection and the plan that is written into the buyer's agreement, $995 for relicensing training, and a $500 property management system database clean-up fee. A transfer of less than 50 percent carries a $7,500 assumption fee and a $3,000 change of ownership fee. A transfer to a close family member on death or disability carries an application fee of up to $7,500 (Item 5, p. 23; Item 6, pp. 29, 32-33; Item 17, p. 79).[1] The buyer must meet Choice's qualifications for new franchisees, and the hotel must meet the then current brand image and standards (Item 17, p. 79).[1] A lender comfort letter is $2,500, plus $500 if needed within one to three days (Item 6, p. 32).[1] Choice-flagged hotels on the market are listed at [Choice Hotels for sale](/hotels-for-sale/choice), and the flag decision is weighed at [Should I buy a branded or independent hotel?](/buy-a-hotel/branded-vs-independent). #### What does Choice's Item 19 say about Comfort hotel performance? Choice's 2026 Item 19 reports that 1,581 Comfort hotels in its performance sample averaged 59.7 percent occupancy, a $107.62 average daily rate and $64.28 RevPAR in 2025.[1] There were 1,643 open Comfort hotels in the United States at December 31, 2025, all franchised. The performance sample is the 1,581 that were operating on or before January 1, 2025, excluding hotels that repositioned from another Choice brand during 2025, had at least 30 days of incomplete data, or were interrupted for more than 30 consecutive days. The median RevPAR was $62.63, the range was $17.80 to $239.88, and 731 hotels, or 46.2 percent, met or exceeded the average (Item 19, pp. 82-83).[1] By brand, 1,042 Comfort Inn and Comfort Inn and Suites hotels averaged $63.12 RevPAR, and 539 Comfort Suites averaged $66.53. Choice also reports an average total Choice enterprise contribution of 81.3 percent of gross room revenues and an average Choice Privileges contribution of 51.8 percent. The enterprise figure counts online travel agent bookings made through Choice's negotiated relationships (Item 19, pp. 83-86).[1] Choice states that the figures come from information franchisees provided, and that they do not reflect cost of sales or operating expenses that must be deducted to obtain net income or profit (Item 19, p. 86).[1] This page draws no profit conclusion from them. The measures are defined at [RevPAR](/glossary/revpar) and [ADR](/glossary/adr). Table: Comfort Inn, Comfort Inn and Suites and Comfort Suites franchise fees, 2026 FDD issued April 1, 2026 Fee | Amount | Where in the FDD Affiliation fee, new franchise | $500 per room, $50,000 minimum; $5,000 application fee credited toward it[1] | Item 5, pp. 22-23 Affiliation fee, transfer or renewal | $750 per room, $65,000 minimum[1] | Item 5, p. 22 Royalty fee | 6.0% of gross room revenues[1] | Item 6, p. 25 Marketing and reservation fee | 3.5% of gross room revenues[1] | Item 6, p. 25 Choice Privileges rewards program fee | 4.5% to 5.5% of room revenue from rewards members[1] | Item 6, p. 26 Choice Accelerate (direct online bookings) | 3% of gross room revenue from stays booked through direct online channels[1] | Item 6, p. 26 Third-party distribution and GDS | $4.00 per consumed reservation; GDS currently $7.70 per reservation[1] | Item 6, pp. 27-28 Property technology and service fee | $10.10 per room per month, $650 minimum, $950 maximum[1] | Item 6, p. 29 Revenue management (mandatory) | ChoiceROCS $970 to $1,900 per month; ChoiceMAX $400 to $525 per month, bundled[1] | Item 6, p. 30 Transfer fee, 50% or more of equity | Then current affiliation fee or $65,000, whichever is greater[1] | Item 6, p. 33 Property improvement plan fee on transfer | $3,000[1] | Item 6, p. 32 Liquidated damages, after opening | Greater of $85 per room per month or average monthly gross room revenues times the royalty, times months to the next termination window, up to 36[1] | Item 6, p. 38 Estimated initial investment, 80-room conversion | $822,951 to $3,335,295; $10,287 to $41,691 per room, excluding real estate[1] | Item 7, p. 41 Estimated initial investment, new 89-room Comfort Inn | $10,318,405 to $16,302,115; $115,937 to $183,170 per room, excluding real estate[1] | Item 7, p. 44 Estimated initial investment, new 89-room Comfort Suites | $11,478,095 to $18,328,875; $128,967 to $205,942 per room, excluding real estate[1] | Item 7, p. 48 First-party data point: Matthews Hotel Markets' September 2026 rate sheet records Prime at 7.00% effective September 17, 2026 and the SBA 7(a) maximum allowable rate at 10.00%, the indexes a loan for an affiliation fee, a PIP or a conversion is priced against.[2] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: a year of Comfort brand fees on assumed room revenue): Hypothetical. Assume an 80-room Comfort Inn earns $2,500,000 of gross room revenues in a year. The revenue figure and the member share below are assumptions for arithmetic. They are not forecasts and they are not figures from the FDD. Royalty fee at 6.0 percent: $2,500,000 x 0.06 = $150,000.[1] Marketing and reservation fee at 3.5 percent: $2,500,000 x 0.035 = $87,500.[1] Together: $237,500, or 9.5 percent of room revenue. Property technology and service fee: 80 rooms x $10.10 = $808 per month, inside the $650 to $950 band, or $9,696 for the year.[1] If $1,000,000 of that revenue comes from Choice Privileges members, the rewards program fee at 4.5 to 5.5 percent is $45,000 to $55,000.[1] Revenue management fees, Choice Accelerate, per-reservation charges, commissions and training come on top and depend on the hotel's booking channels, so they are not estimated here. FAQ: - Q: How much does a Comfort Inn franchise cost? A: Choice's 2026 FDD lists a $500 per room affiliation fee with a $50,000 minimum, a 6 percent royalty and a 3.5 percent marketing and reservation fee. Item 7 estimates $822,951 to $3,335,295 to convert an 80-room hotel, before real estate.[1] - Q: Is Comfort Suites more expensive to build than Comfort Inn? A: On Choice's 2026 estimates, yes. An 89-room Comfort Suites is $11,478,095 to $18,328,875, against $10,318,405 to $16,302,115 for an 89-room Comfort Inn. Both exclude real estate and sitework.[1] - Q: What percent of revenue does Choice Hotels take from a Comfort Inn? A: Six percent royalty plus 3.5 percent marketing and reservation fee on gross room revenues. Choice Privileges, Choice Accelerate, technology, revenue management and per-reservation charges are billed on other bases on top.[1] - Q: Can I leave Choice Hotels before the 20 years are up? A: The 2026 FDD gives a conversion hotel termination windows on the 5th, 10th and 15th anniversaries of opening, with 12 months' written notice. A new build has the 10th and 15th. Choice holds the same rights.[1] - Q: I'm buying a Comfort Inn. What does the relicensing cost? A: For 50 percent or more of the equity, the then current affiliation fee or $65,000, whichever is greater, plus a $3,000 property improvement plan fee and $995 for relicensing training. The buyer signs Choice's then current agreement.[1] - Q: Does the Comfort Inn conversion estimate include the whole renovation? A: No. Choice says its $600,000 to $2,411,000 property improvements line excludes deferred maintenance such as the parking lot, HVAC and exterior, and excludes labor. The customized plan comes on application.[1] - Q: Will these Comfort Inn fees be the same next year? A: Not necessarily. Choice says all fees except the royalty and liquidated damages are subject to change, and it reissues the FDD every year. The current FDD and the signed agreement govern.[1] Sources: - [1] Comfort Inn, Comfort Inn and Suites and Comfort Suites Franchise Disclosure Document (issued April 1, 2026): Item 5, pp. 22-25; Item 6, pp. 25-39; Item 7, pp. 39-50; Item 17, pp. 77-80; Item 19, pp. 82-87. Minnesota CARDS document 35771-202604-09, file number 3577, Clean FDD (Choice Hotels International, Inc., filed with the Minnesota Department of Commerce, accessed 2026-09-18): https://www.cards.commerce.state.mn.us/documents/%7BB0A9219E-0000-C61B-8F69-FDCF9E1C6035%7D/download?documentClass=FRANCHISE_REGISTRATIONS&contentSequence=0 - [2] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates ### How much does a Days Inn franchise cost in 2026? URL: https://matthewshotelmarkets.com/hotel-franchise-costs/days-inn Last updated: 2026-09-18 Wyndham's Days Inn disclosure document, issued March 31, 2026, estimates $248,324 to $3,627,625 to convert a 100-room hotel the owner already holds, and $8,128,742 to $10,088,760 to build an 89-room Days Inn, before land. The initial fee is the greater of $35,000 or $350 per room. The royalty is 5.5 percent and the system assessment fee 3.8 percent of gross room revenues.[1] Key takeaways: - Initial fee: the greater of $35,000 or $350 per guest room, with a $2,500 application fee credited toward it.[1] - Royalty: 5.5 percent of gross room revenues. System assessment fee: 3.8 percent.[1] - Wyndham Rewards loyalty charge: 4.25 to 5.5 percent of the amounts on which members earn points.[1] - Term: 20 years for new construction and 15 years for conversions and transfers, with no renewal right.[1] - Fees change every year. Wyndham's current FDD and the signed franchise agreement govern, not this page. #### What does Wyndham charge up front for a Days Inn franchise? The 2026 Days Inn FDD lists an initial fee equal to the greater of $35,000 or $350 per guest room for a new construction or conversion hotel, with a non-refundable $2,500 application fee credited toward it.[1] The franchisor states that initial fees in 2025 ranged from $10,000 to $21,870, and that it may negotiate the amount and payment terms when business circumstances warrant. It may also defer part of the fee under an initial fee note (Item 5, pp. 30-31).[1] Technology set-up comes next. The SynXis property management system carries a one-time $6,000 set-up and implementation fee. The OPERA alternative runs $11,000 to $22,100 plus interfaces. The Wyndham Gateway internet portal equipment is $1,500. Temporary signage for a conversion that opens before its permanent sign is $1,250, a custom interior design review is up to $6,000, and an extension of the opening deadline is $5,000 (Item 5, pp. 31-32).[1] #### What are the ongoing Days Inn franchise fees? The 2026 Days Inn Item 6 lists a 5.5 percent royalty and a 3.8 percent system assessment fee, both on gross room revenues and due monthly.[1] Gross room revenues are revenues from guest room rentals, including guaranteed no-show revenue and business interruption proceeds, and excluding food and beverage and sales, occupancy and use taxes. The system assessment fee can change on 30 days' notice after consultation with the franchisee advisory committee. The franchisor may also raise any fixed-dollar fee by up to 10 percent a year, cumulatively (Item 6, pp. 32-33, 44).[1] The Wyndham Rewards loyalty program charge is 4.25 to 5.5 percent of the amounts on which members earn points, varying with the hotel's enrollment results. A missed enrollment fee is currently $750 per quarter (Item 6, p. 39).[1] Distribution is charged per booking or as commission. Global distribution, third-party channel and internet booking fees are each $2.08 per reservation. The mandatory digital pay-for-performance commission is currently 7 percent, and can be up to 10 percent, of gross room revenues on reservations that arrive through paid search and similar links. The mandatory Wyndham Connect Plus service is 3.5 percent of gross room revenues on each reservation it books. Agency commissions can reach 20 percent on qualifying reservations (Item 6, pp. 35-38).[1] Property management system support is $734 to $1,050 per month by room count. Revenue management service is optional at Days Inn, at 0.75 percent of gross room revenues for the standard level, with a $645 monthly minimum and a $1,395 maximum (Item 6, pp. 38, 40).[1] These charges apply to different bases, so they cannot be added into one rate. #### How much does it cost to convert to or build a Days Inn? The 2026 Days Inn Item 7 estimates $248,324 to $3,627,625 for a 100-room conversion, which the FDD states as $2,483 to $36,276 per room and which assumes the owner already owns the hotel.[1] The width of that range is the building. Facility improvements run from $0, where the exterior, public areas, guest rooms and mechanical systems already meet standards, to $1,985,000 where the hotel needs extensive structural renovation. Furniture, fixtures and equipment run $16,614 to $522,034, and a conversion contingency is set at 5 percent of facility improvements (Item 7, pp. 50-53).[1] For new construction, the FDD estimates $8,128,742 to $10,088,760 for an 89-room Days Inn, or $91,334 to $113,357 per room, excluding the cost of buying or leasing real estate. The franchisor says actual spending depends on region, labor costs and timetable and may fall outside the ranges (Item 7, pp. 46-48).[1] Financing for this work is covered at [brand conversion financing](/hotel-financing/brand-conversion-financing) and [PIP and renovation loans](/hotel-financing/pip-and-renovation-loans). The plan itself is defined at [PIP](/glossary/pip). #### How long is a Days Inn franchise agreement, and can I renew? The Days Inn term is 20 years for a new construction hotel and 15 years for a conversion or a transfer, starting the first day of the month after opening, and Item 17 states there are no renewal or extension rights.[1] If both sides choose to renew, the franchisee signs the then current franchise agreement, which may have materially different terms, and pays the then current relicense fee, which uses the same formula as the initial fee. The FDD reports that 2025 relicense fees for renewals ranged from $21,000 to $35,000 (Item 5, p. 30; Item 17, p. 82).[1] The franchisee's termination rights in Item 17 are limited to casualty and condemnation (Item 17, pp. 82-83).[1] Separately, a footnote to Item 6 describes a current policy that lets an owner terminate without liquidated damages on 60 to 90 days' notice if, among other conditions, the hotel has been in the system at least two years, its occupancy was below 50 percent and at least 10 points under the Smith Travel Research scale tract occupancy for the prior 12 months, its quality and guest scores met set thresholds for two years, and all fees were paid on time (Item 6, pp. 45-46).[1] The FDD calls this a policy the franchisor currently permits, so confirm it is in the agreement you sign. #### What does it cost to leave the Days Inn system early? Days Inn liquidated damages are the greater of $2,000 per guest room or 24 times the average monthly royalties and system assessment fees for the 12 months before termination.[1] If fewer than 24 months remain in the term, the amount is that monthly average times the months remaining. Termination before opening is charged at one half of the formula amount. The room count is the number the franchisor authorized, regardless of later reductions. Payment is due within 10 days. An owner who does not de-identify the hotel afterward owes $2,000 per day. Reconnecting to the reservation system after a suspension for default is currently $4,000 (Item 6, pp. 42-44, 46).[1] #### What happens to the Days Inn franchise when I sell the hotel? The franchisor approves all transfers and qualifies every buyer in its sole discretion, and the buyer pays the application fee and a relicense fee equal to the greater of $35,000 or $350 per room.[1] The buyer signs the then current franchise agreement and must improve the hotel to the standards for conversion hotels entering the system. The seller and its owners sign general releases unless the law restricts them, and the seller may have to repay a development incentive unless the buyer assumes it. The FDD reports that 2025 relicense fees on transfers ranged from $15,000 to $35,000. An assignment to an affiliate of the original franchisee is a flat $5,000, and an assignment to a lender or receiver is $7,500 (Item 5, pp. 30-31; Item 6, p. 33; Item 17, pp. 84-85).[1] A property improvement plan prepared after opening is currently $1,500 per request, a lender comfort letter is $1,000, and taking over an existing property management system without an upgrade is $995 (Item 5, p. 31; Item 6, pp. 34, 43).[1] Wyndham-flagged hotels on the market are listed at [Wyndham hotels for sale](/hotels-for-sale/wyndham), and the flag decision is weighed at [Should I buy a branded or independent hotel?](/buy-a-hotel/branded-vs-independent). #### What does Item 19 say about Days Inn performance? The 2026 Days Inn Item 19 reports that 498 qualified Days Inn hotels averaged an $89.33 average daily rate, 52.5 percent occupancy and $46.86 RevPAR in 2025.[1] There were 1,201 Days Inn hotels in the United States at December 31, 2025. The 498 qualified hotels are those that opened before January 1, 2025, passed their most recent quality assurance inspection or had not yet had one, and had at least ten guest reviews averaging 3.0 or better out of 5.0. Hotels that left the system during 2025, 73 in all, are excluded. The median RevPAR was $43.06, and 211 of the 498, or 42.4 percent, met or exceeded the average (Item 19, pp. 87-88).[1] The FDD reports an average competitive set RevPAR index of 109.0 percent for the qualified hotels, from Smith Travel Research data the franchisor says it has not audited or verified. For all 1,201 hotels it reports an average central reservation system contribution of 81.5 percent of gross room revenue, of which Wyndham Rewards members account for 53.7 percent. The central reservation figure includes third-party websites (Item 19, pp. 88-90).[1] Item 19 gives rate, occupancy and revenue measures only. It gives no expenses and no profit, and this page draws no profit conclusion from it. The measures are defined at [RevPAR](/glossary/revpar) and [ADR](/glossary/adr). Table: Days Inn by Wyndham franchise fees, 2026 FDD issued March 31, 2026 Fee | Amount | Where in the FDD Application fee | $2,500, non-refundable, credited toward the initial fee[1] | Item 5, p. 30 Initial fee, new construction or conversion | Greater of $35,000 or $350 per guest room[1] | Item 5, p. 30 Relicense fee, transfer or renewal | Greater of $35,000 or $350 per guest room[1] | Item 5, p. 30; Item 6, p. 33 Royalty | 5.5% of gross room revenues[1] | Item 6, p. 32 System assessment fee (marketing and reservations) | 3.8% of gross room revenues[1] | Item 6, p. 33 Wyndham Rewards loyalty program charge | 4.25% to 5.5% of amounts on which members earn points[1] | Item 6, p. 39 GDS, third-party channel and internet booking fees | $2.08 per reservation, each[1] | Item 6, pp. 35-36 Digital pay-for-performance commission | Currently 7%, up to 10%, of gross room revenues on qualifying reservations[1] | Item 6, pp. 36-37 Wyndham Connect Plus | 3.5% of gross room revenues on each reservation booked through the service[1] | Item 6, p. 37 Property management system support | $734 to $1,050 per month[1] | Item 6, p. 40 PIP preparation fee, after opening | $1,500 per request[1] | Item 6, p. 34 Liquidated damages | Greater of $2,000 per room or 24 times average monthly royalties and system assessment fees[1] | Item 6, p. 43 Estimated initial investment, 100-room conversion | $248,324 to $3,627,625; $2,483 to $36,276 per room; assumes the hotel is already owned[1] | Item 7, p. 52 Estimated initial investment, new 89-room hotel | $8,128,742 to $10,088,760; $91,334 to $113,357 per room, excluding real estate[1] | Item 7, p. 48 First-party data point: Matthews Hotel Markets' September 2026 rate sheet records Prime at 7.00% effective September 17, 2026 and the SBA 7(a) maximum allowable rate at 10.00%, the indexes a loan for a relicense fee, a PIP or a conversion is priced against.[2] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: a year of Days Inn brand fees on assumed room revenue): Hypothetical. Assume a 100-room Days Inn earns $1,500,000 of gross room revenues in a year. The revenue figure and the member share below are assumptions for arithmetic. They are not forecasts and they are not figures from the FDD. Royalty at 5.5 percent: $1,500,000 x 0.055 = $82,500.[1] System assessment fee at 3.8 percent: $1,500,000 x 0.038 = $57,000.[1] Together: $139,500, or 9.3 percent of room revenue. If Wyndham Rewards members earn points on $500,000 of that revenue, the loyalty program charge at 4.25 to 5.5 percent is $21,250 to $27,500.[1] On the same assumptions, 24 months of average royalties and system assessment fees is $139,500 / 12 x 24 = $279,000. That is more than $2,000 x 100 rooms = $200,000, so $279,000 would be the liquidated damages figure under the Item 6 formula.[1] Per-reservation fees, commissions, technology support and training come on top and depend on the hotel's booking channels, so they are not estimated here. FAQ: - Q: How much does a Days Inn franchise cost? A: The 2026 FDD lists an initial fee of the greater of $35,000 or $350 per room, a 5.5 percent royalty and a 3.8 percent system assessment fee. Item 7 estimates $248,324 to $3,627,625 to convert a 100-room hotel the owner already holds.[1] - Q: What percent of revenue does Wyndham take from a Days Inn? A: A 5.5 percent royalty plus a 3.8 percent system assessment fee on gross room revenues. Loyalty charges, booking fees, commissions and technology support are billed on other bases on top.[1] - Q: I'm buying a Days Inn. What is the relicense fee? A: The greater of $35,000 or $350 per room, plus the $2,500 application fee. The FDD says 2025 relicense fees on transfers ranged from $15,000 to $35,000. The buyer signs the then current agreement and upgrades the hotel.[1] - Q: How long is a Days Inn franchise agreement? A: Twenty years for new construction and 15 years for conversions and transfers. Item 17 states there are no renewal or extension rights. A renewal, if both sides agree, means a new agreement and a relicense fee.[1] - Q: Why is the Days Inn conversion range so wide? A: Because it depends on the building. Facility improvements run from $0 for a hotel already at standard to $1,985,000 for one needing extensive structural renovation, per Item 7 of the 2026 FDD.[1] - Q: Does the Days Inn FDD say what a Days Inn earns? A: Item 19 reports 2025 average daily rate, occupancy, RevPAR, RevPAR index and reservation contribution for 498 qualified hotels. It gives no expenses and no profit.[1] - Q: Will these Days Inn fees be the same next year? A: Not necessarily. The FDD is reissued every year, and the franchisor may raise any fixed-dollar fee by up to 10 percent a year. The current FDD and the signed agreement govern.[1] Sources: - [1] Days Inn Franchise Disclosure Document (issued March 31, 2026): Item 5, pp. 30-32; Item 6, pp. 32-46; Item 7, pp. 46-54; Item 17, pp. 82-87; Item 19, pp. 87-90. Wisconsin DFI franchise registration file 640621 (Days Inns Worldwide, Inc., filed with the Wisconsin Department of Financial Institutions, accessed 2026-09-18): https://apps.dfi.wi.gov/apps/FranchiseSearch/details.aspx?id=640621&hash=1766667238&search=external&type=GENERAL - [2] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates ### How much does a DoubleTree franchise cost in 2026? URL: https://matthewshotelmarkets.com/hotel-franchise-costs/doubletree Last updated: 2026-09-18 Hilton's 2026 DoubleTree Franchise Disclosure Document, issued March 30, 2026, estimates $31,454,554 to $108,661,784 to open a newly built 225-room DoubleTree and $33,007,054 to $126,260,147 for a 225-room DoubleTree Suites, both excluding real estate. The application fee is $85,000, the monthly royalty is 5 percent of gross rooms revenue and the monthly program fee is 4 percent.[1] Key takeaways: - Item 7 total: $31,454,554 to $108,661,784 for a 225-room DoubleTree, which is about $139,800 to $482,900 per room by our arithmetic, before land.[1] - Ongoing: 5 percent royalty plus 4 percent program fee on gross rooms revenue, Hilton Honors at 4 percent of total eligible guest folio, and a 2 percent spa royalty only if the hotel adds an eforea spa.[1] - A buyer of an existing DoubleTree pays a $175,000 change of ownership application fee and a $10,000 PIP fee. In 2025 buyers paid $0 to $175,000.[1] - The term is generally 23 years for new construction and 10 to 20 years for a conversion. There is no right to renew.[1] - The FDD is Hilton's document and its fees change every year. Get the current FDD from Hilton before relying on these figures. #### What does a DoubleTree franchise cost up front? An $85,000 franchise application fee for a new build or a conversion, plus $400 for each guest room or suite over 250, under Item 5 of the 2026 DoubleTree FDD.[1] Item 5 (pp. 17-19) lists the other initial fees paid to Hilton or its affiliates. A change of ownership application is $175,000 and a re-licensing application is $85,000. The PIP fee, charged to prepare a property improvement plan for a conversion, change of ownership or re-licensing, is $10,000. The OnQ computer system costs $93,150 to $246,150 for hardware, software and installation, other start-up fees are $6,500, training program fees run $5,000 to $20,000, and the opening process services fee is $20,000. Pre-opening revenue management support, which Hilton may require when a hotel opens on an expedited schedule of 150 days or less, is $4,059 to $8,880.[1] Two optional programs carry their own initial fees: $25,000 when the owner signs an eforea spa amendment, and a $75,000 development services fee for each Hilton restaurant brand selected.[1] The application fee is refundable, less a $7,500 processing fee, if Hilton denies the application, if the applicant withdraws before approval, or if a change of ownership does not occur (Item 5, Note 1, p. 19).[1] #### What are the DoubleTree royalty and program fees? The monthly royalty fee is 5 percent of gross rooms revenue and the monthly program fee is 4 percent of gross rooms revenue, both due by the 15th of the following month.[1] Item 6 (p. 23) bases both fees on gross rooms revenue as defined under the Uniform System of Accounts for the Lodging Industry, including loyalty redemption revenue, mandatory guest fees such as resort fees, and guaranteed no-show revenue (Note 1, p. 32).[1] A monthly spa royalty of 2 percent of gross spa revenue is payable only if an eforea spa amendment is in effect. The Item 6 table lists no royalty on food and beverage revenue.[1] Hilton may change the program fee at any time, but the rate will not exceed the current rate plus 1 percent of gross rooms revenue over the term of the agreement (Note 2, p. 33).[1] Other recurring charges sit on top. Hilton Honors is currently 4 percent of total eligible guest folio, waived for stays where the guest enrolls at the property. The Hilton Advance fee is 1.35 percent of eligible digital direct revenue, capped at $30 per stay (p. 26).[1] OnQ connectivity is $400 to $600 per month and hardware and software maintenance is $2,359 to $6,752 per month (p. 23).[1] These charges apply to different bases, so they do not add into one percentage. #### What does the Item 7 estimate cover, and what is it per room? Item 7 of the 2026 DoubleTree FDD totals $31,454,554 to $108,661,784 for a 225-room DoubleTree and $33,007,054 to $126,260,147 for a 225-room DoubleTree Suites, excluding real estate.[1] Divided by 225 rooms, that is about $139,800 to $482,900 per room for the DoubleTree and about $146,700 to $561,200 per room for the DoubleTree Suites. The division is ours. The FDD does not print a per-room figure.[1] Construction and leasehold improvements drive the spread: $18,216,000 to $74,675,250 for the DoubleTree and $18,216,000 to $87,561,000 for the Suites. Furniture, fixtures and equipment are $7,245,000 to $10,867,500 for the DoubleTree, and an eforea spa adds $0 to $4,950,000 (pp. 36-39).[1] The cover page adds that up to $500,030 of the total is paid to Hilton or its affiliates.[1] Read the exclusions. Item 7 states in capitals that the figures do not include real estate costs, market studies, insurance or interest, and do not separately identify the cost of improvements under a conversion, re-licensing or change of ownership license (p. 37).[1] For an owner converting an existing hotel, or a buyer of an existing DoubleTree, the number that matters is the PIP scope from Hilton, not an Item 7 total. Per-room pricing is defined at [price per key](/glossary/per-key). #### What does Hilton report about DoubleTree hotel performance? Item 19 of the 2026 DoubleTree FDD reports a 2025 average room rate of $159.90, average occupancy of 68.4 percent and average RevPAR of $109.35 across 294 comparable U.S. DoubleTree and DoubleTree Suites hotels.[1] Comparable hotels are those open since January 1 of the previous year, excluding hotels that changed brand or ownership type, had large-scale capital projects, or lack comparable results. Of 415 U.S. DoubleTree and DoubleTree Suites hotels at December 31, 2025, 294 were comparable: 24 company-managed and 270 franchisee-managed (p. 93).[1] Medians were a $150.96 room rate, 68.2 percent occupancy and $104.11 RevPAR. The ranges were $95.40 to $318.84 for room rate, 30.4 to 98.5 percent for occupancy and $39.96 to $310.94 for RevPAR. Of franchisee-managed hotels, 101, or 37.4 percent, met or exceeded the average RevPAR (pp. 94-95).[1] The average RevPAR index was 105.2 and the median 106.5, with a range from 48.8 to 248.7, where 100 is a fair share of the competitive set. Hilton cites STR and Hilton as the source and excludes 1 hotel with insufficient data (pp. 95-96).[1] Hilton Honors members accounted for an average 68.5 percent of occupied room nights, with a range from 22.7 to 94.2 percent (pp. 96-97).[1] Item 19 reports rooms revenue measures only. It gives no food and beverage or banquet results, no expenses, no profit and no return on investment, and none can be derived from it. Hilton writes: "Some hotels have achieved the results shown above. Your individual results may differ. There is no assurance that your Hotel will achieve the results shown above" (p. 97).[1] The measures are defined at [RevPAR](/glossary/revpar) and [MPI, ARI and RGI](/glossary/mpi-ari-rgi). #### How long is a DoubleTree franchise agreement, and can I renew it? Hilton's 2026 DoubleTree FDD sets the term at generally 23 years from the effective date for new construction and 10 to 20 years from opening for a conversion, with no right to renew.[1] Item 17 of the 2026 DoubleTree FDD (p. 79) states that on a change of ownership the term is generally the remaining term under the existing franchise agreement, or another term Hilton approves.[1] The franchisee does not have the right to renew or extend. If Hilton agrees, in its sole discretion, to re-license the hotel, the owner may be asked to sign a contract with materially different terms and must meet any PIP conditions Hilton sets.[1] The re-licensing application fee is $85,000 (Item 6, p. 28).[1] The franchisee is not authorized to terminate before the term expires. Item 17 treats a unilateral termination without cause as a material breach, and liquidated damages become payable on demand.[1] The contract itself is defined at [franchise agreement](/glossary/franchise-agreement). #### What happens to the DoubleTree franchise when the hotel is sold? A sale that changes control of a DoubleTree is a change of ownership transfer: the seller gives Hilton 60 days' written notice and the buyer applies for a new franchise.[1] Item 17 of the 2026 DoubleTree FDD (p. 88) requires the buyer to meet Hilton's then-current requirements for new franchisees, including credit, a background investigation and operations experience. The buyer submits a change of ownership application, pays the franchise application fee ($175,000), signs the then-current form of franchise agreement and agrees to Hilton's requested upgrades, which may include a PIP fee.[1] The seller must not be in default and must pay all amounts due through closing. If the buyer has SBA financing, buyer and seller must agree to escrow Hilton's estimated fees and disburse them at closing.[1] Permitted transfers are those that do not change control. Transfers of publicly traded equity, and of privately held equity where the transferee holds less than 50 percent afterward, need no notice or consent. Transfers to affiliates, to a family member or trust, or on death need 60 days' written notice, Hilton's consent and a $5,500 processing fee.[1] An owner may mortgage the hotel to a lender that finances its acquisition, development or operation without Hilton's consent if the owner is the sole borrower and the loan is not secured by other hotels or other collateral. A lender [comfort letter](/glossary/comfort-letter) costs $3,500 (Item 6, p. 28).[1] Hilton-family hotels on the market are listed at [Hilton hotels for sale](/hotels-for-sale/hilton). The buyer's checklist is at [What due diligence do I need before buying a hotel?](/buy-a-hotel/due-diligence-checklist). #### What does it cost to leave DoubleTree before the term ends? Hilton's liquidated damages for a DoubleTree that has been open more than two years are the hotel's average monthly royalty fees multiplied by 60, or by the months remaining in the final 60 months of the term.[1] Item 6 of the 2026 DoubleTree FDD (p. 29) sets four cases for a termination by Hilton. Before opening: the system's average monthly royalty fees multiplied by 60. From opening to the second anniversary: the greater of the hotel's average monthly royalty fees multiplied by 60, or the system's average monthly royalty fees multiplied by 60. After the second anniversary and before the final 60 months of the term: the hotel's average monthly royalty fees multiplied by 60. Within the final 60 months: the hotel's average monthly royalty fees multiplied by the number of months remaining.[1] Note 8 to Item 6 (p. 35) defines the hotel's average as the royalty fees due for the 24 months before the month of termination, divided by 24. The system's average is the average monthly royalty per guest room owed by U.S. DoubleTree hotels over the prior 12 full calendar months, multiplied by the hotel's approved guest rooms. Fee discounts, ramps and waivers are excluded from the calculation.[1] Opening without Hilton's written authorization costs $5,000 per day.[1] Item 6 states that the monthly royalty fee and liquidated damages are the only fees in the item that are not subject to change.[1] #### Does Hilton offer key money on a DoubleTree? Hilton may, in its sole discretion, offer a development incentive on a DoubleTree, and the 2026 FDD calls it a contingent liability, not a loan.[1] Item 10 of the 2026 DoubleTree FDD (p. 51) describes an incentive as a financial contribution toward the development or conversion of the hotel, documented by a development incentive note signed with the franchise agreement. It bears no interest and does not have to be repaid unless the franchise terminates before the end of the term or a transfer occurs. The repayable amount falls by an equal share for each year the hotel is open: one-twentieth a year on a 20-year term, in Hilton's example.[1] On a sale, the seller pays the then-current repayable amount unless Hilton permits the buyer to assume the note.[1] The FDD does not publish incentive amounts, and the program can be changed or ended at any time. The term is defined at [key money](/glossary/key-money). #### How do owners finance DoubleTree franchise fees, a PIP or a conversion? Inside the acquisition or construction loan when the costs are part of a purchase or a build, or with a separate renovation loan when they are not. Lenders size the loan to the hotel's income, and no lender type publishes its leverage limits or spreads. As of September 17, 2026, Prime is 7.00 percent, SOFR is 3.85 percent and the SBA 7(a) maximum allowable rate is 10.00 percent.[2] Item 7 of the DoubleTree FDD notes that many lenders will require an environmental assessment report.[1] The loan structures are at [How do I finance converting my hotel to a new brand?](/hotel-financing/brand-conversion-financing) and [How do I finance a hotel PIP or renovation?](/hotel-financing/pip-and-renovation-loans). The wider trade between a flag and independence is at [Should I buy a branded or independent hotel?](/buy-a-hotel/branded-vs-independent), and the upgrade list itself is defined at [PIP](/glossary/pip). #### Whose numbers are these, and how current are they? Every figure on this page comes from Hilton's 2026 DoubleTree Franchise Disclosure Document, issued March 30, 2026. It is the franchisor's document, not ours.[1] The FDD is written by the franchisor, Hilton Franchise Holding LLC, and a prospective franchisee must receive it at least 14 calendar days before signing a binding agreement or paying anything.[1] Hilton reissues it every year and marks most fees "currently", which means they can change. Hilton also reports that it negotiates. It agreed to modify the monthly royalty fee in 24 instances during 2025 (Item 6, p. 33), and in 2025 franchisees paid application fees from $42,500 to $100,000 for new development or conversion, $0 to $175,000 for a change of ownership and $0 to $100,000 for re-licensing (Item 5, p. 20).[1] Get the current FDD from Hilton, and read the franchise agreement attached to it, before you rely on any number here. This page is a neutral fee guide. It does not rank brands or recommend one. The document type is explained at [franchise disclosure document](/glossary/franchise-fdd), and the other brand guides are listed at [How much does a hotel franchise cost?](/hotel-franchise-costs). Table: DoubleTree by Hilton franchise fees, 2026 FDD issued March 30, 2026 (Items 5, 6 and 7) Fee | Amount | Where in the FDD Application fee, new development or conversion | $85,000 plus $400 per guest room or suite over 250[1] | Item 5, p. 17 Application fee, change of ownership | $175,000[1] | Item 5, p. 17 Application fee, re-licensing | $85,000[1] | Item 5, p. 18 PIP fee | $10,000[1] | Item 5, p. 18 OnQ system: hardware, software, installation | $93,150 to $246,150[1] | Item 5, p. 18 Opening process services fee | $20,000[1] | Item 5, p. 19 eforea spa initial fee (optional) | $25,000[1] | Item 5, p. 18 Monthly royalty fee | 5% of gross rooms revenue[1] | Item 6, p. 23 Monthly spa royalty fee (only with an eforea spa) | 2% of gross spa revenue[1] | Item 6, p. 23 Monthly program fee | 4% of gross rooms revenue. May change, capped at the current rate plus 1%[1] | Item 6, pp. 23 and 33 Hilton Honors | 4% of total eligible guest folio[1] | Item 6, p. 26 Hilton Advance fee | 1.35% of eligible digital direct revenue, up to $30 per stay[1] | Item 6, p. 26 OnQ connectivity, and hardware and software maintenance | $400 to $600 and $2,359 to $6,752 per month[1] | Item 6, p. 23 Permitted transfer processing fee | $5,500[1] | Item 6, p. 28 Lender comfort letter | $3,500, and $1,500 for an assignment[1] | Item 6, p. 28 Liquidated damages, after year 2 | Hotel's average monthly royalty fees x 60, or x months remaining in the final 60 months[1] | Item 6, p. 30 Estimated initial investment, 225-room DoubleTree | $31,454,554 to $108,661,784, excluding real estate[1] | Item 7, p. 37 Estimated initial investment, 225-room DoubleTree Suites | $33,007,054 to $126,260,147, excluding real estate[1] | Item 7, p. 39 First-party data point: Matthews Hotel Markets' September 2026 rate sheet records Prime at 7.00% effective September 17, 2026, SOFR at 3.85% and the SBA 7(a) maximum allowable rate at 10.00%, the indexes a loan for franchise fees, a PIP or a conversion is priced against.[2] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: one year of DoubleTree brand fees on assumed rooms revenue): Hypothetical. Assume a DoubleTree earns $8,000,000 of gross rooms revenue in a year, has no eforea spa, and that $3,200,000 of guest folios are eligible Hilton Honors folios. These figures are assumptions chosen for round arithmetic. They are not forecasts and they are not from the FDD. Monthly royalty fee at 5 percent: $8,000,000 x 0.05 = $400,000.[1] Monthly program fee at 4 percent: $8,000,000 x 0.04 = $320,000.[1] Hilton Honors at 4 percent of eligible folio: $3,200,000 x 0.04 = $128,000.[1] OnQ connectivity plus hardware and software maintenance: $2,759 to $7,352 per month, or $33,108 to $88,224 a year.[1] Total of these four lines: $881,108 to $936,224. Food and beverage revenue carries no royalty in the Item 6 table, so it does not enter this arithmetic. Hilton Advance fees, third-party reservation charges, group and travel planner commissions, training and guest assistance charges are extra and depend on how guests book, so they are left out. The example shows fees only. It says nothing about profit. FAQ: - Q: How much does it cost to open a DoubleTree by Hilton? A: Hilton's 2026 FDD, issued March 30, 2026, estimates $31,454,554 to $108,661,784 for a newly built 225-room DoubleTree, excluding real estate, market studies, insurance and interest. Up to $500,030 of that is paid to Hilton or its affiliates.[1] - Q: What is the DoubleTree royalty fee? A: 5 percent of gross rooms revenue, paid monthly, plus a 4 percent monthly program fee. Hilton reports it agreed to modify the royalty in 24 instances during 2025, so the rate is sometimes negotiated.[1] - Q: What does it cost to convert a hotel to DoubleTree? A: The 2026 FDD lists an $85,000 application fee and a $10,000 PIP fee. Item 7 does not separately identify conversion costs, so Hilton's property improvement plan for the specific building sets the renovation scope.[1] - Q: I'm buying an existing DoubleTree. What will Hilton charge me? A: A $175,000 change of ownership application fee and a $10,000 PIP fee, under the 2026 FDD. You sign Hilton's then-current franchise agreement and agree to its requested upgrades. In 2025, buyers paid from $0 to $175,000.[1] - Q: How long does a DoubleTree franchise last? A: Generally 23 years from the effective date for new construction and 10 to 20 years from opening for a conversion. A buyer generally takes the remaining term or another term Hilton approves. There is no right to renew.[1] - Q: How much does a DoubleTree owner make? A: The FDD does not say. Item 19 reports room rate, occupancy, RevPAR, RevPAR index and Hilton Honors contribution for comparable hotels. It reports no expenses or profit, and Hilton states there is no assurance any hotel will achieve the results shown.[1] - Q: What does it cost to terminate a DoubleTree franchise early? A: After the second anniversary of opening, liquidated damages are the hotel's average monthly royalty fees multiplied by 60, or by the months remaining in the final 60 months of the term.[1] Sources: - [1] 2026 DoubleTree by Hilton Franchise Disclosure Document (issued March 30, 2026): cover page; Item 5, pp. 17-22; Item 6, pp. 23-36; Item 7, pp. 36-42; Item 10, pp. 51-52; Item 17, pp. 79-93; Item 19, pp. 93-98 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2026/03/2026-US-FDD-DoubleTree.pdf - [2] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates ### How much does a Hampton Inn franchise cost in 2026? URL: https://matthewshotelmarkets.com/hotel-franchise-costs/hampton-inn Last updated: 2026-09-18 Hilton's 2026 Hampton Franchise Disclosure Document, issued March 30, 2026, estimates $17,043,739 to $24,732,532 to open a newly built 89-room Hampton Inn and $19,964,850 to $29,121,080 for a 113-room Hampton Inn & Suites, both excluding real estate. The application fee is $100,000, the monthly royalty is 6 percent of gross rooms revenue and the monthly program fee is 4 percent.[1] Key takeaways: - Item 7 total: $17,043,739 to $24,732,532 for an 89-room Hampton Inn, which is about $191,500 to $277,900 per room by our arithmetic, before land.[1] - Ongoing: 6 percent royalty plus 4 percent program fee on gross rooms revenue, and a Hilton Honors charge of 4.6 percent of total eligible guest folio.[1] - A buyer of an existing Hampton pays a $200,000 change of ownership application fee and a $10,000 PIP fee, then funds the PIP itself.[1] - The term is generally 22 years for new construction and 10 to 20 years for a conversion. There is no right to renew.[1] - The FDD is Hilton's document and its fees change every year. Get the current FDD from Hilton before relying on these figures. #### What does a Hampton Inn franchise cost up front? A $100,000 franchise application fee for a new build or a conversion, plus $400 for each guest room over 150, under Item 5 of the 2026 Hampton FDD.[1] Item 5 (pp. 15-16) lists the other initial fees paid to Hilton or its affiliates. A change of ownership application is $200,000 and a re-licensing application is $100,000. The PIP fee, charged to prepare a property improvement plan for a conversion, change of ownership or re-licensing, is $10,000. The OnQ computer system costs $27,590 to $83,959 for hardware, software and installation, other start-up fees are $5,100, training program fees run $5,000 to $17,500, and the opening process services fee is $6,000. If Hilton's supply affiliate furnishes the hotel, its procurement fee is 4 to 10 percent of project cost.[1] The application fee is refundable, less a $7,500 processing fee, if Hilton denies the application, if the applicant withdraws before approval, or if a change of ownership does not occur. Once Hilton approves the application, the fee is non-refundable (Item 5, Note 1, p. 17).[1] #### What are the Hampton Inn royalty and program fees? The monthly royalty fee is 6 percent of gross rooms revenue and the monthly program fee is 4 percent of gross rooms revenue, both due by the 15th of the following month.[1] Item 6 (p. 20) defines gross rooms revenue under the Uniform System of Accounts for the Lodging Industry. It includes revenue from loyalty point redemptions, breakfast included in the room rate, mandatory guest fees, late cancellation fees and guaranteed no-show revenue, whether or not collected (Note 1, p. 30).[1] Hilton may change the program fee at any time, but the rate will not exceed the current rate plus 1 percent of gross rooms revenue over the term of the agreement (Note 2, p. 30).[1] Other recurring charges sit on top. Hilton Honors is currently 4.6 percent of total eligible guest folio, waived for stays where the guest enrolls at the property. The Hilton Advance fee is 1.35 percent of eligible digital direct revenue, capped at $30 per stay (p. 23).[1] OnQ connectivity is $400 to $600 per month, hardware and software maintenance is $1,114 to $2,568 per month, and the brand conference is $2,500 per attendee (pp. 20-22).[1] These charges apply to different bases, so they do not add into one percentage. #### What does the Item 7 estimate cover, and what is it per room? Item 7 of the 2026 Hampton FDD totals $17,043,739 to $24,732,532 for an 89-room Hampton Inn and $19,964,850 to $29,121,080 for a 113-room Hampton Inn & Suites with 81 rooms and 32 studio suites.[1] Divided by the room counts Hilton uses, that is about $191,500 to $277,900 per room for the Hampton Inn and about $176,700 to $257,700 per room for the Hampton Inn & Suites. The division is ours. The FDD does not print a per-room figure.[1] Construction and leasehold improvements are the largest line at $12,478,374 to $18,024,318 for the 89-room hotel, and furniture, fixtures and equipment are $1,254,480 to $1,782,681 (pp. 33-35).[1] The cover page adds that up to $225,380 of the Hampton Inn total is paid to Hilton or its affiliates.[1] Read the exclusions. Item 7 states in capitals that the figures do not include real estate costs, market studies, insurance or interest, and do not separately identify the cost of improvements under a conversion, re-licensing or change of ownership license (p. 35).[1] A buyer of an existing Hampton should expect a PIP scope from Hilton, not an Item 7 number. Per-room pricing is defined at [price per key](/glossary/per-key). #### What does Hilton report about Hampton hotel performance? Item 19 of the 2026 Hampton FDD reports a 2025 average room rate of $149.08, average occupancy of 71.0 percent and average RevPAR of $105.90 across 1,893 comparable Hampton hotels in the United States.[1] Comparable hotels are those open since January 1 of the previous year, excluding hotels that changed brand or ownership type, had large-scale capital projects, or lack comparable results. Of 2,410 U.S. Hampton hotels at December 31, 2025, 1,893 were comparable, and 1,878 of those were franchisee-managed (pp. 77-78).[1] Medians were a $140.32 room rate, 71.1 percent occupancy and $100.01 RevPAR. The ranges were $83.46 to $318.92 for room rate, 30.7 to 98.2 percent for occupancy and $34.81 to $300.28 for RevPAR. Of franchisee-managed hotels, 757, or 40.3 percent, met or exceeded the average RevPAR (pp. 78-79).[1] The average RevPAR index was 120.8 and the median 122.5, with a range from 58.9 to 361.6, where 100 is a fair share of the competitive set. Hilton cites STR and Hilton as the source and excludes 13 hotels with insufficient data (p. 80).[1] Hilton Honors members accounted for an average 77.8 percent of occupied room nights, with a range from 29.4 to 97.4 percent (p. 80).[1] For the 294 comparable hotels opened during or after 2018, the averages were a $158.11 room rate, 72.3 percent occupancy, $114.33 RevPAR and a 125.4 RevPAR index (pp. 81-83).[1] Item 19 reports revenue measures only. It gives no expenses, no profit and no return on investment, and none can be derived from it. Hilton writes: "Some hotels have achieved the results shown above. Your individual results may differ. There is no assurance that your Hotel will achieve the results shown above" (p. 84).[1] The measures are defined at [RevPAR](/glossary/revpar) and [MPI, ARI and RGI](/glossary/mpi-ari-rgi). #### How long is a Hampton franchise agreement, and can I renew it? Hilton's 2026 Hampton FDD sets the term at generally 22 years from the effective date for new construction and 10 to 20 years from opening for a conversion, with no right to renew.[1] Item 17 of the 2026 Hampton FDD (p. 69) states that on a change of ownership the term is generally the remaining term under the existing franchise agreement, or another term Hilton approves.[1] The franchisee does not have the right to renew or extend. If Hilton agrees, in its sole discretion, to re-license the hotel, the owner may be asked to sign a contract with materially different terms and must meet any PIP conditions Hilton sets.[1] The re-licensing application fee is $100,000 (Item 6, p. 25).[1] The franchisee is not authorized to terminate before the term expires. Item 17 treats a unilateral termination without cause as a material breach, and liquidated damages become payable on demand.[1] The contract itself is defined at [franchise agreement](/glossary/franchise-agreement). #### What happens to the Hampton franchise when the hotel is sold? A sale that changes control of a Hampton is a change of ownership transfer: the seller gives Hilton 60 days' written notice and the buyer applies for a new franchise.[1] Item 17 of the 2026 Hampton FDD (p. 74) requires the buyer to meet Hilton's then-current requirements for new franchisees, including credit, a background investigation and operations experience. The buyer submits a change of ownership application, pays the franchise application fee ($200,000), signs the then-current form of franchise agreement and agrees to Hilton's requested upgrades, which may include a PIP fee.[1] The seller must not be in default and must pay all amounts due through closing. If the buyer has SBA financing, buyer and seller must agree to escrow Hilton's estimated fees and disburse them at closing.[1] Permitted transfers are those that do not change control. Transfers of publicly traded equity, and of privately held equity where the transferee holds less than 50 percent afterward, need no notice or consent. Transfers to affiliates, to a family member or trust, or on death need 60 days' written notice, Hilton's consent and a $5,500 processing fee.[1] An owner may mortgage the hotel to a lender that finances its acquisition, development or operation without Hilton's consent if the owner is the sole borrower and the loan is not secured by other hotels or other collateral. A lender [comfort letter](/glossary/comfort-letter) costs $3,500 (Item 6, p. 26).[1] Hamptons on the market are listed at [Hampton Inn hotels for sale](/hotels-for-sale/hampton-inn) and [Hilton hotels for sale](/hotels-for-sale/hilton). The buyer's checklist is at [What due diligence do I need before buying a hotel?](/buy-a-hotel/due-diligence-checklist). #### What does it cost to leave Hampton before the term ends? Hilton's liquidated damages for a Hampton that has been open more than two years are the hotel's average monthly royalty fees multiplied by 60, or by the months remaining in the final 60 months of the term.[1] Item 6 of the 2026 Hampton FDD (p. 27) sets four cases for a termination by Hilton. Before opening: the system's average monthly royalty fees multiplied by 60. From opening to the second anniversary: the greater of the hotel's average monthly royalty fees multiplied by 60, or the system's average monthly royalty fees multiplied by 60. After the second anniversary and before the final 60 months of the term: the hotel's average monthly royalty fees multiplied by 60. Within the final 60 months: the hotel's average monthly royalty fees multiplied by the number of months remaining.[1] Note 8 to Item 6 (p. 32) defines the hotel's average as the royalty fees due for the 24 months before the month of termination, divided by 24. The system's average is the average monthly royalty per guest room owed by U.S. Hampton hotels over the prior 12 full calendar months, multiplied by the hotel's approved guest rooms. Fee discounts, ramps and waivers are excluded from the calculation.[1] Opening without Hilton's written authorization costs $5,000 per day.[1] Item 6 states that the monthly royalty fee and liquidated damages are the only fees in the item that are not subject to change.[1] #### Does Hilton offer key money on a Hampton? Hilton may, in its sole discretion, offer a development incentive on a Hampton, and the 2026 FDD calls it a contingent liability, not a loan.[1] Item 10 of the 2026 Hampton FDD (p. 45) describes an incentive as a financial contribution toward the development or conversion of the hotel, documented by a development incentive note signed with the franchise agreement. It bears no interest and does not have to be repaid unless the franchise terminates before the end of the term or a transfer occurs. The repayable amount falls by an equal share for each year the hotel is open: one-twentieth a year on a 20-year term, in Hilton's example.[1] On a sale, the seller pays the then-current repayable amount unless Hilton permits the buyer to assume the note.[1] The FDD does not publish incentive amounts, and the program can be changed or ended at any time. The term is defined at [key money](/glossary/key-money). #### How do owners finance Hampton franchise fees, a PIP or a conversion? Inside the acquisition or construction loan when the costs are part of a purchase or a build, or with a separate renovation loan when they are not. Lenders size the loan to the hotel's income, and no lender type publishes its leverage limits or spreads. As of September 17, 2026, Prime is 7.00 percent, SOFR is 3.85 percent and the SBA 7(a) maximum allowable rate is 10.00 percent.[2] Item 7 of the Hampton FDD notes that many lenders will require an environmental assessment report.[1] The loan structures are at [How do I finance converting my hotel to a new brand?](/hotel-financing/brand-conversion-financing) and [How do I finance a hotel PIP or renovation?](/hotel-financing/pip-and-renovation-loans). The wider trade between a flag and independence is at [Should I buy a branded or independent hotel?](/buy-a-hotel/branded-vs-independent), and the upgrade list itself is defined at [PIP](/glossary/pip). #### Whose numbers are these, and how current are they? Every figure on this page comes from Hilton's 2026 Hampton Franchise Disclosure Document, issued March 30, 2026. It is the franchisor's document, not ours.[1] The FDD is written by the franchisor, Hilton Franchise Holding LLC, and a prospective franchisee must receive it at least 14 calendar days before signing a binding agreement or paying anything.[1] Hilton reissues it every year and marks most fees "currently", which means they can change. Hilton also reports that it negotiates. It agreed to modify the monthly royalty fee in 75 instances during 2025 (Item 6, p. 30), and in 2025 franchisees paid application fees from $0 to $100,000 for new development or conversion, $25,000 to $200,000 for a change of ownership and $50,000 to $100,000 for re-licensing (Item 5, p. 17).[1] Get the current FDD from Hilton, and read the franchise agreement attached to it, before you rely on any number here. This page is a neutral fee guide. It does not rank brands or recommend one. The document type is explained at [franchise disclosure document](/glossary/franchise-fdd), and the other brand guides are listed at [How much does a hotel franchise cost?](/hotel-franchise-costs). Table: Hampton by Hilton franchise fees, 2026 FDD issued March 30, 2026 (Items 5, 6 and 7) Fee | Amount | Where in the FDD Application fee, new development or conversion | $100,000 plus $400 per guest room over 150[1] | Item 5, p. 15 Application fee, change of ownership | $200,000[1] | Item 5, p. 16 Application fee, re-licensing | $100,000[1] | Item 5, p. 16 PIP fee | $10,000[1] | Item 5, p. 16 OnQ system: hardware, software, installation | $27,590 to $83,959[1] | Item 5, p. 16 Monthly royalty fee | 6% of gross rooms revenue[1] | Item 6, p. 20 Monthly program fee | 4% of gross rooms revenue. May change, capped at the current rate plus 1%[1] | Item 6, pp. 20 and 30 Hilton Honors | 4.6% of total eligible guest folio[1] | Item 6, p. 23 Hilton Advance fee | 1.35% of eligible digital direct revenue, up to $30 per stay[1] | Item 6, p. 23 OnQ connectivity, and hardware and software maintenance | $400 to $600 and $1,114 to $2,568 per month[1] | Item 6, p. 20 Room addition fee | $400 per added guest room[1] | Item 6, p. 20 Permitted transfer processing fee | $5,500[1] | Item 6, p. 25 Lender comfort letter | $3,500, and $1,500 for an assignment[1] | Item 6, p. 26 Liquidated damages, after year 2 | Hotel's average monthly royalty fees x 60, or x months remaining in the final 60 months[1] | Item 6, p. 27 Estimated initial investment, 89-room Hampton Inn | $17,043,739 to $24,732,532, excluding real estate[1] | Item 7, p. 35 Estimated initial investment, 113-room Hampton Inn & Suites | $19,964,850 to $29,121,080, excluding real estate[1] | Item 7, p. 36 First-party data point: Matthews Hotel Markets' September 2026 rate sheet records Prime at 7.00% effective September 17, 2026, SOFR at 3.85% and the SBA 7(a) maximum allowable rate at 10.00%, the indexes a loan for franchise fees, a PIP or a conversion is priced against.[2] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: one year of Hampton brand fees on assumed rooms revenue): Hypothetical. Assume a Hampton Inn earns $3,000,000 of gross rooms revenue in a year, and that $1,200,000 of guest folios are eligible Hilton Honors folios. Both figures are assumptions chosen for round arithmetic. They are not forecasts and they are not from the FDD. Monthly royalty fee at 6 percent: $3,000,000 x 0.06 = $180,000.[1] Monthly program fee at 4 percent: $3,000,000 x 0.04 = $120,000.[1] Hilton Honors at 4.6 percent of eligible folio: $1,200,000 x 0.046 = $55,200.[1] OnQ connectivity plus hardware and software maintenance: $1,514 to $3,168 per month, or $18,168 to $38,016 a year.[1] Total of these four lines: $373,368 to $393,216. Hilton Advance fees, third-party reservation charges, travel planner commissions, training, the brand conference and guest assistance charges are extra and depend on how guests book, so they are left out. The example shows fees only. It says nothing about profit. FAQ: - Q: How much does it cost to open a Hampton Inn? A: Hilton's 2026 FDD, issued March 30, 2026, estimates $17,043,739 to $24,732,532 for a newly built 89-room Hampton Inn, excluding real estate, market studies, insurance and interest. Up to $225,380 of that is paid to Hilton or its affiliates.[1] - Q: What is the Hampton Inn royalty fee? A: 6 percent of gross rooms revenue, paid monthly, plus a 4 percent monthly program fee. Hilton reports it agreed to modify the royalty in 75 instances during 2025, so the rate is sometimes negotiated.[1] - Q: I'm buying an existing Hampton Inn. What will Hilton charge me? A: A $200,000 change of ownership application fee and a $10,000 PIP fee, under the 2026 FDD. You sign Hilton's then-current franchise agreement and agree to its requested upgrades. The fee is refunded less $7,500 if the sale does not close.[1] - Q: How long does a Hampton Inn franchise last? A: Generally 22 years from the effective date for new construction and 10 to 20 years from opening for a conversion. A buyer generally takes the remaining term or another term Hilton approves. There is no right to renew.[1] - Q: How much does a Hampton Inn franchise owner make? A: The FDD does not say. Item 19 reports room rate, occupancy, RevPAR, RevPAR index and Hilton Honors contribution for comparable hotels. It reports no expenses or profit, and Hilton states there is no assurance any hotel will achieve the results shown.[1] - Q: What does it cost to terminate a Hampton Inn franchise early? A: After the second anniversary of opening, liquidated damages are the hotel's average monthly royalty fees multiplied by 60, or by the months remaining in the final 60 months of the term.[1] - Q: Does Hilton finance a Hampton Inn? A: Generally no. Item 10 says Hilton may, in its sole discretion, offer a development incentive that is repayable on a declining basis if the franchise ends early or the hotel transfers. Amounts are not published.[1] Sources: - [1] 2026 Hampton Franchise Disclosure Document (issued March 30, 2026): cover page; Item 5, pp. 15-20; Item 6, pp. 20-33; Item 7, pp. 33-39; Item 10, pp. 44-46; Item 17, pp. 69-77; Item 19, pp. 77-84 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2026/03/2026-US-FDD-Hampton.pdf - [2] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates ### How much does a Hilton Garden Inn franchise cost in 2026? URL: https://matthewshotelmarkets.com/hotel-franchise-costs/hilton-garden-inn Last updated: 2026-09-18 Hilton's 2026 Hilton Garden Inn Franchise Disclosure Document, issued March 30, 2026, estimates $25,499,320 to $37,352,033 to open a typical 134-room hotel, excluding real estate. The franchise application fee is $100,000, the monthly royalty is 5.5 percent of gross rooms revenue, the monthly program fee is 4 percent, and Hilton Honors is 3.3 percent of total eligible guest folio.[1] Key takeaways: - Item 7 total: $25,499,320 to $37,352,033 for 134 rooms, which is about $190,300 to $278,700 per room by our arithmetic, before land.[1] - Ongoing: 5.5 percent royalty plus 4 percent program fee on gross rooms revenue, and a Hilton Honors charge of 3.3 percent of total eligible guest folio.[1] - A buyer of an existing Hilton Garden Inn pays a $200,000 change of ownership application fee and a $10,000 PIP fee, then funds the PIP itself.[1] - An optional Hilton restaurant brand carries a $75,000 development services fee per restaurant brand.[1] - The FDD is Hilton's document and its fees change every year. Get the current FDD from Hilton before relying on these figures. #### What does a Hilton Garden Inn franchise cost up front? A $100,000 franchise application fee for a new build or a conversion, plus $400 for each guest room or suite over 150, under Item 5 of the 2026 Hilton Garden Inn FDD.[1] Item 5 (pp. 17-18) lists the other initial fees paid to Hilton or its affiliates. A change of ownership application is $200,000 and a re-licensing application is $100,000. The PIP fee, charged to prepare a property improvement plan for a conversion, change of ownership or re-licensing, is $10,000. The OnQ computer system costs $30,016 to $118,322 for hardware, software and installation, other start-up fees are $5,100, training program fees run $5,000 to $20,000, and the opening process services fee is $6,000. Restaurant brands are optional, and each one selected carries a $75,000 development services fee, half at signing and half when the restaurant opens.[1] The application fee is refundable, less a $7,500 processing fee, if Hilton denies the application, if the applicant withdraws before approval, or if a change of ownership does not occur (Item 5, Note 1, p. 18).[1] #### What are the Hilton Garden Inn royalty and program fees? The monthly royalty fee is 5.5 percent of gross rooms revenue and the monthly program fee is 4 percent of gross rooms revenue, both due by the 15th of the following month.[1] Item 6 (p. 21) bases both fees on gross rooms revenue as defined under the Uniform System of Accounts for the Lodging Industry, including loyalty redemption revenue, mandatory guest fees and guaranteed no-show revenue (Note 1, p. 32).[1] Hilton may change the program fee at any time, but the rate will not exceed the current rate plus 1 percent of gross rooms revenue over the term of the agreement (Note 2, p. 32).[1] The Item 6 table lists no royalty on food and beverage revenue.[1] Other recurring charges sit on top. Hilton Honors is currently 3.3 percent of total eligible guest folio, waived for stays where the guest enrolls at the property. The Hilton Advance fee is 1.35 percent of eligible digital direct revenue, capped at $30 per stay (p. 25).[1] OnQ connectivity is $400 to $600 per month and hardware and software maintenance is $1,148 to $2,922 per month (p. 22).[1] These charges apply to different bases, so they do not add into one percentage. #### What does the Item 7 estimate cover, and what is it per room? Item 7 of the 2026 Hilton Garden Inn FDD totals $25,499,320 to $37,352,033 for a 134-room hotel, excluding real estate.[1] Divided by 134 rooms, that is about $190,300 to $278,700 per room. The division is ours. The FDD does not print a per-room figure.[1] Construction and leasehold improvements are the largest line at $18,354,015 to $26,654,355, and furniture, fixtures and equipment are $2,366,737 to $3,484,640 (pp. 35-37).[1] The cover page adds that up to $339,322 of the total is paid to Hilton or its affiliates.[1] Read the exclusions. Item 7 states in capitals that the figures do not include real estate costs, market studies, insurance or interest, and do not separately identify the cost of improvements under a conversion, re-licensing or change of ownership license (p. 37).[1] A buyer of an existing Hilton Garden Inn should expect a PIP scope from Hilton, not an Item 7 number. Per-room pricing is defined at [price per key](/glossary/per-key). #### What does Hilton report about Hilton Garden Inn performance? Item 19 of the 2026 Hilton Garden Inn FDD reports a 2025 average room rate of $160.66, average occupancy of 71.4 percent and average RevPAR of $114.75 across 617 comparable U.S. hotels.[1] Comparable hotels are those open since January 1 of the previous year, excluding hotels that changed brand or ownership type, had large-scale capital projects, or lack comparable results. Of 762 U.S. Hilton Garden Inn hotels at December 31, 2025, 617 were comparable, and 614 of those were franchisee-managed (p. 84).[1] Medians were a $148.48 room rate, 70.7 percent occupancy and $105.35 RevPAR. The ranges were $91.21 to $335.82 for room rate, 38.6 to 98.1 percent for occupancy and $46.72 to $326.13 for RevPAR. Of franchisee-managed hotels, 209, or 34.0 percent, met or exceeded the average RevPAR (pp. 84-85).[1] The average RevPAR index was 113.2 and the median 114.5, with a range from 65.8 to 262.2, where 100 is a fair share of the competitive set. Hilton cites STR and Hilton as the source and excludes 4 hotels with insufficient data (p. 86).[1] Hilton Honors members accounted for an average 78.2 percent of occupied room nights, with a range from 39.6 to 95.6 percent (pp. 86-87).[1] For the 110 comparable hotels opened during or after 2018, the averages were a $169.73 room rate, 72.8 percent occupancy, $123.57 RevPAR and a 118.4 RevPAR index (pp. 87-90).[1] Item 19 reports revenue measures only. It gives no expenses, no food and beverage results, no profit and no return on investment, and none can be derived from it. Hilton writes: "Some hotels have achieved the results shown above. Your individual results may differ. There is no assurance that your Hotel will achieve the results shown above" (p. 90).[1] The measures are defined at [RevPAR](/glossary/revpar) and [MPI, ARI and RGI](/glossary/mpi-ari-rgi). #### How long is a Hilton Garden Inn franchise agreement, and can I renew it? Hilton's 2026 Hilton Garden Inn FDD sets the term at generally 22 years from the effective date for new construction and 10 to 20 years from opening for a conversion, with no right to renew.[1] Item 17 of the 2026 Hilton Garden Inn FDD (p. 72) states that on a change of ownership the term is generally the remaining term under the existing franchise agreement, or another term Hilton approves.[1] The franchisee does not have the right to renew or extend. If Hilton agrees, in its sole discretion, to re-license the hotel, the owner may be asked to sign a contract with materially different terms and must meet any PIP conditions Hilton sets.[1] The re-licensing application fee is $100,000 (Item 6, p. 27).[1] The franchisee is not authorized to terminate before the term expires. Item 17 treats a unilateral termination without cause as a material breach, and liquidated damages become payable on demand.[1] The contract itself is defined at [franchise agreement](/glossary/franchise-agreement). #### What happens to the Hilton Garden Inn franchise when the hotel is sold? A sale that changes control of a Hilton Garden Inn is a change of ownership transfer: the seller gives Hilton 60 days' written notice and the buyer applies for a new franchise.[1] Item 17 of the 2026 Hilton Garden Inn FDD (p. 79) requires the buyer to meet Hilton's then-current requirements for new franchisees, including credit, a background investigation and operations experience. The buyer submits a change of ownership application, pays the franchise application fee ($200,000), signs the then-current form of franchise agreement and agrees to Hilton's requested upgrades, which may include a PIP fee.[1] The seller must not be in default and must pay all amounts due through closing. If the buyer has SBA financing, buyer and seller must agree to escrow Hilton's estimated fees and disburse them at closing.[1] Permitted transfers are those that do not change control. Transfers of publicly traded equity, and of privately held equity where the transferee holds less than 50 percent afterward, need no notice or consent. Transfers to affiliates, to a family member or trust, or on death need 60 days' written notice, Hilton's consent and a $5,500 processing fee.[1] An owner may mortgage the hotel to a lender that finances its acquisition, development or operation without Hilton's consent if the owner is the sole borrower and the loan is not secured by other hotels or other collateral. A lender [comfort letter](/glossary/comfort-letter) costs $3,500 (Item 6, p. 27).[1] Hilton-family hotels on the market are listed at [Hilton hotels for sale](/hotels-for-sale/hilton). The buyer's checklist is at [What due diligence do I need before buying a hotel?](/buy-a-hotel/due-diligence-checklist). #### What does it cost to leave Hilton Garden Inn before the term ends? Hilton's liquidated damages for a Hilton Garden Inn that has been open more than two years are the hotel's average monthly royalty fees multiplied by 60, or by the months remaining in the final 60 months of the term.[1] Item 6 of the 2026 Hilton Garden Inn FDD (p. 28) sets four cases for a termination by Hilton. Before opening: the system's average monthly royalty fees multiplied by 60. From opening to the second anniversary: the greater of the hotel's average monthly royalty fees multiplied by 60, or the system's average monthly royalty fees multiplied by 60. After the second anniversary and before the final 60 months of the term: the hotel's average monthly royalty fees multiplied by 60. Within the final 60 months: the hotel's average monthly royalty fees multiplied by the number of months remaining.[1] Note 8 to Item 6 (p. 34) defines the hotel's average as the royalty fees due for the 24 months before the month of termination, divided by 24. The system's average is the average monthly royalty per guest room owed by U.S. Hilton Garden Inn hotels over the prior 12 full calendar months, multiplied by the hotel's approved guest rooms. Fee discounts, ramps and waivers are excluded from the calculation.[1] Opening without Hilton's written authorization costs $5,000 per day.[1] Item 6 states that the monthly royalty fee and liquidated damages are the only fees in the item that are not subject to change.[1] #### Does Hilton offer key money on a Hilton Garden Inn? Hilton may, in its sole discretion, offer a development incentive on a Hilton Garden Inn, and the 2026 FDD calls it a contingent liability, not a loan.[1] Item 10 of the 2026 Hilton Garden Inn FDD (p. 46) describes an incentive as a financial contribution toward the development or conversion of the hotel, documented by a development incentive note signed with the franchise agreement. It bears no interest and does not have to be repaid unless the franchise terminates before the end of the term or a transfer occurs. The repayable amount falls by an equal share for each year the hotel is open: one-twentieth a year on a 20-year term, in Hilton's example.[1] On a sale, the seller pays the then-current repayable amount unless Hilton permits the buyer to assume the note.[1] The FDD does not publish incentive amounts, and the program can be changed or ended at any time. The term is defined at [key money](/glossary/key-money). #### How do owners finance Hilton Garden Inn franchise fees, a PIP or a conversion? Inside the acquisition or construction loan when the costs are part of a purchase or a build, or with a separate renovation loan when they are not. Lenders size the loan to the hotel's income, and no lender type publishes its leverage limits or spreads. As of September 17, 2026, Prime is 7.00 percent, SOFR is 3.85 percent and the SBA 7(a) maximum allowable rate is 10.00 percent.[2] Item 7 of the Hilton Garden Inn FDD notes that many lenders will require an environmental assessment report.[1] The loan structures are at [How do I finance converting my hotel to a new brand?](/hotel-financing/brand-conversion-financing) and [How do I finance a hotel PIP or renovation?](/hotel-financing/pip-and-renovation-loans). The wider trade between a flag and independence is at [Should I buy a branded or independent hotel?](/buy-a-hotel/branded-vs-independent), and the upgrade list itself is defined at [PIP](/glossary/pip). #### Whose numbers are these, and how current are they? Every figure on this page comes from Hilton's 2026 Hilton Garden Inn Franchise Disclosure Document, issued March 30, 2026. It is the franchisor's document, not ours.[1] The FDD is written by the franchisor, Hilton Franchise Holding LLC, and a prospective franchisee must receive it at least 14 calendar days before signing a binding agreement or paying anything.[1] Hilton reissues it every year and marks most fees "currently", which means they can change. Hilton also reports that it negotiates. It agreed to modify the monthly royalty fee in 24 instances during 2025 (Item 6, p. 32), and in 2025 franchisees paid application fees from $50,000 to $100,000 for new development or conversion, $0 to $200,000 for a change of ownership and $0 to $100,000 for re-licensing (Item 5, p. 19).[1] Get the current FDD from Hilton, and read the franchise agreement attached to it, before you rely on any number here. This page is a neutral fee guide. It does not rank brands or recommend one. The document type is explained at [franchise disclosure document](/glossary/franchise-fdd), and the other brand guides are listed at [How much does a hotel franchise cost?](/hotel-franchise-costs). Table: Hilton Garden Inn franchise fees, 2026 FDD issued March 30, 2026 (Items 5, 6 and 7) Fee | Amount | Where in the FDD Application fee, new development or conversion | $100,000 plus $400 per guest room or suite over 150[1] | Item 5, p. 17 Application fee, change of ownership | $200,000[1] | Item 5, p. 17 Application fee, re-licensing | $100,000[1] | Item 5, p. 17 PIP fee | $10,000[1] | Item 5, p. 17 OnQ system: hardware, software, installation | $30,016 to $118,322[1] | Item 5, p. 17 Restaurant brand development services fee (optional) | $75,000 per restaurant brand[1] | Item 5, p. 17 Monthly royalty fee | 5.5% of gross rooms revenue[1] | Item 6, p. 21 Monthly program fee | 4% of gross rooms revenue. May change, capped at the current rate plus 1%[1] | Item 6, pp. 21 and 32 Hilton Honors | 3.3% of total eligible guest folio[1] | Item 6, p. 25 Hilton Advance fee | 1.35% of eligible digital direct revenue, up to $30 per stay[1] | Item 6, p. 25 OnQ connectivity, and hardware and software maintenance | $400 to $600 and $1,148 to $2,922 per month[1] | Item 6, p. 22 Room addition fee | $400 per added guest room or suite[1] | Item 6, p. 22 Permitted transfer processing fee | $5,500[1] | Item 6, p. 27 Lender comfort letter | $3,500, and $1,500 for an assignment[1] | Item 6, p. 27 Liquidated damages, after year 2 | Hotel's average monthly royalty fees x 60, or x months remaining in the final 60 months[1] | Item 6, pp. 28-29 Estimated initial investment, 134 rooms | $25,499,320 to $37,352,033, excluding real estate[1] | Item 7, p. 37 First-party data point: Matthews Hotel Markets' September 2026 rate sheet records Prime at 7.00% effective September 17, 2026, SOFR at 3.85% and the SBA 7(a) maximum allowable rate at 10.00%, the indexes a loan for franchise fees, a PIP or a conversion is priced against.[2] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: one year of Hilton Garden Inn brand fees on assumed rooms revenue): Hypothetical. Assume a Hilton Garden Inn earns $3,000,000 of gross rooms revenue in a year, and that $1,200,000 of guest folios are eligible Hilton Honors folios. Both figures are assumptions chosen for round arithmetic. They are not forecasts and they are not from the FDD. Monthly royalty fee at 5.5 percent: $3,000,000 x 0.055 = $165,000.[1] Monthly program fee at 4 percent: $3,000,000 x 0.04 = $120,000.[1] Hilton Honors at 3.3 percent of eligible folio: $1,200,000 x 0.033 = $39,600.[1] OnQ connectivity plus hardware and software maintenance: $1,548 to $3,522 per month, or $18,576 to $42,264 a year.[1] Total of these four lines: $343,176 to $366,864. Hilton Advance fees, third-party reservation charges, travel planner commissions, training and guest assistance charges are extra and depend on how guests book, so they are left out. The example shows fees only. It says nothing about profit. FAQ: - Q: How much does it cost to open a Hilton Garden Inn? A: Hilton's 2026 FDD, issued March 30, 2026, estimates $25,499,320 to $37,352,033 for a typical 134-room Hilton Garden Inn, excluding real estate, market studies, insurance and interest. Up to $339,322 of that is paid to Hilton or its affiliates.[1] - Q: What is the Hilton Garden Inn royalty fee? A: 5.5 percent of gross rooms revenue, paid monthly, plus a 4 percent monthly program fee. Hilton reports it agreed to modify the royalty in 24 instances during 2025, so the rate is sometimes negotiated.[1] - Q: I'm buying an existing Hilton Garden Inn. What will Hilton charge me? A: A $200,000 change of ownership application fee and a $10,000 PIP fee, under the 2026 FDD. You sign Hilton's then-current franchise agreement and agree to its requested upgrades. In 2025, buyers paid from $0 to $200,000.[1] - Q: How long does a Hilton Garden Inn franchise last? A: Generally 22 years from the effective date for new construction and 10 to 20 years from opening for a conversion. A buyer generally takes the remaining term or another term Hilton approves. There is no right to renew.[1] - Q: How much does a Hilton Garden Inn owner make? A: The FDD does not say. Item 19 reports room rate, occupancy, RevPAR, RevPAR index and Hilton Honors contribution for comparable hotels. It reports no expenses or profit, and Hilton states there is no assurance any hotel will achieve the results shown.[1] - Q: Does Hilton charge a royalty on Hilton Garden Inn restaurant revenue? A: Item 6 of the 2026 FDD charges the 5.5 percent royalty and the 4 percent program fee on gross rooms revenue. An optional Hilton restaurant brand is covered by a separate amendment with a $75,000 development services fee.[1] - Q: What does it cost to terminate a Hilton Garden Inn franchise early? A: After the second anniversary of opening, liquidated damages are the hotel's average monthly royalty fees multiplied by 60, or by the months remaining in the final 60 months of the term.[1] Sources: - [1] 2026 Hilton Garden Inn Franchise Disclosure Document (issued March 30, 2026): cover page; Item 5, pp. 16-20; Item 6, pp. 21-35; Item 7, pp. 35-39; Item 10, pp. 46-47; Item 17, pp. 71-83; Item 19, pp. 83-90 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2026/03/2026-US-FDD-HGI.pdf - [2] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates ### How much does a Home2 Suites franchise cost in 2026? URL: https://matthewshotelmarkets.com/hotel-franchise-costs/home2-suites Last updated: 2026-09-18 Hilton's 2026 Home2 Suites Franchise Disclosure Document, issued March 30, 2026, estimates $18,075,688 to $26,550,592 to open a newly built 107-suite hotel, excluding real estate. The franchise application fee is $100,000, the monthly royalty is 6 percent of gross rooms revenue, the monthly program fee is 3.5 percent, and Hilton Honors is 2.0 percent of total eligible guest folio.[1] Key takeaways: - Item 7 total: $18,075,688 to $26,550,592 for 107 suites, which is about $168,900 to $248,100 per suite by our arithmetic, before land.[1] - Ongoing: 6 percent royalty plus 3.5 percent program fee on gross rooms revenue, and a Hilton Honors charge of 2.0 percent of total eligible guest folio.[1] - A buyer of an existing Home2 Suites pays a $200,000 change of ownership application fee and a $10,000 PIP fee. In 2025 buyers paid $100,000 to $200,000.[1] - Item 19 adds extended-stay measures: stays of 5 or more nights were about 42 percent of the brand's consumed room nights in 2025.[1] - The FDD is Hilton's document and its fees change every year. Get the current FDD from Hilton before relying on these figures. #### What does a Home2 Suites franchise cost up front? A $100,000 franchise application fee for a new build or a conversion, under Item 5 of the 2026 Home2 Suites FDD.[1] Item 5 (pp. 16-17) lists the other initial fees paid to Hilton or its affiliates. A change of ownership application is $200,000 and a re-licensing application is $100,000. The PIP fee, charged to prepare a property improvement plan for a conversion, change of ownership or re-licensing, is $10,000. The OnQ computer system costs $27,606 to $101,971 for hardware, software and installation, other start-up fees are $5,100, training program fees run $5,000 to $17,500, and the opening process services fee is $6,000. If Hilton's supply affiliate furnishes the hotel, its procurement fee is 4 to 10 percent of project cost.[1] The application fee is refundable, less a $7,500 processing fee, if Hilton denies the application, if the applicant withdraws before approval, or if a change of ownership does not occur (Item 5, Note 1, p. 18).[1] #### What are the Home2 Suites royalty and program fees? The monthly royalty fee is 6 percent of gross rooms revenue and the monthly program fee is 3.5 percent of gross rooms revenue, both due by the 15th of the following month.[1] Item 6 (p. 21) bases both fees on gross rooms revenue as defined under the Uniform System of Accounts for the Lodging Industry, including loyalty redemption revenue, mandatory guest fees and guaranteed no-show revenue (Note 1, p. 32).[1] Hilton may change the program fee at any time, but the rate will not exceed the current rate plus 1 percent of gross rooms revenue over the term of the agreement (Note 2, p. 32).[1] Other recurring charges sit on top. Hilton Honors is currently 2.0 percent of total eligible guest folio, waived for stays where the guest enrolls at the property (p. 25). The Hilton Advance fee is 1.35 percent of eligible digital direct revenue, capped at $30 per stay (p. 24).[1] OnQ connectivity is $400 to $600 per month and hardware and software maintenance is $1,060 to $2,553 per month (p. 21).[1] These charges apply to different bases, so they do not add into one percentage. #### What does the Item 7 estimate cover, and what is it per suite? Item 7 of the 2026 Home2 Suites FDD totals $18,075,688 to $26,550,592 for a newly built 107-suite hotel, excluding real estate.[1] Divided by 107 suites, that is about $168,900 to $248,100 per suite. The division is ours. The FDD does not print a per-suite figure.[1] Construction and leasehold improvements are the largest line at $12,800,000 to $18,555,000, and furniture, fixtures and equipment are $1,910,000 to $2,770,000 (pp. 36-37).[1] The cover page adds that up to $245,471 of the total is paid to Hilton or its affiliates.[1] Read the exclusions. Item 7 states in capitals that the figures do not include real estate costs, market studies, insurance or interest, and do not separately identify the cost of improvements under a conversion, re-licensing or change of ownership license (p. 37).[1] A buyer of an existing Home2 Suites should expect a PIP scope from Hilton, not an Item 7 number. Per-room pricing is defined at [price per key](/glossary/per-key). #### What does Hilton report about Home2 Suites performance? Item 19 of the 2026 Home2 Suites FDD reports a 2025 average room rate of $144.47, average occupancy of 78.0 percent and average RevPAR of $112.63 across 561 comparable U.S. hotels.[1] Comparable hotels are those open since January 1 of the previous year, excluding hotels that changed brand or ownership type, had large-scale capital projects, or lack comparable results. Of 731 U.S. Home2 Suites hotels at December 31, 2025, 561 were comparable, and 559 of those were franchisee-managed (p. 82).[1] Medians were a $140.77 room rate, 79.1 percent occupancy and $110.67 RevPAR. The ranges were $80.04 to $263.67 for room rate, 46.0 to 97.0 percent for occupancy and $54.43 to $249.29 for RevPAR. Of franchisee-managed hotels, 250, or 44.7 percent, met or exceeded the average RevPAR (pp. 82-83).[1] The average RevPAR index was 125.1 and the median 127.0, with a range from 69.5 to 243.0, where 100 is a fair share of the competitive set. Hilton cites STR and Hilton as the source and excludes 4 hotels with insufficient data (p. 84).[1] Hilton Honors members accounted for an average 80.4 percent of occupied room nights, with a range from 11.8 to 97.3 percent (pp. 84-85).[1] Item 19 reports revenue measures only. It gives no expenses, no profit and no return on investment, and none can be derived from it. Hilton writes: "Some hotels have achieved the results shown above. Your individual results may differ. There is no assurance that your Hotel will achieve the results shown above" (p. 87).[1] The measures are defined at [RevPAR](/glossary/revpar) and [MPI, ARI and RGI](/glossary/mpi-ari-rgi). #### What does the Home2 Suites FDD say about extended stays? Item 19 defines an extended stay as a completed guest stay of 5 or more consecutive nights and reports that Home2 Suites had about 7.1 million extended stay nights in 2025, about 42 percent of all consumed room nights.[1] For comparable hotels in 2025, the average room rate on extended stays was $135.52 and the median was $132.28, with a range from $73 to $275 (pp. 85-86).[1] Extended Stay Per Available Room, which Hilton abbreviates ESPAR, measures the percentage of available guest rooms occupied by extended stays. The average was 33.3 percent and the median 32.0 percent, with a range from 7 to 87 percent. Of franchisee-managed comparable hotels, 249, or 44.5 percent, met or exceeded the average (p. 86).[1] The average length of an extended stay was 11.9 nights and the median 11.0 nights, calculated as total extended stay room nights divided by total extended stays. Extended stays ranged from 6 to 124 nights (pp. 86-87).[1] The same caveat applies: these are results some hotels achieved, with no assurance for any other hotel.[1] #### How long is a Home2 Suites franchise agreement, and can I renew it? Hilton's 2026 Home2 Suites FDD sets the term at generally 22 years from the effective date for new construction and 10 to 20 years from opening for a conversion, with no right to renew.[1] Item 17 of the 2026 Home2 Suites FDD (p. 72) states that on a change of ownership the term is generally the remaining term under the existing franchise agreement, or another term Hilton approves.[1] The franchisee does not have the right to renew or extend. If Hilton agrees, in its sole discretion, to re-license the hotel, the owner may be asked to sign a contract with materially different terms and must meet any PIP conditions Hilton sets.[1] The re-licensing application fee is $100,000 (Item 6, p. 27).[1] The franchisee is not authorized to terminate before the term expires. Item 17 treats a unilateral termination without cause as a material breach, and liquidated damages become payable on demand.[1] The contract itself is defined at [franchise agreement](/glossary/franchise-agreement). #### What happens to the Home2 Suites franchise when the hotel is sold? A sale that changes control of a Home2 Suites is a change of ownership transfer: the seller gives Hilton 60 days' written notice and the buyer applies for a new franchise.[1] Item 17 of the 2026 Home2 Suites FDD (p. 78) requires the buyer to meet Hilton's then-current requirements for new franchisees, including credit, a background investigation and operations experience. The buyer submits a change of ownership application, pays the franchise application fee ($200,000), signs the then-current form of franchise agreement and agrees to Hilton's requested upgrades, which may include a PIP fee.[1] The seller must not be in default and must pay all amounts due through closing. If the buyer has SBA financing, buyer and seller must agree to escrow Hilton's estimated fees and disburse them at closing.[1] Permitted transfers are those that do not change control. Transfers of publicly traded equity, and of privately held equity where the transferee holds less than 50 percent afterward, need no notice or consent. Transfers to affiliates, to a family member or trust, or on death need 60 days' written notice, Hilton's consent and a $5,500 processing fee.[1] An owner may mortgage the hotel to a lender that finances its acquisition, development or operation without Hilton's consent if the owner is the sole borrower and the loan is not secured by other hotels or other collateral. A lender [comfort letter](/glossary/comfort-letter) costs $3,500 (Item 6, p. 27).[1] Hilton-family hotels on the market are listed at [Hilton hotels for sale](/hotels-for-sale/hilton). The buyer's checklist is at [What due diligence do I need before buying a hotel?](/buy-a-hotel/due-diligence-checklist). #### What does it cost to leave Home2 Suites before the term ends? Hilton's liquidated damages for a Home2 Suites that has been open more than two years are the hotel's average monthly royalty fees multiplied by 60, or by the months remaining in the final 60 months of the term.[1] Item 6 of the 2026 Home2 Suites FDD (p. 28) sets four cases for a termination by Hilton. Before opening: the system's average monthly royalty fees multiplied by 60. From opening to the second anniversary: the greater of the hotel's average monthly royalty fees multiplied by 60, or the system's average monthly royalty fees multiplied by 60. After the second anniversary and before the final 60 months of the term: the hotel's average monthly royalty fees multiplied by 60. Within the final 60 months: the hotel's average monthly royalty fees multiplied by the number of months remaining.[1] Note 8 to Item 6 (p. 34) defines the hotel's average as the royalty fees due for the 24 months before the month of termination, divided by 24. The system's average is the average monthly royalty per guest room owed by U.S. Home2 Suites hotels over the prior 12 full calendar months, multiplied by the hotel's approved guest rooms. Fee discounts, ramps and waivers are excluded from the calculation.[1] Opening without Hilton's written authorization costs $5,000 per day.[1] Item 6 states that the monthly royalty fee and liquidated damages are the only fees in the item that are not subject to change.[1] #### Does Hilton offer key money on a Home2 Suites? Hilton may, in its sole discretion, offer a development incentive on a Home2 Suites, and the 2026 FDD calls it a contingent liability, not a loan.[1] Item 10 of the 2026 Home2 Suites FDD (p. 47) describes an incentive as a financial contribution toward the development or conversion of the hotel, documented by a development incentive note signed with the franchise agreement. It bears no interest and does not have to be repaid unless the franchise terminates before the end of the term or a transfer occurs. The repayable amount falls by an equal share for each year the hotel is open: one-twentieth a year on a 20-year term, in Hilton's example.[1] On a sale, the seller pays the then-current repayable amount unless Hilton permits the buyer to assume the note.[1] The FDD does not publish incentive amounts, and the program can be changed or ended at any time. The term is defined at [key money](/glossary/key-money). #### How do owners finance Home2 Suites franchise fees, a PIP or a conversion? Inside the acquisition or construction loan when the costs are part of a purchase or a build, or with a separate renovation loan when they are not. Lenders size the loan to the hotel's income, and no lender type publishes its leverage limits or spreads. As of September 17, 2026, Prime is 7.00 percent, SOFR is 3.85 percent and the SBA 7(a) maximum allowable rate is 10.00 percent.[2] Item 7 of the Home2 Suites FDD notes that many lenders will require an environmental assessment report.[1] The loan structures are at [How do I finance converting my hotel to a new brand?](/hotel-financing/brand-conversion-financing) and [How do I finance a hotel PIP or renovation?](/hotel-financing/pip-and-renovation-loans). The wider trade between a flag and independence is at [Should I buy a branded or independent hotel?](/buy-a-hotel/branded-vs-independent), and the upgrade list itself is defined at [PIP](/glossary/pip). #### Whose numbers are these, and how current are they? Every figure on this page comes from Hilton's 2026 Home2 Suites Franchise Disclosure Document, issued March 30, 2026. It is the franchisor's document, not ours.[1] The FDD is written by the franchisor, Hilton Franchise Holding LLC, and a prospective franchisee must receive it at least 14 calendar days before signing a binding agreement or paying anything.[1] Hilton reissues it every year and marks most fees "currently", which means they can change. Hilton also reports that it negotiates. It agreed to modify the monthly royalty fee in 32 instances during 2025 (Item 6, p. 32), and in 2025 franchisees paid application fees from $0 to $100,000 for new development or conversion and $100,000 to $200,000 for a change of ownership (Item 5, p. 18).[1] Get the current FDD from Hilton, and read the franchise agreement attached to it, before you rely on any number here. This page is a neutral fee guide. It does not rank brands or recommend one. The document type is explained at [franchise disclosure document](/glossary/franchise-fdd), and the other brand guides are listed at [How much does a hotel franchise cost?](/hotel-franchise-costs). Table: Home2 Suites by Hilton franchise fees, 2026 FDD issued March 30, 2026 (Items 5, 6 and 7) Fee | Amount | Where in the FDD Application fee, new development or conversion | $100,000[1] | Item 5, p. 16 Application fee, change of ownership | $200,000[1] | Item 5, p. 16 Application fee, re-licensing | $100,000[1] | Item 5, p. 16 PIP fee | $10,000[1] | Item 5, p. 16 OnQ system: hardware, software, installation | $27,606 to $101,971[1] | Item 5, p. 17 Monthly royalty fee | 6% of gross rooms revenue[1] | Item 6, p. 21 Monthly program fee | 3.5% of gross rooms revenue. May change, capped at the current rate plus 1%[1] | Item 6, pp. 21 and 32 Hilton Honors | 2.0% of total eligible guest folio[1] | Item 6, p. 25 Hilton Advance fee | 1.35% of eligible digital direct revenue, up to $30 per stay[1] | Item 6, p. 24 OnQ connectivity, and hardware and software maintenance | $400 to $600 and $1,060 to $2,553 per month[1] | Item 6, p. 21 Room addition fee | $400 per added guest room or suite[1] | Item 6, p. 21 Permitted transfer processing fee | $5,500[1] | Item 6, p. 27 Lender comfort letter | $3,500, and $1,500 for an assignment[1] | Item 6, p. 27 Liquidated damages, after year 2 | Hotel's average monthly royalty fees x 60, or x months remaining in the final 60 months[1] | Item 6, pp. 28-29 Estimated initial investment, 107 suites | $18,075,688 to $26,550,592, excluding real estate[1] | Item 7, p. 37 First-party data point: Matthews Hotel Markets' September 2026 rate sheet records Prime at 7.00% effective September 17, 2026, SOFR at 3.85% and the SBA 7(a) maximum allowable rate at 10.00%, the indexes a loan for franchise fees, a PIP or a conversion is priced against.[2] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: one year of Home2 Suites brand fees on assumed rooms revenue): Hypothetical. Assume a Home2 Suites earns $3,000,000 of gross rooms revenue in a year, and that $1,200,000 of guest folios are eligible Hilton Honors folios. Both figures are assumptions chosen for round arithmetic. They are not forecasts and they are not from the FDD. Monthly royalty fee at 6 percent: $3,000,000 x 0.06 = $180,000.[1] Monthly program fee at 3.5 percent: $3,000,000 x 0.035 = $105,000.[1] Hilton Honors at 2.0 percent of eligible folio: $1,200,000 x 0.02 = $24,000.[1] OnQ connectivity plus hardware and software maintenance: $1,460 to $3,153 per month, or $17,520 to $37,836 a year.[1] Total of these four lines: $326,520 to $346,836. Hilton Advance fees, third-party reservation charges, travel planner commissions, training and guest assistance charges are extra and depend on how guests book, so they are left out. The example shows fees only. It says nothing about profit. FAQ: - Q: What are Home2 Suites franchise fees? A: Under Hilton's 2026 FDD, issued March 30, 2026: a $100,000 application fee, a 6 percent monthly royalty and a 3.5 percent monthly program fee on gross rooms revenue, and Hilton Honors at 2.0 percent of total eligible guest folio.[1] - Q: How much does it cost to build a Home2 Suites? A: Hilton estimates $18,075,688 to $26,550,592 for a newly built 107-suite hotel, excluding real estate, market studies, insurance and interest. Up to $245,471 of that is paid to Hilton or its affiliates.[1] - Q: I'm buying an existing Home2 Suites. What will Hilton charge me? A: A $200,000 change of ownership application fee and a $10,000 PIP fee, under the 2026 FDD. You sign Hilton's then-current franchise agreement and agree to its requested upgrades. In 2025, buyers paid $100,000 to $200,000.[1] - Q: How long does a Home2 Suites franchise last? A: Generally 22 years from the effective date for new construction and 10 to 20 years from opening for a conversion. A buyer generally takes the remaining term or another term Hilton approves. There is no right to renew.[1] - Q: How much does a Home2 Suites owner make? A: The FDD does not say. Item 19 reports room rate, occupancy, RevPAR, RevPAR index, Hilton Honors contribution and extended-stay measures for comparable hotels. It reports no expenses or profit, and Hilton states there is no assurance any hotel will achieve the results shown.[1] - Q: How much of Home2 Suites business is extended stay? A: Hilton reports about 7.1 million extended stay nights in 2025, about 42 percent of all consumed room nights, counting stays of 5 or more consecutive nights. The average extended stay at comparable hotels was 11.9 nights.[1] - Q: What does it cost to terminate a Home2 Suites franchise early? A: After the second anniversary of opening, liquidated damages are the hotel's average monthly royalty fees multiplied by 60, or by the months remaining in the final 60 months of the term.[1] Sources: - [1] 2026 Home2 Suites by Hilton Franchise Disclosure Document (issued March 30, 2026): cover page; Item 5, pp. 16-20; Item 6, pp. 21-36; Item 7, pp. 36-40; Item 10, pp. 46-47; Item 17, pp. 72-81; Item 19, pp. 81-88 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2026/03/2026-US-FDD-Home2.pdf - [2] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates ### How much does a Homewood Suites franchise cost in 2026? URL: https://matthewshotelmarkets.com/hotel-franchise-costs/homewood-suites Last updated: 2026-09-18 Hilton's 2026 Homewood Suites Franchise Disclosure Document, issued March 30, 2026, estimates $23,757,245 to $34,728,465 to open a newly built 131-suite hotel, excluding real estate. The application fee is $100,000. The monthly royalty on a new build or conversion is 3.5 percent of gross rooms revenue in year one, 4.5 percent in year two and 5.5 percent after that, and the program fee is 2.5 percent.[1] Key takeaways: - Item 7 total: $23,757,245 to $34,728,465 for 131 suites, which is about $181,400 to $265,100 per suite by our arithmetic, before land.[1] - The royalty steps up on a new development or conversion: 3.5 percent in year one, 4.5 percent in year two, 5.5 percent for the rest of the term. A change of ownership or re-licensing pays 5.5 percent from the start.[1] - The monthly program fee is 2.5 percent of gross rooms revenue, and Hilton Honors is 1.7 percent of total eligible guest folio.[1] - A buyer of an existing Homewood Suites pays a $200,000 change of ownership application fee and a $10,000 PIP fee.[1] - The FDD is Hilton's document and its fees change every year. Get the current FDD from Hilton before relying on these figures. #### What does a Homewood Suites franchise cost up front? A $100,000 franchise application fee for a new build or a conversion, plus $400 for each guest room or suite over 150, under Item 5 of the 2026 Homewood Suites FDD.[1] Item 5 (pp. 15-16) lists the other initial fees paid to Hilton or its affiliates. A change of ownership application is $200,000 and a re-licensing application is $100,000. The PIP fee, charged to prepare a property improvement plan for a conversion, change of ownership or re-licensing, is $10,000. The OnQ computer system costs $28,296 to $118,424 for hardware, software and installation, other start-up fees are $5,100, training program fees run $5,000 to $17,500, and the opening process services fee is $6,000.[1] The application fee is refundable, less a $7,500 processing fee, if Hilton denies the application, if the applicant withdraws before approval, or if a change of ownership does not occur (Item 5, Note 1, p. 17).[1] #### What are the Homewood Suites royalty and program fees? On a new development or conversion the monthly royalty fee is 3.5 percent of gross rooms revenue in the first year of operation, 4.5 percent in the second year and 5.5 percent for the remainder of the term. On a change of ownership or re-licensing it is 5.5 percent.[1] Item 6 (p. 20) sets the monthly program fee at 2.5 percent of gross rooms revenue. Both fees use gross rooms revenue as defined under the Uniform System of Accounts for the Lodging Industry, including loyalty redemption revenue, mandatory guest fees and guaranteed no-show revenue (Note 1, p. 30).[1] Hilton may change the program fee at any time, but the rate will not exceed the current rate plus 1 percent of gross rooms revenue over the term of the agreement (Note 2, p. 31).[1] Other recurring charges sit on top. Hilton Honors is currently 1.7 percent of total eligible guest folio, waived for stays where the guest enrolls at the property (p. 24). The Hilton Advance fee is 1.35 percent of eligible digital direct revenue, capped at $30 per stay (p. 23).[1] OnQ connectivity is $400 to $600 per month and hardware and software maintenance is $1,321 to $2,714 per month (p. 20).[1] These charges apply to different bases, so they do not add into one percentage. #### What does the Item 7 estimate cover, and what is it per suite? Item 7 of the 2026 Homewood Suites FDD totals $23,757,245 to $34,728,465 for a newly built 131-suite hotel, excluding real estate.[1] Divided by 131 suites, that is about $181,400 to $265,100 per suite. The division is ours. The FDD does not print a per-suite figure.[1] Construction and leasehold improvements are the largest line at $16,900,000 to $24,500,000, and furniture, fixtures and equipment are $2,480,000 to $3,600,000 (pp. 34-36).[1] The cover page adds that up to $261,924 of the total is paid to Hilton or its affiliates.[1] Read the exclusions. Item 7 states in capitals that the figures do not include real estate costs, market studies, insurance or interest, and do not separately identify the cost of improvements under a conversion, re-licensing or change of ownership license (p. 36).[1] A buyer of an existing Homewood Suites should expect a PIP scope from Hilton, not an Item 7 number. Per-room pricing is defined at [price per key](/glossary/per-key). #### What does Hilton report about Homewood Suites performance? Item 19 of the 2026 Homewood Suites FDD reports a 2025 average room rate of $160.14, average occupancy of 78.9 percent and average RevPAR of $126.35 across 417 comparable U.S. hotels.[1] Comparable hotels are those open since January 1 of the previous year, excluding hotels that changed brand or ownership type, had large-scale capital projects, or lack comparable results. Of 538 U.S. Homewood Suites hotels at December 31, 2025, 417 were comparable, and 411 of those were franchisee-managed (p. 78).[1] Medians were a $150.02 room rate, 79.3 percent occupancy and $119.27 RevPAR. The ranges were $78.01 to $313.38 for room rate, 40.1 to 96.3 percent for occupancy and $40.53 to $298.02 for RevPAR. Of franchisee-managed hotels, 155, or 37.7 percent, met or exceeded the average RevPAR (pp. 78-79).[1] The average RevPAR index was 123.8 and the median 124.1, with a range from 76.5 to 227.2, where 100 is a fair share of the competitive set. Hilton cites STR and Hilton as the source (p. 80).[1] Hilton Honors members accounted for an average 81.2 percent of occupied room nights, with a range from 39.2 to 97.7 percent (pp. 80-81).[1] For the 90 comparable hotels opened during or after 2018, the averages were a $166.83 room rate, 79.7 percent occupancy and $132.96 RevPAR (pp. 81-83).[1] Item 19 reports revenue measures only. It gives no expenses, no profit and no return on investment, and none can be derived from it. Hilton writes: "Some hotels have achieved the results shown above. Your individual results may differ. There is no assurance that your Hotel will achieve the results shown above" (p. 84).[1] The measures are defined at [RevPAR](/glossary/revpar) and [MPI, ARI and RGI](/glossary/mpi-ari-rgi). #### What does the Homewood Suites FDD say about extended stays? Item 19 defines an extended stay as a completed guest stay of 5 or more consecutive nights and reports that Homewood Suites had about 6.6 million extended stay nights in 2025, about 48 percent of all consumed room nights.[1] For comparable hotels in 2025, the average room rate on extended stays was $147.89 and the median was $142.47, with a range from $55 to $706 (p. 83).[1] Extended Stay Per Available Room, which Hilton abbreviates ESPAR, measures the percentage of available guest rooms occupied by extended stays. The average was 38.3 percent and the median 37.6 percent, with a range from 12 to 87 percent (p. 84).[1] The average length of an extended stay was 13.1 nights and the median 11.7 nights. Extended stays ranged from 6 to 86 nights (p. 84).[1] The same caveat applies: these are results some hotels achieved, with no assurance for any other hotel.[1] #### How long is a Homewood Suites franchise agreement, and can I renew it? Hilton's 2026 Homewood Suites FDD sets the term at generally 22 years from the effective date for new construction and 10 to 20 years from opening for a conversion, with no right to renew.[1] Item 17 of the 2026 Homewood Suites FDD (p. 69) states that on a change of ownership the term is generally the remaining term under the existing franchise agreement, or another term Hilton approves.[1] The franchisee does not have the right to renew or extend. If Hilton agrees, in its sole discretion, to re-license the hotel, the owner may be asked to sign a contract with materially different terms and must meet any PIP conditions Hilton sets.[1] The re-licensing application fee is $100,000 (Item 6, p. 26).[1] The franchisee is not authorized to terminate before the term expires. Item 17 treats a unilateral termination without cause as a material breach, and liquidated damages become payable on demand.[1] The contract itself is defined at [franchise agreement](/glossary/franchise-agreement). #### What happens to the Homewood Suites franchise when the hotel is sold? A sale that changes control of a Homewood Suites is a change of ownership transfer: the seller gives Hilton 60 days' written notice and the buyer applies for a new franchise.[1] Item 17 of the 2026 Homewood Suites FDD (p. 74) requires the buyer to meet Hilton's then-current requirements for new franchisees, including credit, a background investigation and operations experience. The buyer submits a change of ownership application, pays the franchise application fee ($200,000), signs the then-current form of franchise agreement and agrees to Hilton's requested upgrades, which may include a PIP fee.[1] The seller must not be in default and must pay all amounts due through closing. If the buyer has SBA financing, buyer and seller must agree to escrow Hilton's estimated fees and disburse them at closing.[1] Permitted transfers are those that do not change control. Transfers of publicly traded equity, and of privately held equity where the transferee holds less than 50 percent afterward, need no notice or consent. Transfers to affiliates, to a family member or trust, or on death need 60 days' written notice, Hilton's consent and a $5,500 processing fee.[1] An owner may mortgage the hotel to a lender that finances its acquisition, development or operation without Hilton's consent if the owner is the sole borrower and the loan is not secured by other hotels or other collateral. A lender [comfort letter](/glossary/comfort-letter) costs $3,500 (Item 6, p. 26).[1] Hilton-family hotels on the market are listed at [Hilton hotels for sale](/hotels-for-sale/hilton). The buyer's checklist is at [What due diligence do I need before buying a hotel?](/buy-a-hotel/due-diligence-checklist). #### What does it cost to leave Homewood Suites before the term ends? Hilton's liquidated damages for a Homewood Suites that has been open more than two years are the hotel's average monthly royalty fees multiplied by 60, or by the months remaining in the final 60 months of the term.[1] Item 6 of the 2026 Homewood Suites FDD (p. 27) sets four cases for a termination by Hilton. Before opening: the system's average monthly royalty fees multiplied by 60. From opening to the second anniversary: the greater of the hotel's average monthly royalty fees multiplied by 60, or the system's average monthly royalty fees multiplied by 60. After the second anniversary and before the final 60 months of the term: the hotel's average monthly royalty fees multiplied by 60. Within the final 60 months: the hotel's average monthly royalty fees multiplied by the number of months remaining.[1] Note 8 to Item 6 (p. 33) defines the hotel's average as the royalty fees due for the 24 months before the month of termination, divided by 24. The system's average is the average monthly royalty per guest room owed by U.S. Homewood Suites hotels over the prior 12 full calendar months, multiplied by the hotel's approved guest rooms. Fee discounts, ramps and waivers are excluded from the calculation.[1] Opening without Hilton's written authorization costs $5,000 per day.[1] Item 6 states that the monthly royalty fee and liquidated damages are the only fees in the item that are not subject to change.[1] #### Does Hilton offer key money on a Homewood Suites? Hilton may, in its sole discretion, offer a development incentive on a Homewood Suites, and the 2026 FDD calls it a contingent liability, not a loan.[1] Item 10 of the 2026 Homewood Suites FDD (p. 44) describes an incentive as a financial contribution toward the development or conversion of the hotel, documented by a development incentive note signed with the franchise agreement. It bears no interest and does not have to be repaid unless the franchise terminates before the end of the term or a transfer occurs. The repayable amount falls by an equal share for each year the hotel is open: one-twentieth a year on a 20-year term, in Hilton's example.[1] On a sale, the seller pays the then-current repayable amount unless Hilton permits the buyer to assume the note.[1] The FDD does not publish incentive amounts, and the program can be changed or ended at any time. The term is defined at [key money](/glossary/key-money). #### How do owners finance Homewood Suites franchise fees, a PIP or a conversion? Inside the acquisition or construction loan when the costs are part of a purchase or a build, or with a separate renovation loan when they are not. Lenders size the loan to the hotel's income, and no lender type publishes its leverage limits or spreads. As of September 17, 2026, Prime is 7.00 percent, SOFR is 3.85 percent and the SBA 7(a) maximum allowable rate is 10.00 percent.[2] Item 7 of the Homewood Suites FDD notes that many lenders will require an environmental assessment report.[1] The loan structures are at [How do I finance converting my hotel to a new brand?](/hotel-financing/brand-conversion-financing) and [How do I finance a hotel PIP or renovation?](/hotel-financing/pip-and-renovation-loans). The wider trade between a flag and independence is at [Should I buy a branded or independent hotel?](/buy-a-hotel/branded-vs-independent), and the upgrade list itself is defined at [PIP](/glossary/pip). #### Whose numbers are these, and how current are they? Every figure on this page comes from Hilton's 2026 Homewood Suites Franchise Disclosure Document, issued March 30, 2026. It is the franchisor's document, not ours.[1] The FDD is written by the franchisor, Hilton Franchise Holding LLC, and a prospective franchisee must receive it at least 14 calendar days before signing a binding agreement or paying anything.[1] Hilton reissues it every year and marks most fees "currently", which means they can change. Hilton also reports that it negotiates. It agreed to modify the monthly royalty fee in 47 instances and the monthly program fee in 3 instances during 2025 (Item 6, p. 31), and in 2025 franchisees paid application fees from $0 to $100,000 for new construction or conversion, $20,000 to $200,000 for a change of ownership and $0 to $100,000 for re-licensing (Item 5, p. 17).[1] Get the current FDD from Hilton, and read the franchise agreement attached to it, before you rely on any number here. This page is a neutral fee guide. It does not rank brands or recommend one. The document type is explained at [franchise disclosure document](/glossary/franchise-fdd), and the other brand guides are listed at [How much does a hotel franchise cost?](/hotel-franchise-costs). Table: Homewood Suites by Hilton franchise fees, 2026 FDD issued March 30, 2026 (Items 5, 6 and 7) Fee | Amount | Where in the FDD Application fee, new development or conversion | $100,000 plus $400 per guest room or suite over 150[1] | Item 5, p. 15 Application fee, change of ownership | $200,000[1] | Item 5, p. 15 Application fee, re-licensing | $100,000[1] | Item 5, p. 15 PIP fee | $10,000[1] | Item 5, p. 15 OnQ system: hardware, software, installation | $28,296 to $118,424[1] | Item 5, p. 16 Monthly royalty fee, new development or conversion | 3.5% of gross rooms revenue in year 1, 4.5% in year 2, 5.5% after[1] | Item 6, p. 20 Monthly royalty fee, change of ownership or re-licensing | 5.5% of gross rooms revenue[1] | Item 6, p. 20 Monthly program fee | 2.5% of gross rooms revenue. May change, capped at the current rate plus 1%[1] | Item 6, pp. 20 and 31 Hilton Honors | 1.7% of total eligible guest folio[1] | Item 6, p. 24 Hilton Advance fee | 1.35% of eligible digital direct revenue, up to $30 per stay[1] | Item 6, p. 23 OnQ connectivity, and hardware and software maintenance | $400 to $600 and $1,321 to $2,714 per month[1] | Item 6, p. 20 Permitted transfer processing fee | $5,500[1] | Item 6, p. 26 Lender comfort letter | $3,500, and $1,500 for an assignment[1] | Item 6, p. 26 Liquidated damages, after year 2 | Hotel's average monthly royalty fees x 60, or x months remaining in the final 60 months[1] | Item 6, pp. 27-28 Estimated initial investment, 131 suites | $23,757,245 to $34,728,465, excluding real estate[1] | Item 7, p. 36 First-party data point: Matthews Hotel Markets' September 2026 rate sheet records Prime at 7.00% effective September 17, 2026, SOFR at 3.85% and the SBA 7(a) maximum allowable rate at 10.00%, the indexes a loan for franchise fees, a PIP or a conversion is priced against.[2] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: Homewood Suites brand fees on assumed rooms revenue, by year): Hypothetical. Assume a Homewood Suites earns $3,000,000 of gross rooms revenue in each year, and that $1,200,000 of guest folios are eligible Hilton Honors folios. Both figures are assumptions chosen for round arithmetic. They are not forecasts and they are not from the FDD. A new hotel's revenue would not be flat, so read this as a rate illustration only. New development or conversion, year one: royalty at 3.5 percent is $105,000 and program fee at 2.5 percent is $75,000, together $180,000.[1] Year two: royalty at 4.5 percent is $135,000, plus $75,000, together $210,000.[1] Year three onward, and any change of ownership or re-licensing: royalty at 5.5 percent is $165,000, plus $75,000, together $240,000.[1] Hilton Honors at 1.7 percent of eligible folio adds $1,200,000 x 0.017 = $20,400, and OnQ connectivity plus hardware and software maintenance add $20,652 to $39,768 a year.[1] At the 5.5 percent royalty, these four lines total $281,052 to $300,168. Hilton Advance fees, reservation charges, commissions and training are extra. The example shows fees only. It says nothing about profit. FAQ: - Q: What is the Homewood Suites royalty fee? A: Under the 2026 FDD, a new development or conversion pays 3.5 percent of gross rooms revenue in year one, 4.5 percent in year two and 5.5 percent after. A change of ownership or re-licensing pays 5.5 percent. The program fee is 2.5 percent.[1] - Q: How much does it cost to build a Homewood Suites? A: Hilton's 2026 FDD, issued March 30, 2026, estimates $23,757,245 to $34,728,465 for a newly built 131-suite hotel, excluding real estate, market studies, insurance and interest. Up to $261,924 of that is paid to Hilton or its affiliates.[1] - Q: I'm buying an existing Homewood Suites. Do I get the lower starting royalty? A: No. The stepped royalty applies to new development and conversion. Item 6 lists 5.5 percent for a change of ownership, plus a $200,000 application fee and a $10,000 PIP fee. In 2025 buyers paid application fees of $20,000 to $200,000.[1] - Q: How long does a Homewood Suites franchise last? A: Generally 22 years from the effective date for new construction and 10 to 20 years from opening for a conversion. A buyer generally takes the remaining term or another term Hilton approves. There is no right to renew.[1] - Q: How much does a Homewood Suites owner make? A: The FDD does not say. Item 19 reports room rate, occupancy, RevPAR, RevPAR index, Hilton Honors contribution and extended-stay measures for comparable hotels. It reports no expenses or profit, and Hilton states there is no assurance any hotel will achieve the results shown.[1] - Q: How much of Homewood Suites business is extended stay? A: Hilton reports about 6.6 million extended stay nights in 2025, about 48 percent of all consumed room nights, counting stays of 5 or more consecutive nights. The average extended stay at comparable hotels was 13.1 nights.[1] - Q: What does it cost to terminate a Homewood Suites franchise early? A: After the second anniversary of opening, liquidated damages are the hotel's average monthly royalty fees multiplied by 60, or by the months remaining in the final 60 months. Fee ramps are excluded when the average is calculated.[1] Sources: - [1] 2026 Homewood Suites by Hilton Franchise Disclosure Document (issued March 30, 2026): cover page; Item 5, pp. 15-19; Item 6, pp. 20-34; Item 7, pp. 34-38; Item 10, pp. 44-45; Item 17, pp. 68-77; Item 19, pp. 78-85 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2026/03/2026-US-FDD-Homewood.pdf - [2] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates ### How much does a Hyatt Place franchise cost in 2026? URL: https://matthewshotelmarkets.com/hotel-franchise-costs/hyatt-place Last updated: 2026-09-18 Hyatt's 2026 Hyatt Place disclosure document, issued March 27, 2026 and amended August 5, 2026, estimates $23,431,820 to $29,885,898 to build a 127-room hotel, excluding real estate. The application fee is $75,000, or $150,000 to buy an existing Hyatt Place. Ongoing, the royalty is 5 percent and the commercial services fee 3.5 percent of gross rooms revenue.[1] Key takeaways: - Application fee: $75,000 plus $500 per room over 150 for a hotel new to the brand, and $150,000 for a change of ownership.[1] - Royalty: 5 percent of gross rooms revenue. Commercial services fee: currently 3.5 percent of gross rooms revenue.[1] - World of Hyatt assessment: currently 4 percent of eligible revenue from members, or 2 percent on a stay where the guest enrolls at the hotel.[1] - Term: 20 years from opening. A buyer of an existing Hyatt Place takes the seller's remaining term.[1] - Fees change every year. Hyatt's current FDD and the signed franchise agreement govern, not this page. #### What does Hyatt charge up front for a Hyatt Place franchise? Hyatt Place's 2026 Item 5 lists a $75,000 application fee for a hotel new to the brand and a $150,000 change of ownership application fee for a buyer of an existing Hyatt Place.[1] The new development fee rises by $500 for each guest room over 150. If Hyatt does not approve the application, or the applicant withdraws before approval, Hyatt refunds the fee less $7,500. After approval the fee is non-refundable (Item 5, p. 9).[1] A conversion or a purchase of an existing Hyatt Place also pays a PIP preparation fee that Hyatt expects to run $5,000 to $10,000, on top of a design review fee of $5,000 to $45,000. Operator approval and onboarding is $15,000 for two participants when the owner or management company is not already an approved operator. Each lender comfort letter is $2,500. An opening deadline extension is $10,000 (Item 5, pp. 9-12).[1] Hyatt states that in its 2025 fiscal year franchisees paid or committed to total initial fees of $43,027 to $221,098 (Item 5, p. 13).[1] The terms are defined at [PIP](/glossary/pip) and [comfort letter](/glossary/comfort-letter). #### What are the ongoing Hyatt Place franchise fees? Hyatt Place's 2026 Item 6 lists a 5 percent royalty and a 3.5 percent commercial services fee, both on gross rooms revenue, plus loyalty, digital and per-reservation charges billed on other bases.[1] Gross rooms revenue follows the Uniform System of Accounts definition of total rooms revenue, plus resort or destination fees. For a newly built hotel, Hyatt says it may agree to reduce the royalty for the first one to three years (Item 6, pp. 13, 21-22).[1] The commercial services fee covers brand marketing, central reservations, revenue management technology, large-account group sales, the property management system and Hyatt's digital platforms. Hyatt says it could increase if costs increase (Item 6, pp. 19, 26-27).[1] The digital acquisition fee is currently 1.35 percent of gross rooms revenue booked through Hyatt's own websites and apps. Global distribution system reservations currently average about $8.50 each, passed through at cost. The property management system subscription is $3.90 per room per month (Item 6, pp. 15, 19, 27).[1] The World of Hyatt assessment is currently 4 percent of eligible revenue from members who give their number when booking, or 2 percent when the guest enrolls at the hotel for that stay (Item 6, pp. 14, 22).[1] These percentages apply to different revenue bases, so they cannot be added into one rate. #### How much does it cost to build or convert a Hyatt Place? Hyatt Place's 2026 Item 7 estimates $23,431,820 to $29,885,898 to build a new 127-room Hyatt Place, excluding real estate costs.[1] Construction, improvements and sitework are the largest line at $19,325,082 to $22,500,082. Furniture, fixtures and equipment run $1,651,000 to $2,794,000, and operating supplies and equipment $635,000 to $1,016,000. The table includes three months of additional funds at $276,000 to $525,000 and excludes finance charges, interest and debt service (Item 7, pp. 29-33).[1] Hyatt does not state a per-room total, so none is printed here. Item 7 does not price a conversion. Hyatt says an owner converting from another brand, or buying an existing Hyatt Place, will still incur significant costs to renovate to current standards, that those costs vary widely with the hotel's condition, and that Hyatt will prepare a PIP before the franchise agreement is signed (Item 7, p. 33).[1] Financing for that work is covered at [brand conversion financing](/hotel-financing/brand-conversion-financing) and [PIP and renovation loans](/hotel-financing/pip-and-renovation-loans). #### How long is the Hyatt Place franchise term, and can I renew? The Hyatt Place franchise term expires 20 years after the first day of the month in which the hotel opens, and a complying franchisee may acquire one 10-year successor franchise on Hyatt's then current terms.[1] To qualify for the successor franchise, the owner must have substantially complied during the term, be fully complying at the time, meet Hyatt's standards for new franchisees, have passing quality assurance scores for the previous three years, and hold rights to the hotel for at least 10 more years. The owner must also renovate, sign the then current agreement, which Hyatt says may be materially different including fees, pay the PIP fee, and sign a general release where state law allows (Item 17, pp. 69-70).[1] The franchisee may not terminate the franchise agreement except as the law allows, and Hyatt may not terminate it without cause (Item 17, pp. 70-71).[1] #### What happens to the Hyatt Place franchise when I sell the hotel? A sale of the hotel or of a controlling ownership interest needs Hyatt's approval, and the buyer or seller pays the then current change of ownership application fee, which is $150,000 in the 2026 FDD.[1] Hyatt charges no separate transfer fee. It refunds the change of ownership application fee, less $7,500, if it disapproves the transfer (Item 6, p. 16).[1] Conditions for approval include a qualified buyer, completed training, a renovation commitment, a release from the seller and its guarantors, and Hyatt's view that the buyer's capital structure and debt service will not adversely affect the hotel. Hyatt may have the buyer sign its then current franchise agreement or assume the existing one. A buyer who assumes an existing agreement takes the seller's remaining term (Item 17, pp. 69, 72-73).[1] Hyatt holds a right of first offer only where the parties sign Exhibit C, which Hyatt says it requires only in markets it treats as strategic (Item 17, p. 73).[1] Hyatt-flagged hotels on the market are listed at [Hyatt hotels for sale](/hotels-for-sale/hyatt). #### What does it cost to leave the Hyatt Place system early? Hyatt Place liquidated damages equal the lesser of 36 or the months remaining in the term, multiplied by 8.5 percent of average monthly gross rooms revenue.[1] The 8.5 percent is the sum of 5 percent for lost royalty fees and 3.5 percent for lost system services charges. Average monthly revenue is generally the hotel's average monthly gross rooms revenue over the 12 full months before termination. Payment is due within 15 days. The amount rises to 150 percent if the termination involves a transfer to a competitor, or if three or more Hyatt select service franchise agreements with the owner or its affiliates end through default or breach. An owner who keeps operating under the marks after termination owes $5,000 per day plus costs (Item 6, pp. 16, 24).[1] #### What does Hyatt's Item 19 say about Hyatt Place performance? Hyatt Place's 2026 Item 19 reports that 321 franchised Hyatt Place hotels open for all of 2025 averaged 71.2 percent occupancy, a $157.87 average daily rate and $112.46 RevPAR.[1] Those 321 hotels are the franchised subset of 346 covered hotels in the United States and Canada that operated during all of 2025. Eleven hotels that opened in 2025 and four that closed temporarily are excluded. The covered hotels average 139 rooms and had carried the Hyatt Place name for an average of 11.8 years. Among the franchised hotels, the median average daily rate was $141.12 and the median RevPAR $99.06, and 115 of the 321, or 35.8 percent, exceeded the average RevPAR (Item 19, pp. 75-77).[1] Hyatt also reports an average Smith Travel RevPAR index of 105.8 for the franchised hotels, an average of 56.5 percent of revenue from World of Hyatt members, and 57.2 percent of gross rooms revenue from direct channels. Hyatt says it did not develop Smith Travel's methodology and cannot confirm its accuracy (Item 19, pp. 78-81).[1] These are revenue statistics. Hyatt states that no certified public accountant audited them and that they do not reflect cost of sales or operating expenses that must be deducted to obtain net income or profit (Item 19, pp. 81-82).[1] This page draws no profit conclusion from them. The measures are defined at [RevPAR](/glossary/revpar) and [ADR](/glossary/adr). Table: Hyatt Place franchise fees, 2026 FDD issued March 27, 2026, as amended August 5, 2026 Fee | Amount | Where in the FDD Application fee, hotel new to the brand | $75,000 plus $500 per room over 150[1] | Item 5, p. 9 Application fee, change of ownership | $150,000[1] | Item 5, p. 9 PIP preparation fee (conversion or purchase) | $5,000 to $10,000 expected[1] | Item 5, p. 9 Royalty fee | 5% of gross rooms revenue[1] | Item 6, p. 13 Commercial services fee (marketing, reservations, technology) | Currently 3.5% of gross rooms revenue[1] | Item 6, p. 19 World of Hyatt loyalty assessment | Currently 4% of eligible member revenue; 2% on an enrolling stay[1] | Item 6, pp. 14, 22 Digital acquisition fee | Currently 1.35% of gross rooms revenue booked through Hyatt's digital channels[1] | Item 6, p. 19 Global distribution and other reservation services | Currently averages about $8.50 per reservation[1] | Item 6, p. 19 Property management system subscription | $3.90 per room per month[1] | Item 6, p. 15 Transfer | No transfer fee; the then current change of ownership application fee applies[1] | Item 6, p. 16 Comfort letter | $2,500 per letter[1] | Item 6, p. 14 Liquidated damages | Lesser of 36 or months remaining, times 8.5% of average monthly gross rooms revenue; 150% in a consequential termination[1] | Item 6, p. 24 Estimated initial investment, new 127-room hotel | $23,431,820 to $29,885,898, excluding real estate[1] | Item 7, p. 31 First-party data point: Matthews Hotel Markets' September 2026 rate sheet records Prime at 7.00% effective September 17, 2026 and the SBA 7(a) maximum allowable rate at 10.00%, the indexes a loan for an application fee, a PIP or a conversion is priced against.[2] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: a year of Hyatt Place brand fees on assumed rooms revenue): Hypothetical. Assume a 127-room Hyatt Place earns $5,000,000 of gross rooms revenue in a year. The revenue figure and the channel splits below are assumptions for arithmetic. They are not forecasts and they are not figures from the FDD. Royalty fee at 5 percent: $5,000,000 x 0.05 = $250,000.[1] Commercial services fee at 3.5 percent: $5,000,000 x 0.035 = $175,000.[1] Together: $425,000, or 8.5 percent of rooms revenue. If $1,500,000 of that revenue is booked through Hyatt's digital channels, the digital acquisition fee at 1.35 percent is $20,250. If $2,500,000 is eligible World of Hyatt member revenue, the 4 percent assessment is $100,000. The property management system subscription at $3.90 x 127 rooms x 12 months is $5,943.60.[1] Per-reservation charges, training, conferences and quality assurance fees come on top and depend on the hotel, so they are not estimated here. FAQ: - Q: How much does a Hyatt Place franchise cost? A: Hyatt's 2026 FDD lists a $75,000 application fee, a 5 percent royalty, a 3.5 percent commercial services fee, and an estimated $23,431,820 to $29,885,898 to build a 127-room hotel, excluding real estate.[1] - Q: I'm buying an existing Hyatt Place. What does Hyatt charge me? A: The 2026 FDD lists a $150,000 change of ownership application fee, a PIP preparation fee expected at $5,000 to $10,000, and the cost of whatever renovation the PIP requires. Hyatt must approve the buyer.[1] - Q: What percent of revenue does Hyatt Place take? A: Five percent royalty plus a 3.5 percent commercial services fee, both on gross rooms revenue. The World of Hyatt assessment, digital acquisition fee and reservation charges are billed on other bases on top.[1] - Q: How long is a Hyatt Place franchise agreement? A: Twenty years from the first day of the month the hotel opens. A complying franchisee may acquire one 10-year successor franchise on Hyatt's then current terms, which may differ materially.[1] - Q: Does the Hyatt Place Item 7 estimate include land? A: No. The 2026 total excludes real estate costs, and it also excludes finance charges, interest and debt service.[1] - Q: Does Hyatt publish what a Hyatt Place earns? A: Item 19 reports 2025 occupancy, average daily rate, RevPAR, Smith Travel indexes and loyalty contribution for 346 covered hotels. It reports revenue measures only. It gives no expenses and no profit.[1] - Q: Will these Hyatt Place fees be the same next year? A: Not necessarily. Hyatt reissues the FDD every year and marks many fees as current amounts that could increase. The current FDD and the signed franchise agreement govern.[1] Sources: - [1] Hyatt Place 2026 Franchise Disclosure Document (issued March 27, 2026, as amended August 5, 2026): Item 5, pp. 9-13; Item 6, pp. 13-28; Item 7, pp. 29-33; Item 17, pp. 69-74; Item 19, pp. 74-82. Wisconsin DFI franchise registration file 640505 (Hyatt Place Franchising LLC, filed with the Wisconsin Department of Financial Institutions, accessed 2026-09-18): https://apps.dfi.wi.gov/apps/FranchiseSearch/details.aspx?id=640505&hash=1054368882&search=external&type=GENERAL - [2] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates ### How much does a La Quinta franchise cost in 2026? URL: https://matthewshotelmarkets.com/hotel-franchise-costs/la-quinta Last updated: 2026-09-18 Wyndham's La Quinta disclosure document, issued March 31, 2026, estimates $1,670,705 to $7,399,531 to convert a 100-room hotel the owner already holds, and $13,063,365 to $18,217,394 to build a 110-room La Quinta, before land. The initial fee is the greater of $55,000 or $550 per room. The royalty is 5.5 percent for the first 24 months and 6 percent after, plus a 3.5 percent system assessment fee.[1] Key takeaways: - Initial fee: the greater of $55,000 or $550 per guest room, with a $5,000 application fee credited toward it.[1] - Royalty: 5.5 percent of gross room revenues through the 24th full month after opening, then 6.0 percent. System assessment fee: 3.5 percent.[1] - Wyndham Rewards loyalty charge: 4.25 to 5.5 percent of the amounts on which members earn points.[1] - Term: 20 years, with no renewal right. Liquidated damages run to 36 months of royalties and system assessment fees.[1] - Fees change every year. Wyndham's current FDD and the signed franchise agreement govern, not this page. #### What does Wyndham charge up front for a La Quinta franchise? The 2026 La Quinta FDD lists an initial fee equal to the greater of $55,000 or $550 per guest room for a new construction or conversion hotel, with a non-refundable $5,000 application fee credited toward it.[1] The franchisor states that initial fees in 2025 ranged from $25,000 to $55,000, and that it may negotiate the amount and payment terms when business circumstances warrant. A dual-brand La Quinta and Hawthorn Suites project pays separate application and initial fees under each agreement (Item 5, pp. 25-26).[1] The SynXis property management system carries a one-time $6,000 set-up and implementation fee. The OPERA alternative, with on-site deployment, runs $15,550 to $29,300 plus interfaces. The Wyndham Gateway internet portal equipment is $1,500, a custom interior design review is up to $6,000, and an extension of the opening deadline is $10,000. A new construction franchisee must attend a development open house within six months of signing, at $1,499 (Item 5, pp. 26-28).[1] #### What are the ongoing La Quinta franchise fees? The 2026 La Quinta Item 6 lists a royalty of 5.5 percent of gross room revenues from opening through the 24th full calendar month and 6.0 percent for the rest of the term, plus a 3.5 percent system assessment fee.[1] Once the royalty is at 6.0 percent, the FDD says a hotel that achieves superior results may be eligible for a 0.5 percent annual royalty credit. On a transfer, a hotel already at 6.0 percent stays there. La Quinta's gross room revenues definition includes revenue from the rental or use of meeting rooms. The system assessment fee can change on 30 days' notice, and the franchisor may raise any fixed-dollar fee by up to 10 percent a year, cumulatively (Item 6, pp. 28, 40-41).[1] The Wyndham Rewards loyalty program charge is 4.25 to 5.5 percent of the amounts on which members earn points, varying with the hotel's enrollment results (Item 6, p. 35).[1] Global distribution system bookings are $7.85 per reservation, and third-party channel and internet booking fees are $2.60 each. The mandatory digital pay-for-performance commission is currently 7 percent, and can be up to 10 percent, of gross room revenues on qualifying reservations. The mandatory Wyndham Connect Plus service is 3.5 percent of gross room revenues on each reservation it books (Item 6, pp. 31-34).[1] La Quinta requires more services than Wyndham's economy brands. Standard revenue management is required at a minimum, at 0.75 percent of gross room revenues with a $645 monthly minimum and a $1,395 maximum. The remote sales service is required at $1,500 per month. The FDD says either requirement can be met another way under criteria set in system standards. The mobile operations program is mandated at $0.60 per room per month, property management system support is $734 to $1,050 per month, and continuing education is $1,200 per year (Item 6, pp. 30, 34-35, 37).[1] These charges apply to different bases, so they cannot be added into one rate. #### How much does it cost to convert to or build a La Quinta? The 2026 La Quinta Item 7 estimates $1,670,705 to $7,399,531 for a 100-room conversion, which the FDD states as $16,707 to $73,995 per room and which assumes the owner already owns the hotel.[1] Facility improvements are the largest conversion line at $375,000 to $4,535,000, with a conversion contingency of $18,750 to $226,750 (Item 7, pp. 46-47).[1] Unlike the Days Inn and Super 8 estimates, the low end is not zero. For new construction, the FDD estimates $13,063,365 to $18,217,394 for a 110-room La Quinta, or $118,758 to $165,613 per room, excluding the cost of buying or leasing real estate. The initial fee line in that table is $60,500, which is $550 times 110 rooms. For a new dual-brand La Quinta and Hawthorn Suites on a 103-room prototype, the FDD estimates $14,445,089 to $19,896,600, or $140,244 to $193,171 per room (Item 7, pp. 42-46).[1] Financing for this work is covered at [brand conversion financing](/hotel-financing/brand-conversion-financing) and [PIP and renovation loans](/hotel-financing/pip-and-renovation-loans). The plan itself is defined at [PIP](/glossary/pip). #### How long is a La Quinta franchise agreement, and can I terminate if occupancy is low? The La Quinta term is 20 years from the first day of the month on or after the opening date, Item 17 states there are no renewal or extension rights, and the agreement carries an occupancy-based termination right.[1] If the franchisor grants a 25-year term, the franchisee can terminate without cause after 20 years. If both sides choose to renew, the franchisee signs the then current agreement and pays the then current relicense fee (Item 17, pp. 78-79).[1] The occupancy right works on two consecutive measurement years after the second anniversary of opening, with written notice within 30 days after each year, and only for a franchisee in full compliance. Average monthly occupancy below 50 percent in both years allows termination with no termination fee. Between 50 and 60 percent, the fee equals the royalties that accrued over the preceding 12 months. Between 60 and 70 percent, it equals the royalties over the preceding 30 months. The franchisee must also have implemented the franchisor's marketing, sales and revenue management recommendations and must sign a general release (Item 6, pp. 41-42).[1] For a dual-brand operation this right is deleted (Item 17, p. 80).[1] #### What does it cost to leave the La Quinta system early? La Quinta liquidated damages are the greater of $3,000 per guest room or 36 times the monthly average of royalties and system assessment fees accrued over the preceding 12 full calendar months.[1] If fewer than 36 months remain in the term, the amount is that monthly average times the months remaining. For a termination before opening, or before the first anniversary of opening, the amount is the greater of $250,000 or $2,500 per authorized guest room. Payment is due within 10 days. An owner who does not de-identify the hotel afterward owes $2,000 per day, and reconnecting to the reservation system after a suspension is currently $5,000 (Item 6, pp. 38-40).[1] #### What happens to the La Quinta franchise when I sell the hotel? The buyer submits an application, pays the application fee and a relicense fee equal to the greater of $55,000 or $550 per room, signs the then current franchise agreement and improves the hotel as applicable.[1] The FDD reports that 2025 relicense fees on transfers ranged from $7,500 to $55,000, and on renewals from $10,000 to $55,000. An assignment to an affiliate of the franchisee is a flat $30,000, and an assignment to a lender or receiver is $7,500. The seller and its owners sign general releases unless the law restricts them, and the seller may have to repay a development incentive unless the buyer assumes it (Item 5, p. 26; Item 6, p. 29; Item 17, pp. 81-82).[1] A property improvement plan prepared after opening is currently $2,500 per request, a lender comfort letter is $1,000, and a failed-inspection reinspection is $3,000 to $5,500 plus travel (Item 6, pp. 29, 39).[1] Wyndham-flagged hotels on the market are listed at [Wyndham hotels for sale](/hotels-for-sale/wyndham), and the flag decision is weighed at [Should I buy a branded or independent hotel?](/buy-a-hotel/branded-vs-independent). #### What does Item 19 say about La Quinta performance? The 2026 La Quinta Item 19 reports that 435 qualified La Quinta hotels averaged a $112.75 average daily rate, 66.5 percent occupancy and $74.95 RevPAR in 2025.[1] There were 867 La Quinta hotels in the United States and Canada at December 31, 2025. The 435 qualified hotels are those that opened before January 1, 2024 and had at least ten guest reviews averaging 4.0 or better out of 5.0, a higher bar than the 3.0 used in the Days Inn and Super 8 documents. Hotels that left the system during 2025, 31 in all, are excluded. The median RevPAR was $73.13, and 201 of the 435, or 46.2 percent, met or exceeded the average (Item 19, pp. 84-85).[1] The FDD reports an average competitive set RevPAR index of 100 percent for the qualified hotels, from Smith Travel Research data the franchisor says it has not audited or verified. For all 867 hotels it reports an average central reservation system contribution of 88.0 percent of gross room revenue, of which Wyndham Rewards members account for 56.6 percent. The central reservation figure includes third-party websites (Item 19, pp. 85-86).[1] Item 19 gives rate, occupancy and revenue measures only. It gives no expenses and no profit, and this page draws no profit conclusion from it. The measures are defined at [RevPAR](/glossary/revpar) and [ADR](/glossary/adr). Table: La Quinta by Wyndham franchise fees, 2026 FDD issued March 31, 2026 Fee | Amount | Where in the FDD Application fee | $5,000, non-refundable, credited toward the initial fee[1] | Item 5, pp. 25-26 Initial fee, new construction or conversion | Greater of $55,000 or $550 per guest room[1] | Item 5, p. 26 Relicense fee, transfer or renewal | Greater of $55,000 or $550 per guest room[1] | Item 5, p. 26; Item 6, p. 29 Royalty | 5.5% of gross room revenues through the 24th full month, then 6.0%[1] | Item 6, p. 28 System assessment fee (marketing, advertising, reservations) | 3.5% of gross room revenues[1] | Item 6, p. 28 Wyndham Rewards loyalty program charge | 4.25% to 5.5% of amounts on which members earn points[1] | Item 6, p. 35 GDS fee; third-party channel and internet booking fees | $7.85 per reservation; $2.60 per reservation[1] | Item 6, pp. 31-32 Digital pay-for-performance commission | Currently 7%, up to 10%, of gross room revenues on qualifying reservations[1] | Item 6, p. 33 Wyndham Connect Plus | 3.5% of gross room revenues on each reservation booked through the service[1] | Item 6, pp. 33-34 Standard revenue management (required at a minimum) | 0.75% of gross room revenues; $645 to $1,395 per month[1] | Item 6, p. 34 Remote sales service (required) | $1,500 per month[1] | Item 6, pp. 34-35 PIP preparation fee, after opening | $2,500 per request[1] | Item 6, p. 29 Liquidated damages | Greater of $3,000 per room or 36 times average monthly royalties and system assessment fees[1] | Item 6, pp. 39-40 Estimated initial investment, 100-room conversion | $1,670,705 to $7,399,531; $16,707 to $73,995 per room; assumes the hotel is already owned[1] | Item 7, p. 47 Estimated initial investment, new 110-room hotel | $13,063,365 to $18,217,394; $118,758 to $165,613 per room, excluding real estate[1] | Item 7, p. 44 First-party data point: Matthews Hotel Markets' September 2026 rate sheet records Prime at 7.00% effective September 17, 2026 and the SBA 7(a) maximum allowable rate at 10.00%, the indexes a loan for a relicense fee, a PIP or a conversion is priced against.[2] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: a year of La Quinta brand fees on assumed room revenue): Hypothetical. Assume a 100-room La Quinta earns $3,000,000 of gross room revenues in a year. The revenue figure and the member share below are assumptions for arithmetic. They are not forecasts and they are not figures from the FDD. Royalty in the first 24 months at 5.5 percent: $3,000,000 x 0.055 = $165,000. After month 24 at 6.0 percent: $3,000,000 x 0.06 = $180,000.[1] System assessment fee at 3.5 percent: $3,000,000 x 0.035 = $105,000.[1] Together: $270,000, or 9.0 percent of room revenue, in the first 24 months, and $285,000, or 9.5 percent, after. If Wyndham Rewards members earn points on $1,000,000 of that revenue, the loyalty program charge at 4.25 to 5.5 percent is $42,500 to $55,000.[1] Revenue management, remote sales, per-reservation fees, commissions and technology support come on top and depend on the hotel, so they are not estimated here. FAQ: - Q: How much does a La Quinta franchise cost? A: The 2026 FDD lists an initial fee of the greater of $55,000 or $550 per room, a royalty of 5.5 percent rising to 6 percent after 24 months, and a 3.5 percent system assessment fee. Item 7 estimates $1,670,705 to $7,399,531 for a 100-room conversion.[1] - Q: What royalty does Wyndham charge on a La Quinta? A: 5.5 percent of gross room revenues from opening through the 24th full calendar month, then 6.0 percent for the rest of the term. A hotel at 6.0 percent with superior results may be eligible for a 0.5 percent annual credit.[1] - Q: I'm buying a La Quinta. What is the relicense fee? A: The greater of $55,000 or $550 per room, plus the $5,000 application fee. The FDD says 2025 relicense fees on transfers ranged from $7,500 to $55,000. The buyer signs the then current agreement and improves the hotel as applicable.[1] - Q: Can I terminate a La Quinta franchise if occupancy is low? A: Yes, under conditions. Two consecutive measurement years below 50 percent average monthly occupancy allow termination with no fee. Between 50 and 70 percent, a fee of 12 or 30 months of royalties applies. Full compliance and timely notice are required.[1] - Q: How much does it cost to build a new La Quinta? A: The 2026 Item 7 estimates $13,063,365 to $18,217,394 for a 110-room hotel, or $118,758 to $165,613 per room, excluding the cost of buying or leasing real estate.[1] - Q: Does the La Quinta FDD say what a La Quinta earns? A: Item 19 reports 2025 average daily rate, occupancy, RevPAR, RevPAR index and reservation contribution for 435 qualified hotels. It gives no expenses and no profit.[1] - Q: Will these La Quinta fees be the same next year? A: Not necessarily. The FDD is reissued every year, and the franchisor may raise any fixed-dollar fee by up to 10 percent a year. The current FDD and the signed agreement govern.[1] Sources: - [1] La Quinta Franchise Disclosure Document (issued March 31, 2026): Item 5, pp. 25-28; Item 6, pp. 28-42; Item 7, pp. 42-50; Item 17, pp. 78-84; Item 19, pp. 84-87. Wisconsin DFI franchise registration file 640629 (La Quinta Franchising LLC, filed with the Wisconsin Department of Financial Institutions, accessed 2026-09-18): https://apps.dfi.wi.gov/apps/FranchiseSearch/details.aspx?id=640629&hash=1899216290&search=external&type=GENERAL - [2] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates ### How much does a Spark by Hilton franchise cost in 2026? URL: https://matthewshotelmarkets.com/hotel-franchise-costs/spark-by-hilton Last updated: 2026-09-18 Hilton's 2026 Spark by Hilton Franchise Disclosure Document, issued March 30, 2026, estimates $3,251,531 to $5,906,193 to convert a 100-room hotel, excluding real estate. Spark is offered for conversions only. The franchise application fee is $75,000, the monthly royalty is 5.5 percent of gross rooms revenue, the monthly program fee is 3.5 percent, and Hilton Honors is 2 percent of total eligible guest folio.[1] Key takeaways: - Item 7 total: $3,251,531 to $5,906,193 for a 100-room conversion, which is about $32,500 to $59,100 per room by our arithmetic. The estimate assumes a building in good condition and excludes systems, roof, windows and structure.[1] - Spark is conversion-only. The FDD's fees and cost estimates do not cover new construction or adaptive reuse.[1] - Ongoing: 5.5 percent royalty plus 3.5 percent program fee on gross rooms revenue, and Hilton Honors at 2 percent of total eligible guest folio.[1] - Application fees are $75,000 for a conversion, a change of ownership or a re-licensing. The conversion term is generally 10 to 15 years.[1] - The FDD is Hilton's document and its fees change every year. Get the current FDD from Hilton before relying on these figures. #### What does it cost to convert a hotel to Spark by Hilton? Item 7 of the 2026 Spark FDD estimates $3,251,531 to $5,906,193 for the conversion of a 100-room hotel, excluding real estate.[1] Divided by 100 rooms, that is about $32,500 to $59,100 per room. The division is ours. The FDD does not print a per-room figure.[1] The largest lines are construction, renovation and leasehold improvements at $1,300,000 to $2,800,000 and furniture, fixtures and equipment at $900,000 to $1,200,000. Contingencies are $130,000 to $280,000 and additional funds are $300,000 to $500,000 (pp. 33-34).[1] The cover page adds that up to $203,800 of the total is paid to Hilton or its affiliates.[1] The scope behind the number is narrow. Note 1 to Item 7 (pp. 34-35) describes a standard model: a four-floor, interior-corridor building of 55,000 to 63,000 square feet with 100 guest rooms, in good condition, built to code, with an occupancy permit. The prototype has no kitchens, restaurants or other food service, swimming pools, health facilities or dedicated meeting rooms. The estimate does not include repair or replacement of windows or exterior cladding other than repainting, any mechanical, electrical, lighting, roofing, drainage, HVAC, fire or safety systems, the parking lot, or structural elements.[1] A hotel that needs work on those systems carries costs outside the estimate. Item 7 also excludes real estate costs, market studies, insurance and interest (p. 34).[1] Per-room pricing is defined at [price per key](/glossary/per-key). #### Can I build a new Spark by Hilton? Not under the 2026 FDD. Item 1 states that Hilton currently offers Spark franchises for hotel conversion projects only.[1] Hilton defines a conversion as the renovation of an existing hotel building to bring it into compliance with brand standards, and says it does not include new construction or major remodeling. The fees and cost estimates in the FDD do not apply to new development or to adaptive reuse of a building that was not a hotel (Item 1, p. 6).[1] Item 11 says Hilton generally anticipates conversion projects to take about 6 to 18 months, depending on the condition of the existing hotel, with deadlines set project by project in the PIP (p. 60).[1] #### What are the Spark by Hilton initial fees? A $75,000 franchise application fee, whether the application is for a conversion, a change of ownership or a re-licensing, under Item 5 of the 2026 Spark FDD.[1] Item 5 (pp. 15-17) lists the other initial fees paid to Hilton or its affiliates. The PIP fee is $10,000. The OnQ computer system costs $33,500 to $87,800 for hardware, software and installation, other start-up fees are $5,100, training program fees run $5,000 to $15,000, and the opening process services fee is $6,000. Hilton's supply affiliate is the required procurement service provider for the Spark brand package, and Item 5 lists its fee at up to 6 percent of the cost of goods ordered.[1] The application fee is refundable, less a $7,500 processing fee, if Hilton denies the application, if the applicant withdraws before approval, or if a change of ownership does not occur (Item 5, Note 1, p. 17).[1] #### What are the Spark by Hilton royalty and program fees? The monthly royalty fee is 5.5 percent of gross rooms revenue and the monthly program fee is 3.5 percent of gross rooms revenue, both due by the 15th of the following month.[1] Item 6 (p. 20) bases both fees on gross rooms revenue as defined under the Uniform System of Accounts for the Lodging Industry, including loyalty redemption revenue, mandatory guest fees and guaranteed no-show revenue (Note 1, p. 29).[1] Hilton may change the program fee at any time, but the rate will not exceed the current rate plus 1 percent of gross rooms revenue over the term of the agreement (Note 2, p. 30).[1] Other recurring charges sit on top. Hilton Honors is currently 2 percent of total eligible guest folio, waived for stays where the guest enrolls at the property (p. 24). The Hilton Advance fee is 1.35 percent of eligible digital direct revenue, capped at $30 per stay (p. 23).[1] OnQ connectivity is $400 to $600 per month and hardware and software maintenance is $1,042 to $2,335 per month (p. 21).[1] These charges apply to different bases, so they do not add into one percentage. #### What does Hilton report about Spark hotel performance? Item 19 of the 2026 Spark FDD reports one measure: a 2025 average RevPAR index of 113.8 and a median of 110.7 across 87 comparable U.S. hotels.[1] Of 208 U.S. Spark hotels at December 31, 2025, 87 were classified as comparable, and all 87 were franchisee-managed. Comparable hotels are those open since January 1 of the previous year, excluding hotels that changed brand or ownership type, had large-scale capital projects, or lack comparable results (pp. 80-81).[1] The RevPAR index compares a hotel's revenue per available room with its competitive set, and 100 is a fair share. The range ran from 52.9 to 302.2. Of the 87 hotels, 39, or 44.8 percent, met or exceeded the average. Hilton cites STR and Hilton as the source (pp. 81-82).[1] The Spark Item 19 does not report room rate, occupancy or RevPAR in dollars, and it gives no expenses, no profit and no return on investment. None can be derived from an index. Hilton writes: "Some hotels have achieved the results shown above. Your individual results may differ. There is no assurance that your Hotel will achieve the results shown above" (p. 82).[1] The index is defined at [MPI, ARI and RGI](/glossary/mpi-ari-rgi). #### How long is a Spark franchise agreement, and can I renew it? Hilton's 2026 Spark FDD sets the term for a conversion at generally 10 to 15 years from the opening date, with no right to renew.[1] Item 17 of the 2026 Spark FDD (p. 71) states that on a change of ownership the term is generally the remaining term under the existing franchise agreement, or another term Hilton approves.[1] The franchisee does not have the right to renew or extend. If Hilton agrees, in its sole discretion, to re-license the hotel, the owner may be asked to sign a contract with materially different terms and must meet any PIP conditions Hilton sets.[1] The re-licensing application fee is $75,000 (Item 6, p. 26).[1] The franchisee is not authorized to terminate before the term expires. Item 17 treats a unilateral termination without cause as a material breach, and liquidated damages become payable on demand.[1] The contract itself is defined at [franchise agreement](/glossary/franchise-agreement). #### What happens to the Spark franchise when the hotel is sold? A sale that changes control of a Spark is a change of ownership transfer: the seller gives Hilton 60 days' written notice and the buyer applies for a new franchise.[1] Item 17 of the 2026 Spark FDD (p. 77) requires the buyer to meet Hilton's then-current requirements for new franchisees, including credit, a background investigation and operations experience. The buyer submits a change of ownership application, pays the franchise application fee ($75,000), signs the then-current form of franchise agreement and agrees to Hilton's requested upgrades, which may include a PIP fee.[1] The seller must not be in default and must pay all amounts due through closing. If the buyer has SBA financing, buyer and seller must agree to escrow Hilton's estimated fees and disburse them at closing.[1] Permitted transfers are those that do not change control. Transfers of publicly traded equity, and of privately held equity where the transferee holds less than 50 percent afterward, need no notice or consent. Transfers to affiliates, to a family member or trust, or on death need 60 days' written notice, Hilton's consent and a $5,500 processing fee.[1] An owner may mortgage the hotel to a lender that finances its acquisition, development or operation without Hilton's consent if the owner is the sole borrower and the loan is not secured by other hotels or other collateral. A lender [comfort letter](/glossary/comfort-letter) costs $3,500 (Item 6, p. 26).[1] Hilton-family hotels on the market are listed at [Hilton hotels for sale](/hotels-for-sale/hilton). The buyer's checklist is at [What due diligence do I need before buying a hotel?](/buy-a-hotel/due-diligence-checklist). #### What does it cost to leave Spark before the term ends? Hilton's liquidated damages for a Spark that has been open more than two years are the hotel's average monthly royalty fees multiplied by 60, or by the months remaining in the final 60 months of the term.[1] Item 6 of the 2026 Spark FDD (p. 27) sets four cases for a termination by Hilton. Before opening: $10,000 multiplied by the number of approved guest rooms at the hotel. From opening to the second anniversary: the greater of the hotel's average monthly royalty fees multiplied by 60, or $10,000 multiplied by the number of approved guest rooms. After the second anniversary and before the final 60 months of the term: the hotel's average monthly royalty fees multiplied by 60. Within the final 60 months: the hotel's average monthly royalty fees multiplied by the number of months remaining.[1] Note 8 to Item 6 (p. 32) defines the hotel's average as the royalty fees due for the 24 months before the month of termination, divided by 24. Fee discounts, ramps and waivers are excluded from the calculation.[1] Opening without Hilton's written authorization costs $5,000 per day.[1] Item 6 states that the monthly royalty fee and liquidated damages are the only fees in the item that are not subject to change.[1] #### Does Hilton offer key money on a Spark? Hilton may, in its sole discretion, offer a development incentive on a Spark, and the 2026 FDD calls it a contingent liability, not a loan.[1] Item 10 of the 2026 Spark FDD (p. 45) describes an incentive as a financial contribution toward the development or conversion of the hotel, documented by a development incentive note signed with the franchise agreement. It bears no interest and does not have to be repaid unless the franchise terminates before the end of the term or a transfer occurs. The repayable amount falls by an equal share for each year the hotel is open: one-twentieth a year on a 20-year term, in Hilton's example.[1] On a sale, the seller pays the then-current repayable amount unless Hilton permits the buyer to assume the note.[1] The FDD does not publish incentive amounts, and the program can be changed or ended at any time. The term is defined at [key money](/glossary/key-money). #### How do owners finance Spark franchise fees, a PIP or a conversion? Inside the acquisition or construction loan when the costs are part of a purchase or a build, or with a separate renovation loan when they are not. Lenders size the loan to the hotel's income, and no lender type publishes its leverage limits or spreads. As of September 17, 2026, Prime is 7.00 percent, SOFR is 3.85 percent and the SBA 7(a) maximum allowable rate is 10.00 percent.[2] Item 7 of the Spark FDD notes that many lenders will require an environmental assessment report.[1] The loan structures are at [How do I finance converting my hotel to a new brand?](/hotel-financing/brand-conversion-financing) and [How do I finance a hotel PIP or renovation?](/hotel-financing/pip-and-renovation-loans). The wider trade between a flag and independence is at [Should I buy a branded or independent hotel?](/buy-a-hotel/branded-vs-independent), and the upgrade list itself is defined at [PIP](/glossary/pip). #### Whose numbers are these, and how current are they? Every figure on this page comes from Hilton's 2026 Spark Franchise Disclosure Document, issued March 30, 2026. It is the franchisor's document, not ours.[1] The FDD is written by the franchisor, Hilton Franchise Holding LLC, and a prospective franchisee must receive it at least 14 calendar days before signing a binding agreement or paying anything.[1] Hilton reissues it every year and marks most fees "currently", which means they can change. Hilton also reports that it negotiates. It agreed to modify the monthly royalty fee in 53 instances during 2025 (Item 6, p. 30), and in 2025 franchisees paid application fees from $0 to $75,000 for a conversion (Item 5, p. 17).[1] Get the current FDD from Hilton, and read the franchise agreement attached to it, before you rely on any number here. This page is a neutral fee guide. It does not rank brands or recommend one. The document type is explained at [franchise disclosure document](/glossary/franchise-fdd), and the other brand guides are listed at [How much does a hotel franchise cost?](/hotel-franchise-costs). Table: Spark by Hilton franchise fees, 2026 FDD issued March 30, 2026 (Items 5, 6 and 7) Fee | Amount | Where in the FDD Application fee, conversion | $75,000[1] | Item 5, p. 15 Application fee, change of ownership | $75,000[1] | Item 5, p. 16 Application fee, re-licensing | $75,000[1] | Item 5, p. 16 PIP fee | $10,000[1] | Item 5, p. 16 OnQ system: hardware, software, installation | $33,500 to $87,800[1] | Item 5, p. 16 Brand package procurement services | Up to 6% of the cost of goods ordered[1] | Item 5, p. 17 Monthly royalty fee | 5.5% of gross rooms revenue[1] | Item 6, p. 20 Monthly program fee | 3.5% of gross rooms revenue. May change, capped at the current rate plus 1%[1] | Item 6, pp. 20 and 30 Hilton Honors | 2% of total eligible guest folio[1] | Item 6, p. 24 Hilton Advance fee | 1.35% of eligible digital direct revenue, up to $30 per stay[1] | Item 6, p. 23 OnQ connectivity, and hardware and software maintenance | $400 to $600 and $1,042 to $2,335 per month[1] | Item 6, p. 21 Permitted transfer processing fee | $5,500[1] | Item 6, p. 26 Lender comfort letter | $3,500, and $1,500 for an assignment[1] | Item 6, p. 26 Liquidated damages, before opening | $10,000 x approved guest rooms[1] | Item 6, p. 27 Liquidated damages, after year 2 | Hotel's average monthly royalty fees x 60, or x months remaining in the final 60 months[1] | Item 6, p. 27 Estimated initial investment, 100-room conversion | $3,251,531 to $5,906,193, excluding real estate[1] | Item 7, p. 34 First-party data point: Matthews Hotel Markets' September 2026 rate sheet records Prime at 7.00% effective September 17, 2026, SOFR at 3.85% and the SBA 7(a) maximum allowable rate at 10.00%, the indexes a loan for franchise fees, a PIP or a conversion is priced against.[2] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: one year of Spark by Hilton brand fees on assumed rooms revenue): Hypothetical. Assume a Spark by Hilton earns $2,000,000 of gross rooms revenue in a year, and that $800,000 of guest folios are eligible Hilton Honors folios. Both figures are assumptions chosen for round arithmetic. They are not forecasts and they are not from the FDD. Monthly royalty fee at 5.5 percent: $2,000,000 x 0.055 = $110,000.[1] Monthly program fee at 3.5 percent: $2,000,000 x 0.035 = $70,000.[1] Hilton Honors at 2 percent of eligible folio: $800,000 x 0.02 = $16,000.[1] OnQ connectivity plus hardware and software maintenance: $1,442 to $2,935 per month, or $17,304 to $35,220 a year.[1] Total of these four lines: $213,304 to $231,220. Hilton Advance fees, third-party reservation charges, travel planner commissions, training and guest assistance charges are extra and depend on how guests book, so they are left out. The example shows fees only. It says nothing about profit. Liquidated damages before opening are simpler arithmetic. If Hilton terminated a 100-room Spark after renovation work began but before opening, Item 6 sets the amount at $10,000 x 100 = $1,000,000.[1] FAQ: - Q: What does it cost to convert to Spark by Hilton? A: Hilton's 2026 FDD, issued March 30, 2026, estimates $3,251,531 to $5,906,193 for a 100-room conversion, excluding real estate. The estimate assumes a building in good condition and leaves out mechanical, electrical, roofing, HVAC, fire and life safety, window and structural work.[1] - Q: What are Spark by Hilton franchise fees? A: A $75,000 application fee, a 5.5 percent monthly royalty and a 3.5 percent monthly program fee on gross rooms revenue, Hilton Honors at 2 percent of total eligible guest folio, and a $10,000 PIP fee.[1] - Q: How long does a Spark conversion take? A: Item 11 of the 2026 FDD says Hilton generally anticipates conversion projects to take about 6 to 18 months, depending on the condition of the existing hotel. The franchise agreement and the PIP set the actual deadlines.[1] - Q: How long is a Spark by Hilton franchise agreement? A: Generally 10 to 15 years from the opening date for a conversion. A buyer of an existing Spark generally takes the remaining term or another term Hilton approves. There is no right to renew.[1] - Q: Does Hilton publish Spark RevPAR or occupancy? A: Not in the 2026 FDD. Item 19 reports only RevPAR index for 87 comparable hotels: an average of 113.8, a median of 110.7 and a range from 52.9 to 302.2. Hilton states there is no assurance any hotel will achieve those results.[1] - Q: What does it cost to leave Spark early? A: Before opening, $10,000 per approved guest room. In the first two years, the greater of that amount or 60 months of the hotel's average royalty. After that, 60 months of average royalty, or the months remaining in the final 60.[1] - Q: Can I build a new Spark by Hilton? A: No. Item 1 of the 2026 FDD says Hilton currently offers Spark franchises for conversion projects only, and that its fees and cost estimates do not apply to new development or adaptive reuse.[1] Sources: - [1] 2026 Spark by Hilton Franchise Disclosure Document (issued March 30, 2026): cover page; Item 1, p. 6; Item 5, pp. 15-19; Item 6, pp. 20-33; Item 7, pp. 33-37; Item 10, pp. 45-46; Item 11, p. 60; Item 17, pp. 71-80; Item 19, pp. 80-82 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2026/03/2026-US-FDD-Spark.pdf - [2] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates ### How much does a Super 8 franchise cost in 2026? URL: https://matthewshotelmarkets.com/hotel-franchise-costs/super-8 Last updated: 2026-09-18 Wyndham's Super 8 disclosure document, issued March 31, 2026, estimates $285,156 to $2,626,641 to convert a 100-room hotel the owner already holds, and $5,043,737 to $7,141,542 to build a 65-room Super 8, before land. The initial fee is the greater of $25,000 or $250 per room. The royalty is 5.5 percent and the system assessment fee 3 percent of gross room revenues.[1] Key takeaways: - Initial fee: the greater of $25,000 or $250 per guest room, with a $2,500 application fee credited toward it.[1] - Royalty: 5.5 percent of gross room revenues. System assessment fee: 3 percent.[1] - Wyndham Rewards loyalty charge: 4.25 to 5.5 percent of the amounts on which members earn points.[1] - Term: 20 years, with no renewal right. A buyer pays a relicense fee on the same formula as the initial fee.[1] - Fees change every year. Wyndham's current FDD and the signed franchise agreement govern, not this page. #### What does Wyndham charge up front for a Super 8 franchise? The 2026 Super 8 FDD lists an initial fee equal to the greater of $25,000 or $250 per guest room for a new construction or conversion hotel, with a non-refundable $2,500 application fee credited toward it.[1] The franchisor states that initial fees in 2025 ranged from $12,000 to $25,000, and that it may negotiate the amount and payment terms when business circumstances warrant (Item 5, pp. 24-25).[1] Technology set-up comes next. The SynXis property management system carries a one-time $6,000 set-up and implementation fee. The OPERA alternative runs $11,000 to $22,100 plus interfaces. The Wyndham Gateway internet portal equipment is $1,500. Temporary signage for a conversion that opens before its permanent sign is $1,250, a custom interior design review is up to $6,000, and an extension of the opening deadline is $5,000 (Item 5, pp. 25-27).[1] #### What are the ongoing Super 8 franchise fees? The 2026 Super 8 Item 6 lists a 5.5 percent royalty and a 3 percent system assessment fee, both on gross room revenues and due monthly.[1] Gross room revenues are revenues from guest room rentals, including guaranteed no-show revenue and business interruption proceeds, and excluding food and beverage and sales, occupancy and use taxes. The system assessment fee can change on 30 days' notice to cover the cost of marketing, reservation and other services. The franchisor may also raise any fixed-dollar fee by up to 10 percent a year, cumulatively (Item 6, pp. 27, 37-38).[1] The Wyndham Rewards loyalty program charge is 4.25 to 5.5 percent of the amounts on which members earn points, varying with the hotel's enrollment results. A missed enrollment fee is currently $750 per quarter (Item 6, p. 33).[1] Distribution is charged per booking or as commission. Global distribution, third-party channel and internet booking fees are each $2.08 per reservation. The mandatory digital pay-for-performance commission is currently 7 percent, and can be up to 10 percent, of gross room revenues on reservations that arrive through paid search and similar links. The mandatory Wyndham Connect Plus service is 3.5 percent of gross room revenues on each reservation it books. Agency commissions can reach 20 percent on qualifying reservations (Item 6, pp. 29-32).[1] Property management system support is $734 to $1,050 per month by room count. Revenue management service is optional at Super 8, at 0.75 percent of gross room revenues for the standard level, with a $645 monthly minimum and a $1,395 maximum (Item 6, pp. 32, 34).[1] These charges apply to different bases, so they cannot be added into one rate. #### How much does it cost to convert a motel to a Super 8, or build one? The 2026 Super 8 Item 7 estimates $285,156 to $2,626,641 for a 100-room conversion, which the FDD states as $2,852 to $26,266 per room and which assumes the owner already owns the hotel.[1] The width of that range is the building. Facility improvements run from $0, where the exterior, public areas, guest rooms and mechanical systems already meet standards, to $1,097,500 where the hotel needs extensive structural renovation. Furniture, fixtures and equipment run $71,770 to $484,200, signage $20,000 to $80,000, and a conversion contingency is set at 5 percent of facility improvements (Item 7, pp. 43-46).[1] For new construction, the FDD estimates $5,043,737 to $7,141,542 for a 65-room Super 8, or $77,596 to $109,870 per room, excluding the cost of buying or leasing real estate. The FDD says a 65-room hotel needs at least 1.5 acres (Item 7, pp. 39-41).[1] Financing for this work is covered at [brand conversion financing](/hotel-financing/brand-conversion-financing) and [PIP and renovation loans](/hotel-financing/pip-and-renovation-loans). The plan itself is defined at [PIP](/glossary/pip). #### How long is a Super 8 franchise agreement, and can I renew? The Super 8 term is 20 years, starting the first day of the month after the opening date, and Item 17 states there are no renewal or extension rights.[1] If both sides choose to renew, the franchisee signs the then current franchise agreement, which may have materially different terms, and pays the then current relicense fee, which uses the same formula as the initial fee (Item 17, pp. 71-72).[1] The franchisee's termination rights in Item 17 are limited to casualty and condemnation (Item 17, p. 72).[1] Separately, a footnote to Item 6 describes a current policy that lets an owner terminate without liquidated damages on 60 to 90 days' notice if, among other conditions, the hotel has been in the system at least two years, its occupancy was below 50 percent and at least 10 points under the Smith Travel Research scale tract occupancy for the prior 12 months, its quality and guest scores met set thresholds for two years, and all fees were paid on time (Item 6, pp. 38-39).[1] The FDD calls this a policy the franchisor currently permits, so confirm it is in the agreement you sign. #### What does it cost to leave the Super 8 system early? Super 8 liquidated damages are the greater of $2,000 per guest room or 24 times the average monthly royalties and system assessment fees for the 12 months before termination.[1] If fewer than 24 months remain in the term, the amount is that monthly average times the months remaining. Termination before opening is charged at one half of the formula amount. The room count is the number the franchisor authorized, regardless of later reductions. Payment is due within 10 days. An owner who does not de-identify the hotel afterward owes $2,000 per day. Reconnecting to the reservation system after a suspension for default is currently $4,000 (Item 6, pp. 36-37).[1] #### What happens to the Super 8 franchise when I sell the hotel? The franchisor approves all transfers and qualifies every buyer in its sole discretion, and the buyer pays the application fee and a relicense fee equal to the greater of $25,000 or $250 per room.[1] The buyer signs a new franchise agreement and must improve the hotel to the standards for conversion hotels entering the chain. The seller and its owners sign general releases unless the law restricts them, and the seller may have to repay a development incentive unless the buyer assumes it. The FDD reports that the 2025 relicense fee for each transfer and renewal was $25,000. An assignment to an affiliate of the original franchisee is a flat $5,000, and an assignment to a lender or receiver is $7,500 (Item 5, p. 25; Item 6, p. 27; Item 17, p. 74).[1] A property improvement plan prepared after opening is currently $1,500 per request, a lender comfort letter is $1,000, and taking over an existing property management system without an upgrade is $995 (Item 5, p. 26; Item 6, pp. 28, 36).[1] Wyndham-flagged hotels on the market are listed at [Wyndham hotels for sale](/hotels-for-sale/wyndham), and the flag decision is weighed at [Should I buy a branded or independent hotel?](/buy-a-hotel/branded-vs-independent). #### What does Item 19 say about Super 8 performance? The 2026 Super 8 Item 19 reports that 579 qualified Super 8 hotels averaged an $80.47 average daily rate, 50.6 percent occupancy and $40.71 RevPAR in 2025.[1] There were 1,344 Super 8 hotels in the United States at December 31, 2025. The 579 qualified hotels are those that opened before January 1, 2025, passed their most recent quality assurance inspection or had not yet had one, and had at least ten guest reviews averaging 3.0 or better out of 5.0. Hotels that left the system during 2025, 60 in all, are excluded. The median RevPAR was $37.68, and 240 of the 579, or 41.5 percent, met or exceeded the average (Item 19, pp. 76-77).[1] The FDD reports an average competitive set RevPAR index of 104.8 percent for the qualified hotels, from Smith Travel Research data the franchisor says it has not audited or verified. For all 1,344 hotels it reports an average central reservation system contribution of 78.2 percent of gross room revenue, of which Wyndham Rewards members account for 55.0 percent. The central reservation figure includes third-party websites (Item 19, pp. 77-78).[1] Item 19 gives rate, occupancy and revenue measures only. It gives no expenses and no profit, and this page draws no profit conclusion from it. The measures are defined at [RevPAR](/glossary/revpar) and [ADR](/glossary/adr). Table: Super 8 by Wyndham franchise fees, 2026 FDD issued March 31, 2026 Fee | Amount | Where in the FDD Application fee | $2,500, non-refundable, credited toward the initial fee[1] | Item 5, p. 24 Initial fee, new construction or conversion | Greater of $25,000 or $250 per guest room[1] | Item 5, p. 24 Relicense fee, transfer or renewal | Greater of $25,000 or $250 per guest room[1] | Item 5, p. 25; Item 6, p. 27 Royalty | 5.5% of gross room revenues[1] | Item 6, p. 27 System assessment fee (marketing and reservations) | 3% of gross room revenues[1] | Item 6, p. 27 Wyndham Rewards loyalty program charge | 4.25% to 5.5% of amounts on which members earn points[1] | Item 6, p. 33 GDS, third-party channel and internet booking fees | $2.08 per reservation, each[1] | Item 6, pp. 29-30 Digital pay-for-performance commission | Currently 7%, up to 10%, of gross room revenues on qualifying reservations[1] | Item 6, pp. 30-31 Wyndham Connect Plus | 3.5% of gross room revenues on each reservation booked through the service[1] | Item 6, p. 31 Property management system support | $734 to $1,050 per month[1] | Item 6, p. 34 PIP preparation fee, after opening | $1,500 per request[1] | Item 6, p. 28 Liquidated damages | Greater of $2,000 per room or 24 times average monthly royalties and system assessment fees[1] | Item 6, p. 37 Estimated initial investment, 100-room conversion | $285,156 to $2,626,641; $2,852 to $26,266 per room; assumes the hotel is already owned[1] | Item 7, p. 44 Estimated initial investment, new 65-room hotel | $5,043,737 to $7,141,542; $77,596 to $109,870 per room, excluding real estate[1] | Item 7, p. 41 First-party data point: Matthews Hotel Markets' September 2026 rate sheet records Prime at 7.00% effective September 17, 2026 and the SBA 7(a) maximum allowable rate at 10.00%, the indexes a loan for a relicense fee, a PIP or a conversion is priced against.[2] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: a year of Super 8 brand fees on assumed room revenue): Hypothetical. Assume a 60-room Super 8 earns $1,200,000 of gross room revenues in a year. The revenue figure and the member share below are assumptions for arithmetic. They are not forecasts and they are not figures from the FDD. Royalty at 5.5 percent: $1,200,000 x 0.055 = $66,000.[1] System assessment fee at 3 percent: $1,200,000 x 0.03 = $36,000.[1] Together: $102,000, or 8.5 percent of room revenue. If Wyndham Rewards members earn points on $400,000 of that revenue, the loyalty program charge at 4.25 to 5.5 percent is $17,000 to $22,000.[1] On the same assumptions, 24 months of average royalties and system assessment fees is $102,000 / 12 x 24 = $204,000. That is more than $2,000 x 60 rooms = $120,000, so $204,000 would be the liquidated damages figure under the Item 6 formula.[1] Per-reservation fees, commissions, technology support and training come on top and depend on the hotel's booking channels, so they are not estimated here. FAQ: - Q: How much does a Super 8 franchise cost? A: The 2026 FDD lists an initial fee of the greater of $25,000 or $250 per room, a 5.5 percent royalty and a 3 percent system assessment fee. Item 7 estimates $285,156 to $2,626,641 to convert a 100-room hotel the owner already holds.[1] - Q: What percent of revenue does Wyndham take from a Super 8? A: A 5.5 percent royalty plus a 3 percent system assessment fee on gross room revenues. Loyalty charges, booking fees, commissions and technology support are billed on other bases on top.[1] - Q: I'm buying a small Super 8. What is the relicense fee? A: The greater of $25,000 or $250 per room, so $25,000 for any hotel of 100 rooms or fewer, plus the $2,500 application fee. The FDD says each 2025 transfer and renewal paid $25,000.[1] - Q: How long is a Super 8 franchise agreement? A: Twenty years. Item 17 states there are no renewal or extension rights. A renewal, if both sides agree, means signing the then current agreement and paying the relicense fee.[1] - Q: How much does it cost to build a new Super 8? A: The 2026 Item 7 estimates $5,043,737 to $7,141,542 for a 65-room hotel, or $77,596 to $109,870 per room, excluding the cost of buying or leasing real estate.[1] - Q: Does the Super 8 FDD say what a Super 8 earns? A: Item 19 reports 2025 average daily rate, occupancy, RevPAR, RevPAR index and reservation contribution for 579 qualified hotels. It gives no expenses and no profit.[1] - Q: Will these Super 8 fees be the same next year? A: Not necessarily. The FDD is reissued every year, and the franchisor may raise any fixed-dollar fee by up to 10 percent a year. The current FDD and the signed agreement govern.[1] Sources: - [1] Super 8 Franchise Disclosure Document (issued March 31, 2026): Item 5, pp. 24-27; Item 6, pp. 27-39; Item 7, pp. 39-46; Item 17, pp. 71-76; Item 19, pp. 76-79. Wisconsin DFI franchise registration file 640628 (Super 8 Worldwide, Inc., filed with the Wisconsin Department of Financial Institutions, accessed 2026-09-18): https://apps.dfi.wi.gov/apps/FranchiseSearch/details.aspx?id=640628&hash=1250533202&search=external&type=GENERAL - [2] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates ### How much does a Tapestry Collection franchise cost in 2026? URL: https://matthewshotelmarkets.com/hotel-franchise-costs/tapestry-collection Last updated: 2026-09-18 Hilton's 2026 Tapestry Collection Franchise Disclosure Document, issued March 30, 2026, estimates $2,861,047 to $70,253,147 to open a typical 125-room hotel, excluding real estate. The width of that range comes from construction, which runs from $0 to $45,954,000. The application fee is $100,000, the monthly royalty is 5 percent of gross rooms revenue and the monthly program fee is 4 percent.[1] Key takeaways: - Item 7 total: $2,861,047 to $70,253,147 for 125 rooms, which is about $22,900 to $562,000 per room by our arithmetic. The low end carries $0 for construction, design, furniture and contingencies.[1] - Ongoing: 5 percent royalty plus 4 percent program fee on gross rooms revenue, Hilton Honors at 4 percent of total eligible guest folio, and a 2 percent spa royalty only if the hotel adds an eforea spa.[1] - A buyer of an existing Tapestry pays a $150,000 change of ownership application fee and a $10,000 PIP fee.[1] - The Tapestry FDD makes no financial performance representation. Item 19 contains no room rate, occupancy or RevPAR figures.[1] - The FDD is Hilton's document and its fees change every year. Get the current FDD from Hilton before relying on these figures. #### What does a Tapestry Collection franchise cost up front? A $100,000 franchise application fee for a new build or a conversion, plus $400 for each guest room or suite over 250, under Item 5 of the 2026 Tapestry FDD.[1] Item 5 (pp. 17-18) lists the other initial fees paid to Hilton or its affiliates. A change of ownership application is $150,000 and a re-licensing application is $100,000. The PIP fee, charged to prepare a property improvement plan for a conversion, change of ownership or re-licensing, is $10,000. The OnQ computer system costs $51,750 to $136,750 for hardware, software and installation, other start-up fees are $6,500, training program fees run $5,000 to $15,000, and the opening process services fee is $20,000. Pre-opening revenue management support, which Hilton may require when a hotel opens on an expedited schedule of 150 days or less, is $4,059 to $8,880.[1] Two optional programs carry their own initial fees: $25,000 when the owner signs an eforea spa amendment, and a $75,000 development services fee for each Hilton restaurant brand selected.[1] The application fee is refundable, less a $7,500 processing fee, if Hilton denies the application, if the applicant withdraws before approval, or if a change of ownership does not occur (Item 5, Note 1, p. 19).[1] #### What are the Tapestry Collection royalty and program fees? The monthly royalty fee is 5 percent of gross rooms revenue and the monthly program fee is 4 percent of gross rooms revenue, both due by the 15th of the following month.[1] Item 6 (p. 22) bases both fees on gross rooms revenue as defined under the Uniform System of Accounts for the Lodging Industry, including loyalty redemption revenue, mandatory guest fees such as resort fees, and guaranteed no-show revenue (Note 1, p. 33).[1] A monthly spa royalty of 2 percent of gross spa revenue is payable only if an eforea spa amendment is in effect. The Item 6 table lists no royalty on food and beverage revenue.[1] Hilton may change the program fee at any time, but the rate will not exceed the current rate plus 1 percent of gross rooms revenue over the term of the agreement (Note 2, p. 33).[1] Other recurring charges sit on top. Hilton Honors is currently 4 percent of total eligible guest folio, waived for stays where the guest enrolls at the property. The Hilton Advance fee is 1.35 percent of eligible digital direct revenue, capped at $30 per stay (p. 26).[1] OnQ connectivity is $400 to $600 per month and hardware and software maintenance is $2,105 to $6,499 per month (p. 23).[1] These charges apply to different bases, so they do not add into one percentage. #### Why is the Tapestry Item 7 range so wide? Because the 2026 Tapestry FDD puts construction and leasehold improvements at $0 to $45,954,000 for a 125-room hotel, so the total runs from $2,861,047 to $70,253,147.[1] Item 7 (pp. 36-38) shows $0 at the low end for four lines: construction and leasehold improvements ($0 to $45,954,000), design and engineering fees ($0 to $1,838,160), furniture, fixtures and equipment ($0 to $7,115,625) and contingencies ($0 to $4,595,400). Additional funds are $1,000,000 to $1,400,000, and an eforea spa adds $0 to $4,950,000.[1] Divided by 125 rooms, the total is about $22,900 to $562,000 per room. The division is ours. The FDD does not print a per-room figure.[1] The cover page adds that up to $400,630 of the total is paid to Hilton or its affiliates.[1] The notes to Item 7 say conversion costs vary with the age of the building, code compliance, fire and life safety requirements, the condition of the structure and the state of the furniture and finishes against brand standards, and that a converting owner's furniture costs will most likely be lower than a new hotel's (Notes 6 and 7, pp. 38-39).[1] Item 7 also states in capitals that the figures do not include real estate costs, market studies, insurance or interest, and do not separately identify the cost of improvements under a conversion, re-licensing or change of ownership license (p. 38).[1] An owner converting an independent hotel gets the real number from Hilton's PIP, not from Item 7. Per-room pricing is defined at [price per key](/glossary/per-key). #### What does Hilton report about Tapestry hotel performance? Nothing. Item 19 of the 2026 Tapestry FDD makes no financial performance representation.[1] Hilton writes: "We do not make any representations about a franchisee's future financial performance or the past financial performance of company-owned or franchised outlets" (Item 19, p. 92).[1] That differs from Hilton's 2026 FDDs for brands such as [Hampton](/hotel-franchise-costs/hampton-inn) and [DoubleTree](/hotel-franchise-costs/doubletree), which report room rate, occupancy, RevPAR and RevPAR index for comparable hotels. Hilton adds that it does not authorize its employees or representatives to make such representations orally or in writing, and that a buyer of an existing hotel may be given that hotel's actual records.[1] An owner weighing a Tapestry conversion has to build the revenue case from the hotel's own history and a market study, not from the FDD. Item 7 notes that Hilton may encourage a converting owner to commission a market study, and that accepting one is not a performance representation by Hilton.[1] #### How long is a Tapestry franchise agreement, and can I renew it? Hilton's 2026 Tapestry FDD sets the term at generally 23 years from the effective date for new construction and 10 to 20 years from opening for a conversion, with no right to renew.[1] Item 17 of the 2026 Tapestry FDD (p. 78) states that on a change of ownership the term is generally the remaining term under the existing franchise agreement, or another term Hilton approves.[1] The franchisee does not have the right to renew or extend. If Hilton agrees, in its sole discretion, to re-license the hotel, the owner may be asked to sign a contract with materially different terms and must meet any PIP conditions Hilton sets.[1] The re-licensing application fee is $100,000 (Item 6, p. 28).[1] The franchisee is not authorized to terminate before the term expires. Item 17 treats a unilateral termination without cause as a material breach, and liquidated damages become payable on demand.[1] The contract itself is defined at [franchise agreement](/glossary/franchise-agreement). #### What happens to the Tapestry franchise when the hotel is sold? A sale that changes control of a Tapestry is a change of ownership transfer: the seller gives Hilton 60 days' written notice and the buyer applies for a new franchise.[1] Item 17 of the 2026 Tapestry FDD (p. 86) requires the buyer to meet Hilton's then-current requirements for new franchisees, including credit, a background investigation and operations experience. The buyer submits a change of ownership application, pays the franchise application fee ($150,000), signs the then-current form of franchise agreement and agrees to Hilton's requested upgrades, which may include a PIP fee.[1] The seller must not be in default and must pay all amounts due through closing. If the buyer has SBA financing, buyer and seller must agree to escrow Hilton's estimated fees and disburse them at closing.[1] Permitted transfers are those that do not change control. Transfers of publicly traded equity, and of privately held equity where the transferee holds less than 50 percent afterward, need no notice or consent. Transfers to affiliates, to a family member or trust, or on death need 60 days' written notice, Hilton's consent and a $5,500 processing fee.[1] An owner may mortgage the hotel to a lender that finances its acquisition, development or operation without Hilton's consent if the owner is the sole borrower and the loan is not secured by other hotels or other collateral. A lender [comfort letter](/glossary/comfort-letter) costs $3,500 (Item 6, p. 29).[1] Hilton-family hotels on the market are listed at [Hilton hotels for sale](/hotels-for-sale/hilton). The buyer's checklist is at [What due diligence do I need before buying a hotel?](/buy-a-hotel/due-diligence-checklist). #### What does it cost to leave Tapestry before the term ends? Hilton's liquidated damages for a Tapestry that has been open more than two years are the hotel's average monthly royalty fees multiplied by 60, or by the months remaining in the final 60 months of the term.[1] Item 6 of the 2026 Tapestry FDD (p. 29) sets four cases for a termination by Hilton. Before opening: the system's average monthly royalty fees multiplied by 60. From opening to the second anniversary: the greater of the hotel's average monthly royalty fees multiplied by 60, or the system's average monthly royalty fees multiplied by 60. After the second anniversary and before the final 60 months of the term: the hotel's average monthly royalty fees multiplied by 60. Within the final 60 months: the hotel's average monthly royalty fees multiplied by the number of months remaining.[1] Note 8 to Item 6 (p. 35) defines the hotel's average as the royalty fees due for the 24 months before the month of termination, divided by 24. The system's average is the average monthly royalty per guest room owed by U.S. Tapestry hotels over the prior 12 full calendar months, multiplied by the hotel's approved guest rooms. Fee discounts, ramps and waivers are excluded from the calculation.[1] Opening without Hilton's written authorization costs $5,000 per day.[1] Item 6 states that the monthly royalty fee and liquidated damages are the only fees in the item that are not subject to change.[1] #### Does Hilton offer key money on a Tapestry? Hilton may, in its sole discretion, offer a development incentive on a Tapestry, and the 2026 FDD calls it a contingent liability, not a loan.[1] Item 10 of the 2026 Tapestry FDD (p. 50) describes an incentive as a financial contribution toward the development or conversion of the hotel, documented by a development incentive note signed with the franchise agreement. It bears no interest and does not have to be repaid unless the franchise terminates before the end of the term or a transfer occurs. The repayable amount falls by an equal share for each year the hotel is open: one-twentieth a year on a 20-year term, in Hilton's example.[1] On a sale, the seller pays the then-current repayable amount unless Hilton permits the buyer to assume the note.[1] The FDD does not publish incentive amounts, and the program can be changed or ended at any time. The term is defined at [key money](/glossary/key-money). #### How do owners finance Tapestry franchise fees, a PIP or a conversion? Inside the acquisition or construction loan when the costs are part of a purchase or a build, or with a separate renovation loan when they are not. Lenders size the loan to the hotel's income, and no lender type publishes its leverage limits or spreads. As of September 17, 2026, Prime is 7.00 percent, SOFR is 3.85 percent and the SBA 7(a) maximum allowable rate is 10.00 percent.[2] Item 7 of the Tapestry FDD notes that many lenders will require an environmental assessment report.[1] The loan structures are at [How do I finance converting my hotel to a new brand?](/hotel-financing/brand-conversion-financing) and [How do I finance a hotel PIP or renovation?](/hotel-financing/pip-and-renovation-loans). The wider trade between a flag and independence is at [Should I buy a branded or independent hotel?](/buy-a-hotel/branded-vs-independent), and the upgrade list itself is defined at [PIP](/glossary/pip). #### Whose numbers are these, and how current are they? Every figure on this page comes from Hilton's 2026 Tapestry Franchise Disclosure Document, issued March 30, 2026. It is the franchisor's document, not ours.[1] The FDD is written by the franchisor, Hilton Franchise Holding LLC, and a prospective franchisee must receive it at least 14 calendar days before signing a binding agreement or paying anything.[1] Hilton reissues it every year and marks most fees "currently", which means they can change. Hilton also reports that it negotiates. It agreed to modify the monthly royalty fee in 28 instances during 2025 (Item 6, p. 33), and in 2025 franchisees paid application fees from $0 to $100,000 for new development or conversion and $75,000 to $150,000 for a change of ownership (Item 5, p. 19).[1] Get the current FDD from Hilton, and read the franchise agreement attached to it, before you rely on any number here. This page is a neutral fee guide. It does not rank brands or recommend one. The document type is explained at [franchise disclosure document](/glossary/franchise-fdd), and the other brand guides are listed at [How much does a hotel franchise cost?](/hotel-franchise-costs). Table: Tapestry Collection by Hilton franchise fees, 2026 FDD issued March 30, 2026 (Items 5, 6 and 7) Fee | Amount | Where in the FDD Application fee, new development or conversion | $100,000 plus $400 per guest room or suite over 250[1] | Item 5, p. 17 Application fee, change of ownership | $150,000[1] | Item 5, p. 17 Application fee, re-licensing | $100,000[1] | Item 5, p. 17 PIP fee | $10,000[1] | Item 5, p. 17 OnQ system: hardware, software, installation | $51,750 to $136,750[1] | Item 5, p. 17 Opening process services fee | $20,000[1] | Item 5, p. 18 eforea spa initial fee (optional) | $25,000[1] | Item 5, p. 17 Monthly royalty fee | 5% of gross rooms revenue[1] | Item 6, p. 22 Monthly spa royalty fee (only with an eforea spa) | 2% of gross spa revenue[1] | Item 6, p. 22 Monthly program fee | 4% of gross rooms revenue. May change, capped at the current rate plus 1%[1] | Item 6, pp. 22 and 33 Hilton Honors | 4% of total eligible guest folio[1] | Item 6, p. 26 Hilton Advance fee | 1.35% of eligible digital direct revenue, up to $30 per stay[1] | Item 6, p. 26 OnQ connectivity, and hardware and software maintenance | $400 to $600 and $2,105 to $6,499 per month[1] | Item 6, p. 23 Permitted transfer processing fee | $5,500[1] | Item 6, p. 28 Lender comfort letter | $3,500, and $1,500 for an assignment[1] | Item 6, p. 29 Liquidated damages, after year 2 | Hotel's average monthly royalty fees x 60, or x months remaining in the final 60 months[1] | Item 6, p. 30 Estimated initial investment, 125 rooms | $2,861,047 to $70,253,147, excluding real estate[1] | Item 7, p. 38 First-party data point: Matthews Hotel Markets' September 2026 rate sheet records Prime at 7.00% effective September 17, 2026, SOFR at 3.85% and the SBA 7(a) maximum allowable rate at 10.00%, the indexes a loan for franchise fees, a PIP or a conversion is priced against.[2] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: one year of Tapestry Collection brand fees on assumed rooms revenue): Hypothetical. Assume a Tapestry Collection hotel earns $8,000,000 of gross rooms revenue in a year, has no eforea spa, and that $3,200,000 of guest folios are eligible Hilton Honors folios. These figures are assumptions chosen for round arithmetic. They are not forecasts and they are not from the FDD, which reports no performance figures for Tapestry. Monthly royalty fee at 5 percent: $8,000,000 x 0.05 = $400,000.[1] Monthly program fee at 4 percent: $8,000,000 x 0.04 = $320,000.[1] Hilton Honors at 4 percent of eligible folio: $3,200,000 x 0.04 = $128,000.[1] OnQ connectivity plus hardware and software maintenance: $2,505 to $7,099 per month, or $30,060 to $85,188 a year.[1] Total of these four lines: $878,060 to $933,188. Hilton Advance fees, third-party reservation charges, travel planner commissions, training and guest assistance charges are extra and depend on how guests book, so they are left out. The example shows fees only. It says nothing about profit. FAQ: - Q: What does it cost to convert an independent hotel to Tapestry Collection? A: The 2026 FDD lists a $100,000 application fee and a $10,000 PIP fee. Its Item 7 range for a 125-room hotel starts at $2,861,047 with $0 of construction, but the FDD does not price conversions separately. Hilton's PIP sets the actual scope.[1] - Q: What are Tapestry Collection franchise fees? A: Under Hilton's 2026 FDD, issued March 30, 2026: a 5 percent monthly royalty and a 4 percent monthly program fee on gross rooms revenue, Hilton Honors at 4 percent of total eligible guest folio, and a 2 percent spa royalty only with an eforea spa.[1] - Q: Does Hilton publish Tapestry Collection RevPAR or occupancy? A: No. Item 19 of the 2026 Tapestry FDD states that Hilton does not make any representations about a franchisee's future financial performance or the past financial performance of company-owned or franchised outlets.[1] - Q: How long is a Tapestry Collection franchise agreement? A: Generally 23 years from the effective date for new construction and 10 to 20 years from opening for a conversion. A buyer generally takes the remaining term or another term Hilton approves. There is no right to renew.[1] - Q: I'm buying an existing Tapestry Collection hotel. What will Hilton charge me? A: A $150,000 change of ownership application fee and a $10,000 PIP fee, under the 2026 FDD. You sign Hilton's then-current franchise agreement and agree to its requested upgrades. In 2025, buyers paid $75,000 to $150,000.[1] - Q: Does Tapestry charge a royalty on restaurant revenue? A: The Item 6 table in the 2026 FDD charges the 5 percent royalty and 4 percent program fee on gross rooms revenue and lists no royalty on food and beverage revenue. A 2 percent spa royalty applies only under an eforea spa amendment.[1] - Q: What does it cost to leave Tapestry Collection early? A: After the second anniversary of opening, liquidated damages are the hotel's average monthly royalty fees multiplied by 60, or by the months remaining in the final 60 months of the term.[1] Sources: - [1] 2026 Tapestry Collection by Hilton Franchise Disclosure Document (issued March 30, 2026): cover page; Item 5, pp. 17-21; Item 6, pp. 22-36; Item 7, pp. 36-41; Item 10, pp. 50-51; Item 17, pp. 78-91; Item 19, pp. 91-92 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2026/03/2026-US-FDD-Tapestry.pdf - [2] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates ### How much does a Tru by Hilton franchise cost in 2026? URL: https://matthewshotelmarkets.com/hotel-franchise-costs/tru-by-hilton Last updated: 2026-09-18 Hilton's 2026 Tru by Hilton Franchise Disclosure Document, issued March 30, 2026, estimates $14,258,164 to $20,659,558 to open a newly built 98-room hotel, excluding real estate. The franchise application fee is $100,000, the monthly royalty is 5.5 percent of gross rooms revenue, the monthly program fee is 4 percent, and Hilton Honors is 2 percent of total eligible guest folio.[1] Key takeaways: - Item 7 total: $14,258,164 to $20,659,558 for 98 rooms, which is about $145,500 to $210,800 per room by our arithmetic, before land.[1] - Ongoing: 5.5 percent royalty plus 4 percent program fee on gross rooms revenue, and a Hilton Honors charge of 2 percent of total eligible guest folio.[1] - A buyer of an existing Tru pays a $150,000 change of ownership application fee and a $10,000 PIP fee. In 2025 buyers paid $75,000 to $150,000.[1] - Item 19 covers 243 comparable Tru hotels, all franchisee-managed, out of 311 open in the United States at December 31, 2025.[1] - The FDD is Hilton's document and its fees change every year. Get the current FDD from Hilton before relying on these figures. #### What does a Tru by Hilton franchise cost up front? A $100,000 franchise application fee for a new build or a conversion, under Item 5 of the 2026 Tru FDD.[1] Item 5 (pp. 15-16) lists the other initial fees paid to Hilton or its affiliates. A change of ownership application is $150,000 and a re-licensing application is $100,000. The PIP fee, charged to prepare a property improvement plan for a conversion, change of ownership or re-licensing, is $10,000. The OnQ computer system costs $36,652 to $90,846 for hardware, software and installation, other start-up fees are $5,100, training program fees run $5,000 to $17,500, and the opening process services fee is $6,000. If Hilton's supply affiliate furnishes the hotel, its procurement fee is 4 to 10 percent of project cost.[1] The application fee is refundable, less a $7,500 processing fee, if Hilton denies the application, if the applicant withdraws before approval, or if a change of ownership does not occur (Item 5, Note 1, p. 17).[1] #### What are the Tru by Hilton royalty and program fees? The monthly royalty fee is 5.5 percent of gross rooms revenue and the monthly program fee is 4 percent of gross rooms revenue, both due by the 15th of the following month.[1] Item 6 (p. 20) bases both fees on gross rooms revenue as defined under the Uniform System of Accounts for the Lodging Industry, including loyalty redemption revenue, mandatory guest fees and guaranteed no-show revenue (Note 1, p. 29).[1] Hilton may change the program fee at any time, but the rate will not exceed the current rate plus 1 percent of gross rooms revenue over the term of the agreement (Note 2, p. 30).[1] Other recurring charges sit on top. Hilton Honors is currently 2 percent of total eligible guest folio, waived for stays where the guest enrolls at the property. The Hilton Advance fee is 1.35 percent of eligible digital direct revenue, capped at $30 per stay (p. 23).[1] OnQ connectivity is $400 to $600 per month and hardware and software maintenance is $1,037 to $2,330 per month (p. 20).[1] These charges apply to different bases, so they do not add into one percentage. #### What does the Item 7 estimate cover, and what is it per room? Item 7 of the 2026 Tru FDD totals $14,258,164 to $20,659,558 for a newly built 98-room hotel, excluding real estate.[1] Divided by 98 rooms, that is about $145,500 to $210,800 per room. The division is ours. The FDD does not print a per-room figure.[1] Construction and leasehold improvements are the largest line at $10,237,185 to $14,787,045, and furniture, fixtures and equipment are $1,246,474 to $1,771,305 (pp. 33-34).[1] The cover page adds that up to $234,346 of the total is paid to Hilton or its affiliates.[1] Read the exclusions. Item 7 states in capitals that the figures do not include real estate costs, market studies, insurance or interest, and do not separately identify the cost of improvements under a conversion, re-licensing or change of ownership license (p. 34).[1] A buyer of an existing Tru should expect a PIP scope from Hilton, not an Item 7 number. Per-room pricing is defined at [price per key](/glossary/per-key). #### What does Hilton report about Tru hotel performance? Item 19 of the 2026 Tru FDD reports a 2025 average room rate of $128.20, average occupancy of 71.2 percent and average RevPAR of $91.27 across 243 comparable U.S. hotels.[1] Comparable hotels are those open since January 1 of the previous year, excluding hotels that changed brand or ownership type, had large-scale capital projects, or lack comparable results. Of 311 U.S. Tru hotels at December 31, 2025, 243 were comparable, and all 243 were franchisee-managed (p. 79).[1] Medians were a $125.35 room rate, 71.8 percent occupancy and $89.63 RevPAR. The ranges were $82.68 to $230.46 for room rate, 45.2 to 98.4 percent for occupancy and $42.23 to $164.34 for RevPAR. Of the franchisee-managed hotels, 113, or 46.5 percent, met or exceeded the average RevPAR (pp. 79-80).[1] The average RevPAR index was 135.0 and the median 133.5, with a range from 80.1 to 256.6, where 100 is a fair share of the competitive set. Hilton cites STR and Hilton as the source and excludes 1 hotel with insufficient data (pp. 80-81).[1] Hilton Honors members accounted for an average 76.3 percent of occupied room nights, with a range from 29.2 to 94.0 percent (p. 81).[1] Item 19 reports revenue measures only. It gives no expenses, no profit and no return on investment, and none can be derived from it. Hilton writes: "Some hotels have achieved the results shown above. Your individual results may differ. There is no assurance that your Hotel will achieve the results shown above" (p. 82).[1] The measures are defined at [RevPAR](/glossary/revpar) and [MPI, ARI and RGI](/glossary/mpi-ari-rgi). #### How long is a Tru franchise agreement, and can I renew it? Hilton's 2026 Tru FDD sets the term at generally 22 years from the effective date for new construction and 10 to 20 years from opening for a conversion, with no right to renew.[1] Item 17 of the 2026 Tru FDD (p. 70) states that on a change of ownership the term is generally the remaining term under the existing franchise agreement, or another term Hilton approves.[1] The franchisee does not have the right to renew or extend. If Hilton agrees, in its sole discretion, to re-license the hotel, the owner may be asked to sign a contract with materially different terms and must meet any PIP conditions Hilton sets.[1] The re-licensing application fee is $100,000 (Item 6, p. 25).[1] The franchisee is not authorized to terminate before the term expires. Item 17 treats a unilateral termination without cause as a material breach, and liquidated damages become payable on demand.[1] The contract itself is defined at [franchise agreement](/glossary/franchise-agreement). #### What happens to the Tru franchise when the hotel is sold? A sale that changes control of a Tru is a change of ownership transfer: the seller gives Hilton 60 days' written notice and the buyer applies for a new franchise.[1] Item 17 of the 2026 Tru FDD (p. 75) requires the buyer to meet Hilton's then-current requirements for new franchisees, including credit, a background investigation and operations experience. The buyer submits a change of ownership application, pays the franchise application fee ($150,000), signs the then-current form of franchise agreement and agrees to Hilton's requested upgrades, which may include a PIP fee.[1] The seller must not be in default and must pay all amounts due through closing. If the buyer has SBA financing, buyer and seller must agree to escrow Hilton's estimated fees and disburse them at closing.[1] Permitted transfers are those that do not change control. Transfers of publicly traded equity, and of privately held equity where the transferee holds less than 50 percent afterward, need no notice or consent. Transfers to affiliates, to a family member or trust, or on death need 60 days' written notice, Hilton's consent and a $5,500 processing fee.[1] An owner may mortgage the hotel to a lender that finances its acquisition, development or operation without Hilton's consent if the owner is the sole borrower and the loan is not secured by other hotels or other collateral. A lender [comfort letter](/glossary/comfort-letter) costs $3,500 (Item 6, p. 26).[1] Hilton-family hotels on the market are listed at [Hilton hotels for sale](/hotels-for-sale/hilton). The buyer's checklist is at [What due diligence do I need before buying a hotel?](/buy-a-hotel/due-diligence-checklist). #### What does it cost to leave Tru before the term ends? Hilton's liquidated damages for a Tru that has been open more than two years are the hotel's average monthly royalty fees multiplied by 60, or by the months remaining in the final 60 months of the term.[1] Item 6 of the 2026 Tru FDD (p. 26) sets four cases for a termination by Hilton. Before opening: the system's average monthly royalty fees multiplied by 60. From opening to the second anniversary: the greater of the hotel's average monthly royalty fees multiplied by 60, or the system's average monthly royalty fees multiplied by 60. After the second anniversary and before the final 60 months of the term: the hotel's average monthly royalty fees multiplied by 60. Within the final 60 months: the hotel's average monthly royalty fees multiplied by the number of months remaining.[1] Note 8 to Item 6 (p. 32) defines the hotel's average as the royalty fees due for the 24 months before the month of termination, divided by 24. The system's average is the average monthly royalty per guest room owed by U.S. Tru hotels over the prior 12 full calendar months, multiplied by the hotel's approved guest rooms. Fee discounts, ramps and waivers are excluded from the calculation.[1] Opening without Hilton's written authorization costs $5,000 per day.[1] Item 6 states that the monthly royalty fee and liquidated damages are the only fees in the item that are not subject to change.[1] #### Does Hilton offer key money on a Tru? Hilton may, in its sole discretion, offer a development incentive on a Tru, and the 2026 FDD calls it a contingent liability, not a loan.[1] Item 10 of the 2026 Tru FDD (p. 44) describes an incentive as a financial contribution toward the development or conversion of the hotel, documented by a development incentive note signed with the franchise agreement. It bears no interest and does not have to be repaid unless the franchise terminates before the end of the term or a transfer occurs. The repayable amount falls by an equal share for each year the hotel is open: one-twentieth a year on a 20-year term, in Hilton's example.[1] On a sale, the seller pays the then-current repayable amount unless Hilton permits the buyer to assume the note.[1] The FDD does not publish incentive amounts, and the program can be changed or ended at any time. The term is defined at [key money](/glossary/key-money). #### How do owners finance Tru franchise fees, a PIP or a conversion? Inside the acquisition or construction loan when the costs are part of a purchase or a build, or with a separate renovation loan when they are not. Lenders size the loan to the hotel's income, and no lender type publishes its leverage limits or spreads. As of September 17, 2026, Prime is 7.00 percent, SOFR is 3.85 percent and the SBA 7(a) maximum allowable rate is 10.00 percent.[2] Item 7 of the Tru FDD notes that many lenders will require an environmental assessment report.[1] The loan structures are at [How do I finance converting my hotel to a new brand?](/hotel-financing/brand-conversion-financing) and [How do I finance a hotel PIP or renovation?](/hotel-financing/pip-and-renovation-loans). The wider trade between a flag and independence is at [Should I buy a branded or independent hotel?](/buy-a-hotel/branded-vs-independent), and the upgrade list itself is defined at [PIP](/glossary/pip). #### Whose numbers are these, and how current are they? Every figure on this page comes from Hilton's 2026 Tru Franchise Disclosure Document, issued March 30, 2026. It is the franchisor's document, not ours.[1] The FDD is written by the franchisor, Hilton Franchise Holding LLC, and a prospective franchisee must receive it at least 14 calendar days before signing a binding agreement or paying anything.[1] Hilton reissues it every year and marks most fees "currently", which means they can change. Hilton also reports that it negotiates. It agreed to modify the monthly royalty fee in 18 instances in 2025 (Item 6, p. 30), and in 2025 franchisees paid application fees from $0 to $100,000 for new development or conversion and $75,000 to $150,000 for a change of ownership (Item 5, p. 17).[1] Get the current FDD from Hilton, and read the franchise agreement attached to it, before you rely on any number here. This page is a neutral fee guide. It does not rank brands or recommend one. The document type is explained at [franchise disclosure document](/glossary/franchise-fdd), and the other brand guides are listed at [How much does a hotel franchise cost?](/hotel-franchise-costs). Table: Tru by Hilton franchise fees, 2026 FDD issued March 30, 2026 (Items 5, 6 and 7) Fee | Amount | Where in the FDD Application fee, new development or conversion | $100,000[1] | Item 5, p. 15 Application fee, change of ownership | $150,000[1] | Item 5, p. 15 Application fee, re-licensing | $100,000[1] | Item 5, p. 15 PIP fee | $10,000[1] | Item 5, p. 15 OnQ system: hardware, software, installation | $36,652 to $90,846[1] | Item 5, p. 16 Monthly royalty fee | 5.5% of gross rooms revenue[1] | Item 6, p. 20 Monthly program fee | 4% of gross rooms revenue. May change, capped at the current rate plus 1%[1] | Item 6, pp. 20 and 30 Hilton Honors | 2% of total eligible guest folio[1] | Item 6, p. 23 Hilton Advance fee | 1.35% of eligible digital direct revenue, up to $30 per stay[1] | Item 6, p. 23 OnQ connectivity, and hardware and software maintenance | $400 to $600 and $1,037 to $2,330 per month[1] | Item 6, p. 20 Room addition fee | $400 per added guest room[1] | Item 6, p. 20 Permitted transfer processing fee | $5,500[1] | Item 6, p. 25 Lender comfort letter | $3,500, and $1,500 for an assignment[1] | Item 6, p. 26 Liquidated damages, after year 2 | Hotel's average monthly royalty fees x 60, or x months remaining in the final 60 months[1] | Item 6, pp. 26-27 Estimated initial investment, 98 rooms | $14,258,164 to $20,659,558, excluding real estate[1] | Item 7, p. 34 First-party data point: Matthews Hotel Markets' September 2026 rate sheet records Prime at 7.00% effective September 17, 2026, SOFR at 3.85% and the SBA 7(a) maximum allowable rate at 10.00%, the indexes a loan for franchise fees, a PIP or a conversion is priced against.[2] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: one year of Tru by Hilton brand fees on assumed rooms revenue): Hypothetical. Assume a Tru by Hilton earns $3,000,000 of gross rooms revenue in a year, and that $1,200,000 of guest folios are eligible Hilton Honors folios. Both figures are assumptions chosen for round arithmetic. They are not forecasts and they are not from the FDD. Monthly royalty fee at 5.5 percent: $3,000,000 x 0.055 = $165,000.[1] Monthly program fee at 4 percent: $3,000,000 x 0.04 = $120,000.[1] Hilton Honors at 2 percent of eligible folio: $1,200,000 x 0.02 = $24,000.[1] OnQ connectivity plus hardware and software maintenance: $1,437 to $2,930 per month, or $17,244 to $35,160 a year.[1] Total of these four lines: $326,244 to $344,160. Hilton Advance fees, third-party reservation charges, travel planner commissions, training and guest assistance charges are extra and depend on how guests book, so they are left out. The example shows fees only. It says nothing about profit. FAQ: - Q: How much does it cost to build a Tru by Hilton? A: Hilton's 2026 FDD, issued March 30, 2026, estimates $14,258,164 to $20,659,558 for a newly built 98-room Tru, excluding real estate, market studies, insurance and interest. Up to $234,346 of that is paid to Hilton or its affiliates.[1] - Q: What is the Tru by Hilton royalty fee? A: 5.5 percent of gross rooms revenue, paid monthly, plus a 4 percent monthly program fee. Hilton reports it agreed to modify the royalty in 18 instances in 2025, so the rate is sometimes negotiated.[1] - Q: I'm buying an existing Tru by Hilton. What will Hilton charge me? A: A $150,000 change of ownership application fee and a $10,000 PIP fee, under the 2026 FDD. You sign Hilton's then-current franchise agreement and agree to its requested upgrades. In 2025, buyers paid $75,000 to $150,000.[1] - Q: How long does a Tru by Hilton franchise last? A: Generally 22 years from the effective date for new construction and 10 to 20 years from opening for a conversion. A buyer generally takes the remaining term or another term Hilton approves. There is no right to renew.[1] - Q: How much does a Tru by Hilton owner make? A: The FDD does not say. Item 19 reports room rate, occupancy, RevPAR, RevPAR index and Hilton Honors contribution for comparable hotels. It reports no expenses or profit, and Hilton states there is no assurance any hotel will achieve the results shown.[1] - Q: What does it cost to terminate a Tru by Hilton franchise early? A: After the second anniversary of opening, liquidated damages are the hotel's average monthly royalty fees multiplied by 60, or by the months remaining in the final 60 months of the term.[1] Sources: - [1] 2026 Tru by Hilton Franchise Disclosure Document (issued March 30, 2026): cover page; Item 5, pp. 15-19; Item 6, pp. 20-33; Item 7, pp. 33-37; Item 10, pp. 44-45; Item 17, pp. 70-78; Item 19, pp. 78-83 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2026/03/2026-US-FDD-Tru.pdf - [2] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates ## How does the hotel business work? ### How does the hotel business work? URL: https://matthewshotelmarkets.com/hotel-industry Last updated: 2026-09-18 A hotel sells room nights, and three parties usually split the work: an owner who holds the real estate and the risk, a brand that licenses its name for a share of rooms revenue, and an operator who runs the building. In 2025 U.S. hotels ran 62.3 percent occupancy at a $160.54 average rate, per CoStar figures reported January 22, 2026.[1] Key takeaways: - Rooms are the business. Apple Hospitality REIT, which owns 217 select-service hotels, reported $1,278.4 million of room revenue in $1,412.4 million of total revenue for 2025, which is 90.5 percent.[2] - The name on the sign rarely owns the building. Hilton owned or leased 46 of its 9,158 properties at December 31, 2025, and Marriott says it owns or leases less than one percent of its system.[5][6] - A brand is paid off the top. Hilton's 2025 Hampton disclosure lists a 6 percent royalty and a 4 percent program fee, both on gross rooms revenue.[7] - U.S. RevPAR was $100.02 in 2025, down 0.3 percent. July 2026 RevPAR was $119.77, up 8.2 percent on the year, helped by the World Cup.[1][4] - Forecasters disagree about 2026. CoStar and Tourism Economics say RevPAR grows 4.4 percent. CBRE says 2.5 percent. We publish both and blend neither.[14][15] #### How do hotels make money? Hotels make money by selling room nights first, then food, drink, meeting space, parking and other services, and what is left after departmental costs, overhead, fees, taxes and insurance is the owner's. The mix depends on the kind of hotel. Apple Hospitality REIT owns 217 select-service hotels, and rooms were 90.5 percent of its 2025 revenue.[2] Host Hotels & Resorts owns luxury and upper-upscale hotels, and rooms were $3,608 million of $6,015 million of hotel revenue in 2025, about 60 percent, with food and beverage at $1,803 million.[3] Both companies publish the expense side too. Host's rooms department cost $906 million against that $3,608 million of revenue, while its food and beverage department cost $1,224 million against $1,803 million.[3] Rooms carry the profit. The industry keeps its books in one format, the Uniform System of Accounts for the Lodging Industry, so one hotel's statement can be compared with another's. The full walk-through, with both REITs' reported margins, is at [How do hotels make money?](/hotel-industry/how-hotels-make-money). #### What are RevPAR, ADR and occupancy? Occupancy is the share of rooms sold, ADR is the average rate paid for a sold room, and RevPAR is the two multiplied together: room revenue per available room. For 2025, CoStar reported U.S. occupancy of 62.3 percent, ADR of $160.54 and RevPAR of $100.02.[1] Multiply 0.623 by $160.54 and you get $100.02. For July 2026 it reported 69.7 percent, $171.74 and $119.77.[4] Those are national averages across every kind of hotel in every kind of market, so they are a poor yardstick for any single property. The useful comparison is a hotel against its own competitive set. Hilton's 2025 Hampton disclosure reports an average RevPAR index of 121.0 for comparable Hampton hotels in 2024, where 100 means a fair share.[7] Definitions, the latest public figures and what a good number means are at [What are RevPAR, ADR and occupancy, and what is a good number?](/hotel-industry/revpar-adr-occupancy). #### Who owns the hotel, and who runs it? Usually three different parties: an owner holds the property, a franchisor licenses the brand, and the owner or a third-party management company operates the hotel. Hilton's 10-K counts 9,158 properties at December 31, 2025. It owned or leased 46, managed 873 and franchised or licensed 8,239.[5] Marriott reports 9,805 properties at year-end 2025, of which 7,644 were franchised, licensed or other, and says it owns or leases less than one percent of its system.[6] The brand companies are fee businesses. The people who own the buildings are mostly private owners, plus a small number of public REITs and institutional funds. How the franchise agreement and the management agreement differ, and what each costs according to public filings, is at [What is the difference between a hotel owner, a franchisor and a management company?](/hotel-industry/owner-franchisor-management-company). The ownership landscape itself is at [Who owns hotels in the United States?](/hotel-industry/who-owns-hotels). #### What do chain scales like upper midscale and upscale mean? Chain scales are the industry's price tiers for branded hotels: luxury, upper upscale, upscale, upper midscale, midscale and economy, with independents counted as their own group. STR has said it assigns chain scales by grouping branded hotels on their average room rates, with all independent hotels in a single separate category.[11] Choice Hotels' fiscal 2025 10-K uses the same six tiers to describe the industry and places Hampton by Hilton and Holiday Inn Express in upper midscale and Courtyard and Hilton Garden Inn in upscale.[10] The tier matters to an owner because lenders, buyers and forecasters all cut their numbers by it. CBRE's midyear 2026 outlook has luxury RevPAR growing 5.2 percent and economy falling 0.6 percent in the same year.[15] The tiers, and how they differ from service labels like select-service, are at [What are hotel chain scales and classes?](/hotel-industry/chain-scales-and-classes). #### How big is the U.S. hotel industry? AHLA forecasts nearly $805 billion of hotel guest spending in 2026 and about 2.2 million people employed directly in hotel operations.[12] Those figures are from AHLA's public State of the Industry release of January 27, 2026, which also reports $85.1 billion of federal, state and local taxes generated in 2025.[12] The Bureau of Labor Statistics counts 1,926,600 employees in the accommodation subsector in August 2026, a preliminary figure, across 78,789 private establishments in the first quarter of 2026. That subsector is hotels and motels plus RV parks, camps and rooming houses.[13] The two employment numbers measure different things, and the page that sets them side by side is [How big is the US hotel industry in 2026?](/hotel-industry/industry-size-2026). #### What is the outlook for hotels? Every public forecast for 2026 was raised during the year, and the forecasters still disagree by about two points of RevPAR growth. CoStar and Tourism Economics started 2026 forecasting RevPAR growth of 0.6 percent and, on August 7, 2026, raised it to 4.4 percent, with 2.1 percent for 2027.[14] CBRE's midyear review has 2.5 percent for 2026 and 2.1 percent for 2027.[15] We set the public forecasts side by side with their dates at [What is the outlook for hotels in 2026 and 2027?](/hotel-industry/outlook-2026-2027). We do not average them into a forecast of our own. #### How does any of this affect what my hotel is worth or what it can borrow? Value and debt are both sized on the hotel's net operating income, so every basic on this page ends up in a cap rate or a coverage test. A buyer capitalizes net operating income. The Matthews Hotel Index for Q1 2026 puts stabilized select-service cap rates at 7.5 to 8.25 percent in Austin, for example.[17] A lender tests the same income against debt service at current rates. As of September 17, 2026, the 10-year Treasury is 4.94 percent and SOFR is 3.85 percent, and no lender type publishes its spread over either.[16] From here, owners usually want one of four pages: [How does hotel financing work, and what does it cost right now?](/hotel-financing), [What is my hotel worth, and who decides?](/hotel-valuation), [What is involved in selling a hotel?](/sell-a-hotel) or [How do I buy a hotel?](/buy-a-hotel). #### Who owns most U.S. hotels? Private owners, many of them family businesses, own most U.S. hotels, and most of those hotels carry a franchise. AAHOA, the owners' association, says its members own 36,807 U.S. hotels, which it puts at 60 percent of the country's hotels, citing a study it commissioned from Oxford Economics.[8] AHLA says 57 percent of U.S. hotels are franchised and projected 36,173 franchised hotels for 2024.[9] Both are trade-association figures and we attribute them that way. Public REITs are visible but small by count: Host owns 76 hotels and Apple Hospitality owns 217.[2][3] Table: The basics of the U.S. hotel business and the public source behind each figure (read September 18, 2026) Question | The short answer | Source and date Where does the revenue come from? | Rooms: 90.5% of revenue at a select-service REIT, about 60% at a luxury and upper-upscale REIT | Apple Hospitality and Host Hotels full-year 2025 results, February 2026[2][3] How full and at what rate? | 62.3% occupancy, $160.54 ADR, $100.02 RevPAR for 2025 | CoStar, reported January 22, 2026[1] Latest month? | 69.7% occupancy, $171.74 ADR, $119.77 RevPAR in July 2026 | CoStar, reported August 26, 2026[4] Does the brand own the hotel? | Rarely. Hilton owned or leased 46 of 9,158 properties | Hilton 10-K, as of December 31, 2025[5] What does a brand charge? | Hampton: 6% royalty plus 4% program fee on gross rooms revenue | Hilton's 2025 Hampton FDD, issued March 30, 2025[7] Who owns the buildings? | AAHOA says its members own 60% of U.S. hotels | AAHOA and Oxford Economics, as published by AAHOA[8] How big is it? | Nearly $805 billion of guest spending forecast for 2026 | AHLA, January 27, 2026[12] Where is it going? | 2026 RevPAR growth: 4.4% per CoStar and Tourism Economics, 2.5% per CBRE | August 7, 2026 and midyear 2026[14][15] First-party data point: The Matthews Hotel Index for Q1 2026 shows how far a single market sits from the national average: Austin at about 70 percent occupancy with RevPAR between $95 and $165 depending on segment, against the 62.3 percent and $100.02 CoStar reported for the whole country in 2025.[17][1] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: a 100-room branded hotel running exactly at the 2025 national average): Hypothetical. No real hotel runs at the national average, which is the point of the exercise. Rooms available: 100 rooms times 365 nights is 36,500 room nights a year. RevPAR: CoStar reported $100.02 for 2025, which is 62.3 percent occupancy times a $160.54 ADR.[1] Rooms revenue is 36,500 times $100.02, or $3,650,730. Brand fees: on Hilton's 2025 Hampton schedule the royalty is 6 percent of gross rooms revenue, $219,044, and the program fee is 4 percent, $146,029.[7] Together that is $365,073 a year before the hotel pays a housekeeper, a utility bill or a lender. What the owner gets in return is the reservation system and the index premium. Hilton reports that comparable Hampton hotels averaged a RevPAR index of 121.0 in 2024, meaning 21 percent more RevPAR than their competitive sets.[7] Whether that trade is a good one for a specific hotel is a market question, and the brand's average is not a promise. FAQ: - Q: Is a Hampton Inn owned by Hilton? A: Almost never. Hilton owned or leased 46 of its 9,158 properties at December 31, 2025, across all brands.[5] Of 1,960 comparable Hampton hotels in Hilton's 2025 disclosure, 1,945 were managed by the franchisee or a non-Hilton management company.[7] - Q: What is the main source of revenue for a hotel? A: Rooms. They were 90.5 percent of 2025 revenue at Apple Hospitality REIT's select-service hotels and about 60 percent at Host Hotels & Resorts' luxury and upper-upscale hotels, where food and beverage was another 30 percent.[2][3] - Q: What was U.S. hotel occupancy in 2025? A: 62.3 percent, down 1.2 percent from 2024, according to CoStar figures reported on January 22, 2026. ADR was $160.54 and RevPAR was $100.02.[1] - Q: Is RevPAR the same as profit? A: No. RevPAR measures room revenue only. AHLA reported in January 2026 that gross operating profit per available room was roughly 90 percent of its 2019 level because operating expenses had risen.[12] Lenders and buyers underwrite income, not RevPAR. - Q: How many people work in U.S. hotels? A: AHLA projects about 2.2 million direct hotel operations jobs in 2026.[12] The Bureau of Labor Statistics counts 1,926,600 employees in the accommodation subsector for August 2026, a preliminary figure.[13] The definitions differ. - Q: Are hotels expected to grow in 2026? A: Yes, by every public forecast we read. CoStar and Tourism Economics forecast RevPAR growth of 4.4 percent as of August 7, 2026, and CBRE's midyear review forecasts 2.5 percent.[14][15] Sources: - [1] Key full-year US hotel metrics fall for first time since 2020 (January 22, 2026): full-year 2025 occupancy, ADR and RevPAR (Hotel Dive, citing CoStar, accessed 2026-09-18): https://www.hoteldive.com/news/hotel-occupancy-revpar-decline-2025/810212/ - [2] Apple Hospitality REIT Reports Results of Operations for Fourth Quarter and Full Year 2025 (February 23, 2026) (Apple Hospitality REIT, Inc., accessed 2026-09-18): https://ir.applehospitalityreit.com/News/news-details/2026/Apple-Hospitality-REIT-Reports-Results-of-Operations-for-Fourth-Quarter-and-Full-Year-2025/default.aspx - [3] Host Hotels & Resorts, Inc. Reports Results for 2025 (February 18, 2026), consolidated statements of operations and comparable hotel results (Host Hotels & Resorts, Inc., via GlobeNewswire, accessed 2026-09-18): https://www.globenewswire.com/news-release/2026/02/18/3240651/0/en/host-hotels-resorts-inc-reports-results-for-2025.html - [4] U.S. Hotels Post Strong July Gains as Occupancy, Rates and RevPAR Rise (August 26, 2026) (Hotel Online, citing CoStar, accessed 2026-09-18): https://www.hotel-online.com/news/us-hotels-post-strong-july-gains-as-occupancy-rates-and-revpar-rise - [5] Hilton Worldwide Holdings Inc. Form 10-K for fiscal year 2025 (filed February 11, 2026), Item 1, Business (U.S. Securities and Exchange Commission, EDGAR, accessed 2026-09-18): https://www.sec.gov/Archives/edgar/data/1585689/000158568926000007/hlt-20251231.htm - [6] Marriott International, Inc. Form 10-K for fiscal year 2025 (filed February 10, 2026), Item 1, Business (U.S. Securities and Exchange Commission, EDGAR, accessed 2026-09-18): https://www.sec.gov/Archives/edgar/data/1048286/000104828626000007/mar-20251231.htm - [7] 2025 Hampton Franchise Disclosure Document (issued March 30, 2025), Items 5, 6, 15, 17 and 19 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - [8] Oxford Economics Study: the economic impact of AAHOA Member-owned hotels (Asian American Hotel Owners Association (AAHOA), accessed 2026-09-18): https://www.aahoa.com/resources/oxford-study - [9] Franchising: hotel franchising facts (American Hotel & Lodging Association, accessed 2026-09-18): https://www.ahla.com/issue/franchising - [10] Choice Hotels International, Inc. Form 10-K for fiscal year 2025, Item 1, Business: The Lodging Industry (U.S. Securities and Exchange Commission, EDGAR, accessed 2026-09-18): https://www.sec.gov/Archives/edgar/data/1046311/000104631126000008/chh-20251231.htm - [11] Luxury chain scale shows pricing disparity (June 19, 2009), which states how STR assigns chain scales (STR, republished by Hospitality Net, accessed 2026-09-18): https://www.hospitalitynet.org/report/4042052/luxury-chain-scale-shows-pricing-disparity-str - [12] AHLA releases 2026 State of the Industry (January 27, 2026) (American Hotel & Lodging Association, accessed 2026-09-18): https://www.ahla.com/news/ahla-releases-2026-state-industry - [13] Industries at a Glance: Accommodation, NAICS 721 (data extracted September 18, 2026) (U.S. Bureau of Labor Statistics, accessed 2026-09-18): https://www.bls.gov/iag/tgs/iag721.htm - [14] CoStar, Tourism Economics 'significantly' boost US hotel outlook (August 7, 2026) (Hotel Dive, citing CoStar and Tourism Economics, accessed 2026-09-18): https://www.hoteldive.com/news/costar-tourism-economics-raise-us-hotel-performance-outlook-2026/827318/ - [15] U.S. Real Estate Market Outlook Midyear Review 2026, Hotels (CBRE, accessed 2026-09-18): https://www.cbre.com/insights/books/us-real-estate-market-outlook-midyear-review-2026/hotels - [16] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates - [17] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/research/mhi/q1-2026 ### What are hotel chain scales and classes? URL: https://matthewshotelmarkets.com/hotel-industry/chain-scales-and-classes Last updated: 2026-09-18 Chain scales are price tiers for hotel brands: luxury, upper upscale, upscale, upper midscale, midscale and economy, with independent hotels grouped separately. STR has said it assigns them by grouping branded hotels on average room rates.[1] The tier matters: CBRE's midyear 2026 outlook has luxury RevPAR growing 5.2 percent this year and economy falling 0.6 percent.[5] Key takeaways: - The six tiers, top to bottom: luxury, upper upscale, upscale, upper midscale, midscale, economy. Choice Hotels' fiscal 2025 10-K uses the same six to describe the industry.[3] - The basis is price, not amenities. STR has said it groups branded hotels by average room rates and puts all independents in a separate category.[1] - Class is the version that includes independents: an independent hotel gets a class based on its room rate relative to nearby chain hotels.[2] - Select-service, focused service and full service are service labels, not chain scales. Marriott and Hilton each use their own tier names in their 10-Ks.[4][7] - New supply is concentrated in two tiers. Upper midscale and upscale were 3,507 of the 5,975 projects in the U.S. pipeline at mid-2026, per Lodging Econometrics.[6] #### What are the hotel chain scales? The hotel chain scales are six price tiers for branded hotels, which run luxury, upper upscale, upscale, upper midscale, midscale and economy, plus a separate group for independent hotels. The system belongs to STR, the benchmarking firm that is now part of CoStar. Nearly every lender, appraiser, broker and brand in the United States uses its vocabulary, which is why you will see the tiers in a 10-K, a construction pipeline report and a forecast without anyone stopping to define them. Choice Hotels' fiscal 2025 10-K lays the six tiers out in a table to describe the lodging industry.[3] Lodging Econometrics reports the construction pipeline by the same tiers.[6] The names have changed over time. An STR guide from December 2008 lists seven scale groups: luxury, upper upscale, upscale, midscale with food and beverage, midscale without food and beverage, economy and independent.[2] The two midscale groups have since become upper midscale and midscale, which is the wording in current filings.[3] #### How does STR decide which chain scale a brand belongs to? STR decides a brand's chain scale by price: it has said it determines chain scales by grouping branded hotels based on average room rates.[1] Two things follow from that. First, the scale is about what guests pay, not about what the hotel offers. A brand with no restaurant can sit above a brand with one if it commands a higher rate. Second, the scale attaches to the brand, so every hotel in the brand carries the same scale whether it is the best or the worst in the system. STR has also said that all independent, non-branded hotels are categorized in a single, separate chain scale category.[1] The STR statement we cite is from 2009, and we could not open STR's current methodology page or its current brand list, which sit on CoStar's site. The documents we did read give no rate cutoffs between tiers, so we publish none. #### What is the difference between chain scale and class? Chain scale sorts brands, and class sorts every hotel, including independents, into the same six tiers. STR's guide to its STAR report defines class as an industry categorization that includes chain-affiliated and independent hotels. The class for a chain-affiliated hotel is the same as its chain scale. An independent hotel is assigned a class based on its room rate, relative to that of the chain hotels in its geographic proximity.[2] So a boutique independent that charges what the nearby upper-upscale flags charge is an upper-upscale class hotel, even though its chain scale is simply independent. This matters when you read a benchmarking report, because a hotel is compared against its market class as well as against its own [comp set](/glossary/comp-set). The same STR guide says a competitive set must include at least three hotels other than the subject, with four preferred.[2] #### Is select-service a chain scale? No. Select-service, limited service, focused service, full service and extended stay describe what a hotel offers, while chain scale describes what it charges. The two systems overlap but are not the same, and the brand companies do not use STR's names for their own portfolios. Marriott's 10-K for fiscal 2025 sorts its brands into luxury, premium, select and midscale, and puts Courtyard, Fairfield, Residence Inn, SpringHill Suites and TownePlace Suites in select.[4] Hilton's 10-K describes its brands by positioning: luxury, lifestyle, full service, focused service and all-suites.[7] Hilton's franchise disclosure describes Hampton as offering high quality at moderate prices.[8] On this site, select-service means a rooms-focused branded hotel, which in practice sits in the upscale or upper midscale tier. The investment difference between the service models is covered at [What is the difference between select-service and full-service hotel investment?](/hotel-valuation/select-service-vs-full-service). #### Which hotel brands are in which chain scale? STR's full brand-by-scale list is a licensed product that we do not reproduce, but public 10-K filings give examples for each tier. Choice Hotels' fiscal 2025 10-K gives brand examples for every tier. It places Hampton by Hilton, Holiday Inn Express, Fairfield Inn and its own Comfort Inn in upper midscale. It places Courtyard, Hilton Garden Inn, Hyatt Place and its own Cambria Hotels in upscale, and Super 8, Motel 6, Red Roof Inn and its own Econo Lodge in economy.[3] Those are one franchisor's examples in an SEC filing. They are not STR's current list, and because the tier follows average rate, a brand's tier can change over time. If you need the scale for a specific flag, the franchisor's development team or your STR report will state it. For an underwriting conversation it is usually enough to know the tier and the two on either side of it. #### How are the chain scales performing in 2026? In 2026 the top of the market is growing and the bottom is not, according to every public forecast we read. CBRE's midyear 2026 outlook forecasts national RevPAR growth of 2.5 percent for the year, with luxury at 5.2 percent, midscale at 0.7 percent and economy at minus 0.6 percent.[5] CoStar and Tourism Economics made the same point in February 2026, when they said upper-tier segments were showing signs of demand recovery while select-service and economy hotels faced downward pressure on average daily rates.[9] Company results show the distance between tiers in dollars. For 2025, Choice Hotels reported system RevPAR of $52.85, Apple Hospitality REIT reported $117.95 at its comparable select-service hotels, and Host Hotels & Resorts reported $229.24 at its comparable luxury and upper-upscale hotels.[3][10][11] Definitions of the metric are at [What are RevPAR, ADR and occupancy, and what is a good number?](/hotel-industry/revpar-adr-occupancy), and the forecasts are compared at [What is the outlook for hotels in 2026 and 2027?](/hotel-industry/outlook-2026-2027). #### Which chain scales are getting the most new hotels? Upper midscale and upscale are getting the most new hotels, with 2,225 and 1,282 projects in the U.S. pipeline at the end of the second quarter of 2026, according to Lodging Econometrics.[6] The total pipeline was 5,975 projects with 703,001 rooms, so those two tiers were 59 percent of projects by our arithmetic. Upper midscale alone accounted for 214,027 rooms and upscale for 159,252. Upper upscale stood at 367 projects with 65,021 rooms and luxury at 103 projects with 25,496 rooms, which Lodging Econometrics called record highs for both.[6] The release was dated July 23, 2026. For an owner of an upper midscale or upscale hotel, the pipeline is the competitor that has not opened yet. A new-build flag in your tier, in your submarket, affects both your RevPAR index and what a buyer will assume about it. #### Why does chain scale matter for value and financing? Chain scale matters because buyers and lenders use it as shorthand for how volatile a hotel's income is and how deep the pool of buyers and lenders will be. Cap rates differ by segment within the same city. The Matthews Hotel Index for Q1 2026 shows stabilized select-service cap rates of 7.5 to 8.25 percent in Austin, against 7.0 to 8.0 percent for full-service and 6.5 to 7.75 percent for resort and lifestyle hotels.[12] Lenders sort the same way, though none publishes its terms by tier. For how the tier feeds a price, see [What is a good cap rate for a hotel in 2026?](/hotel-valuation/hotel-cap-rates) and [How much is my branded select-service hotel worth?](/hotel-valuation/branded-select-service-hotel-value). For the loan, see [What do lenders require for a hotel loan?](/hotel-financing/loan-requirements). Table: The hotel chain scales, how each is defined, and a dated public data point for each Tier | How it is defined | A public data point Luxury | Highest average room rates among branded hotels[1] | CBRE forecasts 2026 RevPAR growth of 5.2%.[5] Pipeline: 103 projects, 25,496 rooms at Q2 2026[6] Upper upscale | Second tier by average room rate[1] | Pipeline: 367 projects, 65,021 rooms at Q2 2026[6] Upscale | Third tier by average room rate[1] | Pipeline: 1,282 projects, 159,252 rooms at Q2 2026[6] Upper midscale | Fourth tier by average room rate[1] | Largest pipeline: 2,225 projects, 214,027 rooms at Q2 2026[6] Midscale | Fifth tier by average room rate[1] | CBRE forecasts 2026 RevPAR growth of 0.7%[5] Economy | Lowest average room rates among branded hotels[1] | CBRE forecasts 2026 RevPAR change of minus 0.6%[5] Independent | All non-branded hotels, grouped separately.[1] Each gets a class from its rate relative to nearby chain hotels[2] | AHLA says 57% of U.S. hotels are franchised, so 43% are not[13] First-party data point: The Matthews Hotel Index for Q1 2026 shows segment changing price inside one city: Austin select-service cap rates of 7.5% to 8.25%, full-service of 7.0% to 8.0%, and resort and lifestyle of 6.5% to 7.75%.[12] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: how an independent hotel ends up with a class): Hypothetical. The hotel, its rate and its neighbors are invented to show the logic. The documents we read give no rate cutoffs, so the dollar figures below are illustration only. A 60-room independent inn in a downtown district runs an average rate of $182 for the year. It has no flag, so its chain scale is independent.[1] Its class depends on the chain hotels near it.[2] Suppose the branded upscale hotels in the same area average $175 and the branded upper midscale hotels average $140. The inn's $182 sits with the upscale group, so its class is upscale. In a benchmarking report it would be compared with upscale class hotels in its market and submarket, as well as with whatever competitive set its management selected, which needs at least three hotels besides the inn itself.[2] Move the same inn to a resort town where upscale flags average $260 and its $182 would place it a tier or two lower. The building did not change. The neighbors did. That is the practical difference between a chain scale, which follows the brand everywhere, and a class, which is local. FAQ: - Q: What chain scale is a Hampton Inn? A: Upper midscale, according to the brand examples in Choice Hotels' fiscal 2025 10-K, which lists Hampton by Hilton alongside Holiday Inn Express, Fairfield Inn and Comfort Inn.[3] STR's own current list is licensed and we do not reproduce it. - Q: What is the difference between upscale and upper upscale? A: Average room rate. Both are STR tiers for branded hotels, and upper upscale is the higher-priced of the two.[1] Choice Hotels' 10-K gives Courtyard and Hilton Garden Inn as upscale examples and Marriott, Hilton, Hyatt and Sheraton as upper upscale examples.[3] - Q: Is chain scale based on amenities or star rating? A: Neither. STR has said it determines chain scales by grouping branded hotels based on average room rates.[1] Star and diamond ratings come from other organizations and measure different things. - Q: What chain scale is an independent hotel? A: Independent is its own chain scale category. For benchmarking, an independent hotel is also assigned a class based on its room rate relative to nearby chain hotels.[1][2] - Q: Which hotel segment is performing best in 2026? A: Luxury, in CBRE's midyear 2026 outlook: RevPAR growth of 5.2 percent against 2.5 percent nationally, with economy at minus 0.6 percent.[5] - Q: Can a brand change chain scales? A: Yes. Because the scale follows a brand's average room rate, a brand's tier can change as its rates change.[1] The tier names themselves changed after 2008, when STR still listed midscale with and without food and beverage.[2] Sources: - [1] Luxury chain scale shows pricing disparity (June 19, 2009), which states how STR assigns chain scales (STR, republished by Hospitality Net, accessed 2026-09-18): https://www.hospitalitynet.org/report/4042052/luxury-chain-scale-shows-pricing-disparity-str - [2] How to use the STAR report (PDF dated December 1, 2008): definitions of class, market scale and competitive set (STR, hosted by HSMAI, accessed 2026-09-18): https://higherlogicdownload.s3.amazonaws.com/HSMAI/1e8cd6e8-21bf-476f-bc30-b600b33c652d/UploadedFiles/7pER55exS7zc1Qx5iSaK_HowTo%20Use%20the%20STAR%20Report%20-%20STR.pdf - [3] Choice Hotels International, Inc. Form 10-K for fiscal year 2025, Item 1, Business: The Lodging Industry (U.S. Securities and Exchange Commission, EDGAR, accessed 2026-09-18): https://www.sec.gov/Archives/edgar/data/1046311/000104631126000008/chh-20251231.htm - [4] Marriott International, Inc. Form 10-K for fiscal year 2025 (filed February 10, 2026), Item 1, Business (U.S. Securities and Exchange Commission, EDGAR, accessed 2026-09-18): https://www.sec.gov/Archives/edgar/data/1048286/000104828626000007/mar-20251231.htm - [5] U.S. Real Estate Market Outlook Midyear Review 2026, Hotels (CBRE, accessed 2026-09-18): https://www.cbre.com/insights/books/us-real-estate-market-outlook-midyear-review-2026/hotels - [6] U.S. hotel construction pipeline, second quarter 2026 (July 23, 2026) (Lodging Econometrics, accessed 2026-09-18): https://lodgingeconometrics.com/us-hotel-construction-pipeline-q2-2026/ - [7] Hilton Worldwide Holdings Inc. Form 10-K for fiscal year 2025 (filed February 11, 2026), Item 1, Business (U.S. Securities and Exchange Commission, EDGAR, accessed 2026-09-18): https://www.sec.gov/Archives/edgar/data/1585689/000158568926000007/hlt-20251231.htm - [8] 2025 Hampton Franchise Disclosure Document (issued March 30, 2025), Items 5, 6, 15, 17 and 19 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - [9] 2026 forecast shows modest RevPAR growth amid lingering industry headwinds (February 10, 2026) (Hotel Online, citing STR and Tourism Economics (CoStar Group), accessed 2026-09-18): https://www.hotel-online.com/news/2026-forecast-shows-modest-revpar-growth-amid-lingering-industry-headwinds - [10] Apple Hospitality REIT Reports Results of Operations for Fourth Quarter and Full Year 2025 (February 23, 2026) (Apple Hospitality REIT, Inc., accessed 2026-09-18): https://ir.applehospitalityreit.com/News/news-details/2026/Apple-Hospitality-REIT-Reports-Results-of-Operations-for-Fourth-Quarter-and-Full-Year-2025/default.aspx - [11] Host Hotels & Resorts, Inc. Reports Results for 2025 (February 18, 2026), consolidated statements of operations and comparable hotel results (Host Hotels & Resorts, Inc., via GlobeNewswire, accessed 2026-09-18): https://www.globenewswire.com/news-release/2026/02/18/3240651/0/en/host-hotels-resorts-inc-reports-results-for-2025.html - [12] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/research/mhi/q1-2026 - [13] Franchising: hotel franchising facts (American Hotel & Lodging Association, accessed 2026-09-18): https://www.ahla.com/issue/franchising ### How do hotels make money? URL: https://matthewshotelmarkets.com/hotel-industry/how-hotels-make-money Last updated: 2026-09-18 Hotels make money mostly by selling rooms. Apple Hospitality REIT reported on February 23, 2026 that rooms were $1,278.4 million of its $1,412.4 million of 2025 revenue, and that its comparable hotels kept 34.3 percent of revenue as hotel-level EBITDA.[1] Host Hotels & Resorts, with large food and beverage operations, reported a 28.9 percent comparable hotel EBITDA margin.[2] Key takeaways: - Rooms were 90.5 percent of 2025 revenue at Apple Hospitality's 217 select-service hotels and about 60 percent at Host's luxury and upper-upscale hotels. The percentages are our arithmetic on their reported dollars.[1][2] - Rooms carry the profit. Host's rooms department cost $906 million against $3,608 million of revenue. Its food and beverage department cost $1,224 million against $1,803 million.[2] - Hotel statements follow one format, the Uniform System of Accounts for the Lodging Industry. Its 12th Revised Edition took effect January 1, 2026.[3] - Brand and management fees are visible in public filings: Apple Hospitality paid $62.6 million of franchise fees and $47.1 million of management fees in 2025.[1] - Revenue recovered faster than profit. AHLA reported in January 2026 that gross operating profit per available room was roughly 90 percent of its 2019 level.[6] #### Where does a hotel's revenue come from? A hotel's revenue comes from rooms first, then food and beverage, then everything else a guest can be charged for, and the split depends on how much of a building the hotel has besides bedrooms. Two public companies show the two ends of the range. Apple Hospitality REIT owns 217 hotels with 29,583 guest rooms, nearly all of them Hilton and Marriott select-service brands such as Hampton, Hilton Garden Inn, Courtyard and Residence Inn. For 2025 it reported room revenue of $1,278.4 million, food and beverage revenue of $65.7 million and other revenue of $68.3 million, for a total of $1,412.4 million.[1] By our arithmetic that is 90.5 percent rooms, 4.7 percent food and beverage and 4.8 percent other. Host Hotels & Resorts describes itself as one of the largest owners of luxury and upper-upscale hotels, with 76 properties and roughly 41,700 rooms. For 2025 it reported rooms revenue of $3,608 million, food and beverage revenue of $1,803 million and other revenue of $604 million, plus $99 million of condominium sales that have nothing to do with running a hotel.[2] Leaving the condominiums out, rooms were 60.0 percent of hotel revenue, food and beverage 30.0 percent and other 10.0 percent. Host also reports the same idea per room: comparable hotel RevPAR of $229.24 against total RevPAR of $382.83, so each available room produced about $153 a night of revenue that was not room rent.[2] #### Which hotel departments actually make the profit? The rooms department makes most of a hotel's profit, because a sold room costs little to service compared with a meal, which needs a kitchen, a staff and food. Host's 2025 statement of operations puts numbers on it. The rooms department's expenses were $906 million against $3,608 million of rooms revenue, so the department kept about 74.9 percent of its revenue. Food and beverage expenses were $1,224 million against $1,803 million of revenue, so that department kept about 32.1 percent.[2] Those two percentages are our arithmetic on Host's reported figures, and they are departmental margins, before any of the hotel's overhead. This is why select-service hotels exist. A hotel with a breakfast bar and no restaurant gives up a low-margin revenue line and the staff that goes with it. It is also why a full-service hotel is harder to finance on a thin year: a larger share of its revenue comes from departments that keep a third of each dollar. The investment comparison is at [What is the difference between select-service and full-service hotel investment?](/hotel-valuation/select-service-vs-full-service). #### How is a hotel profit and loss statement laid out? A hotel profit and loss statement follows the Uniform System of Accounts for the Lodging Industry, or USALI, which sorts revenue and expense the same way at every hotel so that statements can be compared. USALI is published by Hospitality Financial and Technology Professionals. AHLA's release on the current edition calls it the authoritative standard for lodging financial and operating reporting, and the 12th Revised Edition was released July 11, 2024 with an adoption date of January 1, 2026.[3] The changes in that edition include an Energy, Water and Waste schedule in place of the old Utilities schedule, a section for all-inclusive hotels, new lines for guest loyalty program costs, and new schedules for payroll full-time equivalents and for annual mandatory brand and operator costs.[3] The summary operating statement runs in a fixed order. Operating revenue comes in four categories: rooms, food and beverage, other operated departments, and miscellaneous income. Each department's direct expenses come off to give total departmental income. Then come five undistributed operating expense schedules: administrative and general, information and telecommunications systems, sales and marketing, property operations and maintenance, and energy, water and waste. What remains is gross operating profit. Management fees come next, then non-operating income and expenses such as property taxes, insurance and rent, which leaves EBITDA. An operator's version usually ends at EBITDA less a replacement reserve. An owner's version carries on through interest, depreciation and taxes to net income.[4] A lender or buyer will ask for statements in this format because it lets them compare your hotel's cost lines with others'. The terms are defined at [gross operating profit](/glossary/gop), [NOI](/glossary/noi) and [FF&E reserve](/glossary/ffe-reserve). #### What does a select-service hotel's cost structure look like in a real filing? Apple Hospitality REIT's 2025 results list its hotel expenses line by line, and together they took about two thirds of revenue. Against $1,412.4 million of total revenue, Apple Hospitality reported operating expense of $362.0 million, hotel administrative expense of $125.9 million, sales and marketing of $127.0 million, utilities of $51.4 million, repair and maintenance of $71.3 million, franchise fees of $62.6 million and management fees of $47.1 million. Property taxes, insurance and other came to $89.7 million.[1] The table below shows each as a share of revenue, which is our arithmetic. Two lines deserve a second look. Franchise fees of $62.6 million are 4.9 percent of Apple Hospitality's room revenue. That is lower than a single brand's headline schedule, such as the 6 percent royalty and 4 percent program fee in Hilton's 2025 Hampton disclosure,[5] but the two are not the same measurement. We cannot tell from the release which brand charges sit in the franchise fee line and which sit in other lines, so read 4.9 percent as the size of that line and not as the full cost of the flags. Management fees of $47.1 million are 3.3 percent of total revenue. Host reported management fees of $262 million, about 4.4 percent of its hotel revenue.[2] How those two contracts work is at [What is the difference between a hotel owner, a franchisor and a management company?](/hotel-industry/owner-franchisor-management-company). #### What profit margin do hotel owners actually report? For 2025, Apple Hospitality reported a comparable hotels adjusted hotel EBITDA margin of 34.3 percent and Host reported a comparable hotel EBITDA margin of 28.9 percent.[1][2] Both are hotel-level measures. Apple Hospitality says its adjusted hotel EBITDA leaves out corporate general and administrative expense in order to isolate property-level performance.[1] Each company defines its own measure, so the two margins are close cousins, not the same calculation. Neither margin is what the owner takes home. Both are before interest and principal on the mortgage, before the capital an owner has to keep putting back into rooms and public space, and before income taxes. A select-service hotel that keeps a third of its revenue at the hotel level still has to cover a replacement reserve and debt service out of that third. That is the number a lender tests, and you can run your own at the [hotel DSCR calculator](/tools/dscr-calculator). #### Why has hotel profit lagged hotel revenue? Hotel profit has lagged revenue because operating expenses, labor above all, rose faster than room rates. AHLA's 2026 State of the Industry release, dated January 27, 2026, says rising operating expenses kept gross operating profit per available room at roughly 90 percent of 2019 levels, and that the industry paid nearly $128 billion in wages and benefits in 2025.[6] The REITs show the same pressure in their own words. Apple Hospitality's 34.3 percent margin for 2025 was down 190 basis points from 2024, and Host's 28.9 percent was down 40 basis points.[1][2] A hotel can post record revenue and still be worth less than it was if the cost of producing that revenue grew faster. #### How does hotel income turn into value and loan proceeds? Buyers divide a hotel's net operating income by a cap rate to get value, and lenders divide the same income by debt service to decide how much they will lend. That is why the statement format matters so much: a missing management fee or reserve overstates income, and the buyer or lender will put it back. As of September 17, 2026, the 10-year Treasury is 4.94 percent and the maximum SBA 7(a) rate is 10.00 percent, and lenders do not publish the spreads or coverage floors they apply on top.[7] The method for turning income into a price is at [Walk me through the math on valuing a select-service hotel](/hotel-valuation/how-to-value-a-hotel). The financing side starts at [How does hotel financing work, and what does it cost right now?](/hotel-financing), and owners weighing a sale can start at [What is involved in selling a hotel?](/sell-a-hotel). Table: Apple Hospitality REIT, full-year 2025: hotel revenue and expense lines as reported, with each line's share of total revenue (our arithmetic) Line, as the company labels it | 2025, $ millions | Share of total revenue Room revenue | 1,278.4[1] | 90.5% Food and beverage revenue | 65.7[1] | 4.7% Other revenue | 68.3[1] | 4.8% Total revenue | 1,412.4[1] | 100.0% Operating expense | 362.0[1] | 25.6% Hotel administrative expense | 125.9[1] | 8.9% Sales and marketing expense | 127.0[1] | 9.0% Utilities expense | 51.4[1] | 3.6% Repair and maintenance expense | 71.3[1] | 5.0% Franchise fees | 62.6[1] | 4.4% Management fees | 47.1[1] | 3.3% Property taxes, insurance and other | 89.7[1] | 6.4% Comparable hotels adjusted hotel EBITDA margin, as reported | n/a | 34.3%[1] First-party data point: Matthews Hotel Markets' September 2026 rate sheet shows what hotel income has to cover: with the 10-year Treasury at 4.94% on September 17, 2026 and the SBA 7(a) maximum at 10.00%, debt service takes a large share of the third of revenue a select-service hotel keeps at the property level.[7] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: scaling a 100-room select-service hotel from one REIT's reported ratios): Hypothetical. The ratios are Apple Hospitality's reported 2025 results, which describe 217 hotels it chose to own, and your hotel will differ. Start with rooms revenue. At the 2025 national RevPAR of $100.02, a 100-room hotel has 36,500 available room nights and rooms revenue of $3,650,730. We use that RevPAR only to have a starting number. Gross up to total revenue. If rooms are 90.5 percent of revenue, as they were for Apple Hospitality,[1] total revenue is $3,650,730 divided by 0.905, or $4,033,956. Food, beverage and other income are the remaining $383,226. Apply the reported margin. At Apple Hospitality's 34.3 percent comparable hotels margin,[1] hotel-level EBITDA is $1,383,647. About $2.65 million went to running the hotel, paying the brand and the manager, and paying property taxes and insurance. What is still to come out of the $1,383,647: a replacement reserve for furniture and equipment, interest and principal on the loan, and income taxes. The first two are what a lender looks at when it sizes a loan. FAQ: - Q: What is a typical hotel profit margin? A: There is no single figure. For 2025, Apple Hospitality REIT reported a 34.3 percent comparable hotels adjusted hotel EBITDA margin on select-service hotels, and Host Hotels & Resorts reported 28.9 percent on luxury and upper-upscale hotels.[1][2] Both are before debt service and capital spending. - Q: Do hotels make money on food and beverage? A: Less than on rooms. Host's 2025 food and beverage department had $1,224 million of expenses against $1,803 million of revenue, keeping about 32 percent. Its rooms department kept about 75 percent.[2] Both percentages are our arithmetic on Host's figures. - Q: What is USALI? A: The Uniform System of Accounts for the Lodging Industry, the standard format for hotel financial statements. It is published by Hospitality Financial and Technology Professionals, and the 12th Revised Edition has an adoption date of January 1, 2026.[3] - Q: What is the difference between GOP and NOI? A: Gross operating profit is revenue less departmental and undistributed operating expenses. Management fees, property taxes, insurance and a replacement reserve still come out below it before you reach the net operating income a buyer or lender underwrites.[4] - Q: How much of a hotel's revenue goes to the brand? A: It depends on the brand and what you count. Hilton's 2025 Hampton disclosure lists a 6 percent royalty and a 4 percent program fee on gross rooms revenue.[5] Apple Hospitality's franchise fee line for 2025 was $62.6 million, 4.9 percent of its room revenue.[1] - Q: Why do lenders want hotel financials in USALI format? A: Because every line means the same thing at every hotel, so a lender can compare your costs with other hotels' and see whether a management fee or reserve is missing. The 12th edition added a schedule for mandatory brand and operator costs for the same reason.[3] Sources: - [1] Apple Hospitality REIT Reports Results of Operations for Fourth Quarter and Full Year 2025 (February 23, 2026) (Apple Hospitality REIT, Inc., accessed 2026-09-18): https://ir.applehospitalityreit.com/News/news-details/2026/Apple-Hospitality-REIT-Reports-Results-of-Operations-for-Fourth-Quarter-and-Full-Year-2025/default.aspx - [2] Host Hotels & Resorts, Inc. Reports Results for 2025 (February 18, 2026), consolidated statements of operations and comparable hotel results (Host Hotels & Resorts, Inc., via GlobeNewswire, accessed 2026-09-18): https://www.globenewswire.com/news-release/2026/02/18/3240651/0/en/host-hotels-resorts-inc-reports-results-for-2025.html - [3] HFTP, AHLA and GFC unveil the 12th Revised Edition of the Uniform System of Accounts for the Lodging Industry (July 11, 2024) (American Hotel & Lodging Association, accessed 2026-09-18): https://www.ahla.com/news/hftp-ahla-and-gfc-unveil-groundbreaking-12th-revised-edition-uniform-system-accounts-lodging - [4] USALI P&L structure (Summary Operating Statement): a practical guide (February 23, 2026) (Hospitality Finance Network, accessed 2026-09-18): https://hospitalityfinancenetwork.com/usali-pl-structure-summary-operating-statement-a-practical-guide/ - [5] 2025 Hampton Franchise Disclosure Document (issued March 30, 2025), Items 5, 6, 15, 17 and 19 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - [6] AHLA releases 2026 State of the Industry (January 27, 2026) (American Hotel & Lodging Association, accessed 2026-09-18): https://www.ahla.com/news/ahla-releases-2026-state-industry - [7] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates ### How big is the US hotel industry in 2026? URL: https://matthewshotelmarkets.com/hotel-industry/industry-size-2026 Last updated: 2026-09-18 AHLA's State of the Industry release of January 27, 2026 forecasts nearly $805 billion of U.S. hotel guest spending in 2026, about 2.2 million direct hotel operations jobs, nearly $131 billion in wages and benefits, and nearly $87 billion in taxes.[1] The Bureau of Labor Statistics counts 1,926,600 accommodation employees in August 2026, a preliminary figure.[2] Key takeaways: - Guest spending: nearly $805 billion forecast for 2026, up 1.7 percent on 2025, per AHLA.[1] - Jobs: AHLA projects about 2.2 million direct hotel operations jobs in 2026. BLS counts 1,926,600 employees in the accommodation subsector for August 2026, preliminary.[1][2] - Taxes: hotels generated $85.1 billion in federal, state and local taxes in 2025, and AHLA projects nearly $87 billion in 2026.[1] - Count: there is no free public hotel census. AAHOA's and AHLA's own figures imply a little over 60,000 hotels, by our arithmetic.[3][4] - Pipeline: 5,975 projects with 703,001 rooms at the end of the second quarter of 2026, per Lodging Econometrics.[5] #### How big is the U.S. hotel industry in dollars? AHLA forecasts nearly $805 billion of hotel guest spending in the United States in 2026, a 1.7 percent increase over 2025.[1] That is the headline figure in AHLA's 2026 State of the Industry release, dated January 27, 2026. It is a measure of what hotel guests spend, and the release does not break it down. It is much larger than what hotels themselves collect. CoStar reported 2025 RevPAR of $100.02, which is $36,507 of room revenue per available room per year.[6] Even at six million rooms, that comes to about $219 billion of room revenue, so most of the $805 billion has to be money guests spend outside the hotel bill. That inference is ours. The worked arithmetic is below. We reuse AHLA's figures from our [hotel financing statistics](/data/hotel-financing-statistics) page, where each carries its source date and the date we last read it. #### How many people work in the U.S. hotel industry? About 2.2 million people work directly in U.S. hotel operations, according to AHLA's projection for 2026, and the Bureau of Labor Statistics counts 1.93 million employees in the accommodation subsector.[1][2] AHLA projects the hotel workforce will grow by more than 30,000 jobs in 2026 to approximately 2.2 million, and says the industry paid nearly $128 billion in wages and benefits in 2025, a figure it expects to approach $131 billion in 2026.[1] The BLS series is narrower in one way and wider in another. It counts payroll employees only, and it covers NAICS 721, accommodation, which is hotels and motels plus RV parks, recreational camps and rooming and boarding houses. On that basis, seasonally adjusted employment was 1,938,200 in May 2026, 1,916,100 in June, 1,918,000 in July and 1,926,600 in August, with the last two months preliminary.[2] Average hourly earnings for all employees were $24.74 in the latest preliminary reading. BLS's 2025 occupation data for the subsector lists 420,800 maids and housekeeping cleaners, 247,700 hotel desk clerks and 38,100 lodging managers.[2] We read the public BLS industry page for NAICS 721 and quote only what it shows for the subsector as a whole. We do not quote a separate figure for hotels and motels, NAICS 7211, because we did not read one. #### How much tax do hotels generate? U.S. hotels generated $85.1 billion in local, state and federal taxes in 2025, up $1.7 billion from 2024, and AHLA projects nearly $87 billion for 2026.[1] The figure combines taxes at every level, which is why it is so large relative to hotel room revenue. Lodging taxes are a line on the guest's bill that the hotel collects and passes through. They never become hotel revenue, but they do raise the total price the guest compares when choosing where to stay. For an owner, the tax that matters to income is property tax, which sits below gross operating profit on the statement. See [How do hotels make money?](/hotel-industry/how-hotels-make-money). #### How many hotels are there in the United States? There is no free public census of U.S. hotels, and the public figures that exist point to a little over 60,000 hotels. AAHOA says its members own 36,807 hotels and that this is 60 percent of U.S. hotels, which implies about 61,300 in total.[3] AHLA says 57 percent of U.S. hotels are franchised and projected 36,173 franchised hotels for 2024, which implies about 63,500.[4] Both totals are our arithmetic on rounded percentages, so treat them as rough. BLS counts 78,789 private establishments in the accommodation subsector in the first quarter of 2026, a preliminary figure, up from 78,152 in the second quarter of 2025.[2] That count is higher because it includes RV parks, camps and rooming houses. The number most of the industry uses comes from STR's census, which is a licensed product and is not reproduced here. Who owns these hotels is covered at [Who owns hotels in the United States?](/hotel-industry/who-owns-hotels). #### How many hotel rooms are there in the United States? No public primary source we could open states a current U.S. room count, and the published pipeline figures imply something between 5.5 and 6.0 million rooms. Lodging Econometrics forecasts that 661 new hotels with 74,820 rooms will open in 2026 and calls that a 1.3 percent growth rate.[5] Dividing 74,820 by 0.013 gives about 5.8 million existing rooms. Because 1.3 percent is rounded, the true base could be anywhere from about 5.5 to 6.0 million. That is our arithmetic and not a figure Lodging Econometrics published. AAHOA separately says its members' hotels, which it puts at 60 percent of all hotels, hold 3.2 million guestrooms.[3] We had one room-night figure on this site before and removed it because we could not find it in AHLA's public release. The note is on the [hotel financing statistics](/data/hotel-financing-statistics) page. The same rule applies here: if the count is not in a public document we read, it does not go on the page. #### How big are the largest hotel brand systems? The largest brand companies each report between about 7,500 and 9,800 hotels in their worldwide systems, nearly all owned by someone else. Marriott reports 9,805 properties with 1,779,936 rooms at year-end 2025.[8] Hilton reports 9,158 properties with 1,351,351 rooms in 143 countries and territories at December 31, 2025.[7] Wyndham reports over 8,300 affiliated hotels with approximately 869,000 rooms in approximately 100 countries.[9] Choice Hotels reports 7,575 hotels with 656,825 rooms.[10] These are global system counts from each company's fiscal 2025 Form 10-K, so they cannot be added up to a U.S. total. The contracts behind them are explained at [What is the difference between a hotel owner, a franchisor and a management company?](/hotel-industry/owner-franchisor-management-company). #### How many hotels are being built? At the end of the second quarter of 2026 the U.S. pipeline held 5,975 projects with 703,001 rooms, of which 1,081 projects with 133,216 rooms were under construction, according to Lodging Econometrics.[5] Another 2,147 projects with 245,871 rooms were scheduled to start within twelve months, and 2,747 projects with 323,914 rooms were in early planning. Conversions, where an existing hotel changes flags, were 1,567 projects with 152,044 rooms, up 15 percent by projects on a year earlier. In the first half of 2026, 277 new hotels with 31,416 rooms opened. Lodging Econometrics forecasts 661 openings with 74,820 rooms for the full year, 738 hotels with 78,909 rooms in 2027, and 832 hotels with 88,321 rooms in 2028, which it puts at growth rates of 1.3, 1.4 and 1.5 percent.[5] Other forecasters count supply differently. CBRE's midyear 2026 outlook projects inventory growth of 0.7 percent a year over the next three years and says construction has declined for 15 consecutive months.[11] We set the forecasts side by side at [What is the outlook for hotels in 2026 and 2027?](/hotel-industry/outlook-2026-2027). #### How much of that capacity is being used? U.S. hotels sold 62.3 percent of their available room nights in 2025, at an average rate of $160.54, according to CoStar.[6] Demand has picked up since. CoStar and Tourism Economics said on August 7, 2026 that the industry sold a record number of room nights in the first half of 2026, 11.4 million more than in the first half of 2025, and that room revenue rose by $5.4 billion.[12] The metrics are defined at [What are RevPAR, ADR and occupancy, and what is a good number?](/hotel-industry/revpar-adr-occupancy). If you are sizing this market because you plan to enter it, the buyer's guide is at [How do I buy a hotel?](/buy-a-hotel), and current borrowing costs are on the rate sheet: the 10-year Treasury was 4.94 percent and SOFR 3.85 percent on September 17, 2026.[13] Table: The size of the U.S. hotel industry: every figure with who published it and when Measure | Figure | Source | Date of source Hotel guest spending, 2026 forecast | Nearly $805 billion, up 1.7% | AHLA[1] | January 27, 2026 Direct hotel operations jobs, 2026 projection | About 2.2 million, up more than 30,000 | AHLA[1] | January 27, 2026 Wages and benefits | Nearly $128 billion in 2025, approaching $131 billion in 2026 | AHLA[1] | January 27, 2026 Taxes generated | $85.1 billion in 2025, nearly $87 billion in 2026 | AHLA[1] | January 27, 2026 Accommodation employment, NAICS 721 | 1,926,600, preliminary, seasonally adjusted | BLS[2] | August 2026 Accommodation establishments, NAICS 721 | 78,789 private establishments, preliminary | BLS[2] | First quarter 2026 Hotels owned by AAHOA members | 36,807, which AAHOA puts at 60% of U.S. hotels | AAHOA, citing Oxford Economics[3] | Undated page, read September 18, 2026 Franchised hotels | 36,173 projected for 2024, 57% of U.S. hotels | AHLA[4] | 2024 figures Construction pipeline | 5,975 projects, 703,001 rooms | Lodging Econometrics[5] | July 23, 2026 Occupancy, ADR, RevPAR, full-year 2025 | 62.3%, $160.54, $100.02 | CoStar, reported by Hotel Dive[6] | January 22, 2026 First-party data point: Matthews Hotel Markets' September 2026 rate sheet prices the debt behind all of this: the 10-year Treasury at 4.94% on September 17, 2026, SOFR at 3.85%, and the 25-year SBA 504 debenture at 6.54%.[13] Source: https://matthewshotelmarkets.com/rates Worked example (Worked arithmetic: why $805 billion of guest spending is not hotel revenue): This uses published figures only. The conclusion is our inference, and it is labeled as one. Step 1. Room revenue per room. CoStar's 2025 RevPAR was $100.02.[6] Times 365 nights, one available room produced $36,507 of room revenue in the year. Step 2. A room count. Lodging Econometrics says 74,820 rooms opening in 2026 is a 1.3 percent growth rate.[5] 74,820 divided by 0.013 is about 5.8 million rooms. Allowing for rounding in the 1.3 percent, call it 5.5 to 6.0 million. Step 3. Multiply. 5.5 million rooms times $36,507 is about $201 billion. 6.0 million rooms times $36,507 is about $219 billion. Step 4. Compare. AHLA's guest spending forecast for 2026 is nearly $805 billion.[1] Room revenue on this arithmetic is roughly a quarter of that. So the AHLA figure is best read as the spending of people who stay in hotels, including what they spend elsewhere on the trip, and not as the revenue of the hotel industry. If you are sizing the market for a business plan or a lender presentation, use the right one and say which it is. FAQ: - Q: How much is the U.S. hotel industry worth? A: There is no single public valuation. AHLA forecasts nearly $805 billion of hotel guest spending for 2026.[1] By our arithmetic on public figures, hotel room revenue is roughly $200 billion to $220 billion a year.[5][6] - Q: How many hotels are in the United States? A: No free public census exists. AAHOA's and AHLA's published figures imply about 61,300 to 63,500 hotels, by our arithmetic.[3][4] BLS counts 78,789 accommodation establishments, a wider category that includes RV parks and rooming houses.[2] - Q: How many hotel rooms are in the United States? A: We found no public primary source that states it. Lodging Econometrics' statement that 74,820 new rooms equals 1.3 percent growth implies roughly 5.5 to 6.0 million existing rooms, by our arithmetic.[5] - Q: How many jobs does the hotel industry support? A: AHLA projects about 2.2 million direct hotel operations jobs in 2026.[1] BLS counted 1,926,600 payroll employees in the accommodation subsector in August 2026, a preliminary figure.[2] - Q: What is the most common job in a hotel? A: Housekeeping. BLS's 2025 occupation data for the accommodation subsector lists 420,800 maids and housekeeping cleaners, followed by 247,700 hotel desk clerks and 143,620 waiters and waitresses.[2] - Q: Is the U.S. hotel industry growing? A: Yes, slowly in rooms and faster in revenue. Lodging Econometrics forecasts 1.3 percent room growth in 2026.[5] CoStar and Tourism Economics reported a record first half for room nights sold, up 11.4 million on 2025.[12] Sources: - [1] AHLA releases 2026 State of the Industry (January 27, 2026) (American Hotel & Lodging Association, accessed 2026-09-18): https://www.ahla.com/news/ahla-releases-2026-state-industry - [2] Industries at a Glance: Accommodation, NAICS 721 (data extracted September 18, 2026) (U.S. Bureau of Labor Statistics, accessed 2026-09-18): https://www.bls.gov/iag/tgs/iag721.htm - [3] Oxford Economics Study: the economic impact of AAHOA Member-owned hotels (Asian American Hotel Owners Association (AAHOA), accessed 2026-09-18): https://www.aahoa.com/resources/oxford-study - [4] Franchising: hotel franchising facts (American Hotel & Lodging Association, accessed 2026-09-18): https://www.ahla.com/issue/franchising - [5] U.S. hotel construction pipeline, second quarter 2026 (July 23, 2026) (Lodging Econometrics, accessed 2026-09-18): https://lodgingeconometrics.com/us-hotel-construction-pipeline-q2-2026/ - [6] Key full-year US hotel metrics fall for first time since 2020 (January 22, 2026): full-year 2025 occupancy, ADR and RevPAR (Hotel Dive, citing CoStar, accessed 2026-09-18): https://www.hoteldive.com/news/hotel-occupancy-revpar-decline-2025/810212/ - [7] Hilton Worldwide Holdings Inc. Form 10-K for fiscal year 2025 (filed February 11, 2026), Item 1, Business (U.S. Securities and Exchange Commission, EDGAR, accessed 2026-09-18): https://www.sec.gov/Archives/edgar/data/1585689/000158568926000007/hlt-20251231.htm - [8] Marriott International, Inc. Form 10-K for fiscal year 2025 (filed February 10, 2026), Item 1, Business (U.S. Securities and Exchange Commission, EDGAR, accessed 2026-09-18): https://www.sec.gov/Archives/edgar/data/1048286/000104828626000007/mar-20251231.htm - [9] Wyndham Hotels & Resorts, Inc. Form 10-K for fiscal year 2025, Item 1, Business (U.S. Securities and Exchange Commission, EDGAR, accessed 2026-09-18): https://www.sec.gov/Archives/edgar/data/1722684/000172268426000007/wh-20251231.htm - [10] Choice Hotels International, Inc. Form 10-K for fiscal year 2025, Item 1, Business: The Lodging Industry (U.S. Securities and Exchange Commission, EDGAR, accessed 2026-09-18): https://www.sec.gov/Archives/edgar/data/1046311/000104631126000008/chh-20251231.htm - [11] U.S. Real Estate Market Outlook Midyear Review 2026, Hotels (CBRE, accessed 2026-09-18): https://www.cbre.com/insights/books/us-real-estate-market-outlook-midyear-review-2026/hotels - [12] CoStar, Tourism Economics 'significantly' boost US hotel outlook (August 7, 2026) (Hotel Dive, citing CoStar and Tourism Economics, accessed 2026-09-18): https://www.hoteldive.com/news/costar-tourism-economics-raise-us-hotel-performance-outlook-2026/827318/ - [13] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates ### What is the outlook for hotels in 2026 and 2027? URL: https://matthewshotelmarkets.com/hotel-industry/outlook-2026-2027 Last updated: 2026-09-18 The public forecasts agree on direction and disagree on size. As of August 7, 2026, CoStar and Tourism Economics forecast U.S. RevPAR growth of 4.4 percent for 2026 and 2.1 percent for 2027.[1] CBRE's midyear 2026 review forecasts 2.5 percent and 2.1 percent.[2] PwC's May 2026 edition forecasts 2.9 percent for 2026.[3] We publish them side by side and do not blend them. Key takeaways: - 2026 RevPAR growth: 4.4 percent per CoStar and Tourism Economics (August 7, 2026), 2.9 percent per PwC (May 2026 edition), 2.5 percent per CBRE (midyear 2026).[1][3][2] - 2027 RevPAR growth: 2.1 percent per CoStar and Tourism Economics, and 2.1 percent per CBRE.[1][2] - Every forecaster raised its 2026 number during the year. CoStar and Tourism Economics went from 0.6 percent in February to 2.8 percent in June to 4.4 percent in August.[4][5][1] - The World Cup is in the 2026 base. CoStar's August assumptions put 2027 ADR growth at 1.6 percent, or 2.1 percent excluding the June and July World Cup effect.[6] - Revenue is not profit. STR's president said in August 2026 that expenses will rise faster than inflation in both years.[1] #### What do the public forecasts say about U.S. hotels in 2026? The public forecasts for 2026 range from 2.5 to 4.4 percent RevPAR growth, with the most recent forecast the highest. CoStar and Tourism Economics, in a forecast reported on August 7, 2026, project 2026 RevPAR growth of 4.4 percent, ADR growth of 3.1 percent and occupancy of 63.1 percent.[1] CoStar's published assumptions for the same forecast put demand growth at 1.7 percent.[6] CBRE's midyear 2026 review projects RevPAR growth of 2.5 percent, ADR growth of 1.7 percent and occupancy of 62.8 percent.[2] PwC's Hospitality Directions for May 2026, published June 25, projects RevPAR growth of 2.9 percent.[3] The starting point for all three is the same. CoStar reported 2025 occupancy of 62.3 percent, ADR of $160.54 and RevPAR of $100.02, with RevPAR down 0.3 percent on 2024.[7] We read the CoStar and PwC figures where trade publications carried them, and the source list says so. #### What do the public forecasts say about 2027? For 2027, CoStar and Tourism Economics and CBRE both forecast RevPAR growth of 2.1 percent, about half the pace CoStar expects for 2026. CoStar and Tourism Economics project 2027 occupancy of 63.4 percent and ADR growth of 1.6 percent, with demand growth of 1.1 percent. Their assumptions include U.S. GDP growth of 2.6 percent in 2027 against 2.2 percent in 2026, and inflation of 2.3 percent.[1][6] CBRE projects 2027 occupancy of 63.0 percent and ADR growth of 1.7 percent.[2] The PwC summary we read does not state a 2027 figure, so the table leaves it blank.[3] The two 2.1 percent figures were published weeks apart and rest on different 2026 bases, so they do not describe the same 2027 RevPAR in dollars. Agreement on a growth rate is not agreement on a level. #### Why did every hotel forecast go up during 2026? Every hotel forecast went up during 2026 because actual results kept beating the prior forecast, from the first quarter through the World Cup in June and July. In February 2026, CoStar and Tourism Economics expected RevPAR to grow 0.6 percent, on ADR growth of 1.0 percent and demand growth of 0.4 percent.[4] CBRE started the year at 1.2 percent, and PwC's December 2025 outlook had 0.9 percent.[2][8] Then the data came in. CBRE says first-quarter RevPAR grew 3.8 percent, the best quarter since the first quarter of 2023.[2] By June 2, CoStar and Tourism Economics had moved to 2.8 percent, citing RevPAR up 4 percent in the first four months.[5] July RevPAR was up 8.2 percent on July 2025, to $119.77.[9] On August 7 the forecast went to 4.4 percent. STR's president attributed the beat to stronger leisure and business travel, fueled in part by the World Cup and the America 250 celebrations, and the firms said the industry sold a record number of room nights in the first half, 11.4 million more than a year earlier.[1] The lesson for an owner is about forecasts as much as about hotels: the most cited number in the industry moved by 3.8 points in six months. #### Why do CBRE and CoStar disagree, and which forecast is right? CBRE and CoStar disagree by 1.9 points on 2026 mainly because their forecasts were made at different times, and nobody can know yet which is right. CBRE's 2.5 percent is from its midyear review. CoStar's 4.4 percent was published on August 7, after a July in which 22 of the top 25 markets posted RevPAR growth.[2][1][9] A forecast that predates the World Cup months will be lower than one that includes them. We do not pick a winner and we do not average them. An average of forecasts made on different dates is a number that no one actually forecast. If you are underwriting a purchase or a refinance, the honest approach is to run the income on more than one growth case, say which public forecast each case follows, and see whether the deal survives the lower one. Our [hotel financing statistics](/data/hotel-financing-statistics) page carries these forecasts with their dates for the same reason. #### How much of 2026 is the World Cup? In February 2026, CoStar and Tourism Economics estimated that the World Cup would add 0.4 percent to full-year U.S. RevPAR, mostly through rate.[4] The effect in host cities was much larger than the national figure. In July 2026, New York City, which hosted the final, posted ADR up 24.0 percent to $351.18 and RevPAR up 27.1 percent to $305.74, according to CoStar's monthly release.[9] Events like this raise a problem for the following year, because 2027 will be measured against them. CoStar's August assumptions show the size of it: 2027 ADR growth of 1.6 percent as forecast, or 2.1 percent if the June and July World Cup effect is excluded.[6] For a hotel in a host market, a trailing twelve months that includes June and July 2026 flatters the run rate. A buyer or lender will normalize it, so an owner preparing to sell or refinance should do the same before someone else does. #### Which hotel segments are expected to do best? Luxury is expected to do best and economy worst: CBRE's midyear 2026 review forecasts luxury RevPAR up 5.2 percent, midscale up 0.7 percent and economy down 0.6 percent.[2] CoStar and Tourism Economics described the same split in February 2026, with upper-tier segments showing signs of demand recovery and select-service and economy hotels facing downward pressure on average daily rates.[4] For the owner of a midscale or economy hotel, the national headline overstates what CBRE expects for that hotel's tier. The tiers are explained at [What are hotel chain scales and classes?](/hotel-industry/chain-scales-and-classes). #### Will hotel profits grow as fast as hotel revenue? Probably not, according to the forecasters themselves: STR's president said in August 2026 that expenses will rise faster than inflation in both 2026 and 2027.[1] AHLA's 2026 State of the Industry release, dated January 27, 2026, said rising operating expenses had kept gross operating profit per available room at roughly 90 percent of 2019 levels.[10] A RevPAR forecast is a revenue forecast. Value and loan proceeds are sized on income, so a year of 2 percent RevPAR growth with 4 percent cost growth leaves an owner with less income, not more. How revenue turns into income is at [How do hotels make money?](/hotel-industry/how-hotels-make-money). #### How much new hotel supply is coming? New supply is forecast at between about 0.7 and 1.5 percent a year, depending on who is counting and how. CBRE projects U.S. hotel inventory growth of 0.7 percent a year over the next three years and says construction has declined for 15 consecutive months.[2] CoStar and Tourism Economics had 2026 supply growth at 0.7 percent in February.[4] Lodging Econometrics, which counts openings, forecasts 661 new hotels with 74,820 rooms in 2026, 738 hotels with 78,909 rooms in 2027 and 832 hotels with 88,321 rooms in 2028, which it puts at growth rates of 1.3, 1.4 and 1.5 percent.[11] The Lodging Econometrics release counts new openings and says nothing about hotels that close, which is one reason its rate can be higher than a net inventory figure. Either way, what matters to a single hotel is what opens within a few miles of it. #### What does the outlook mean if I am refinancing or selling? A stronger revenue outlook helps income, but in September 2026 it arrives together with higher borrowing costs, and both go into a price or a loan. The Federal Reserve raised its target range by 25 basis points on September 16, 2026, and as of September 17 the 10-year Treasury is 4.94 percent and SOFR is 3.85 percent.[12][13] Lenders do not publish their spreads or coverage tests, so the only way to know what the outlook is worth to your hotel is a written quote on your own trailing income. Start with [How much hotel debt is maturing in 2026 and 2027?](/hotel-financing/loan-maturities-2026-2027) and [Should I refinance my hotel or sell it instead?](/hotel-financing/refinance-or-sell), or run the [refinance vs sell calculator](/tools/refinance-vs-sell). For pricing, see [What is a good cap rate for a hotel in 2026?](/hotel-valuation/hotel-cap-rates) and [What is involved in selling a hotel?](/sell-a-hotel). Table: Public U.S. hotel forecasts for 2026 and 2027, side by side, newest first. Not blended. Where a cell says not stated, the summary we read did not give the figure Forecaster | Date | 2026 RevPAR | 2026 occupancy | 2026 ADR | 2027 RevPAR | 2027 occupancy | 2027 ADR CoStar and Tourism Economics[1] | August 7, 2026 | +4.4% | 63.1% | +3.1% | +2.1% | 63.4% | +1.6% CBRE[2] | Midyear 2026 | +2.5% | 62.8% | +1.7% | +2.1% | 63.0% | +1.7% PwC, May 2026 edition[3] | June 25, 2026 | +2.9% | not stated | not stated | not stated | not stated | not stated CoStar and Tourism Economics, earlier[5] | June 2, 2026 | +2.8% | 62.8% | +2% | not stated | not stated | not stated CoStar and Tourism Economics, earlier[4] | February 10, 2026 | +0.6% | not stated | +1.0% | +1.4% | not stated | not stated CBRE, earlier[2] | Start of 2026 | +1.2% | not stated | not stated | not stated | not stated | not stated PwC, earlier[8] | December 2025 edition | +0.9% | not stated | +1.1% | not stated | not stated | not stated Actual, full-year 2025, per CoStar[7] | January 22, 2026 | minus 0.3%, to $100.02 | 62.3% | +0.9% to $160.54 | n/a | n/a | n/a First-party data point: Matthews Hotel Markets' September 2026 rate sheet is the other half of the outlook: the 10-year Treasury at 4.94% on September 17, 2026 and SOFR at 3.85%, the day after the Federal Reserve raised its target range by 25 basis points.[13][12] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: what the gap between two forecasts is worth at a 100-room hotel): Hypothetical. The hotel is invented, and the flow-through and cap rate are assumptions chosen to show the arithmetic, not predictions. Start: a 100-room hotel with a 2025 RevPAR of $100.00, close to the national figure.[7] Rooms revenue is 100 times 365 times $100.00, or $3,650,000. Case A follows CoStar and Tourism Economics at 4.4 percent.[1] RevPAR becomes $104.40 and rooms revenue $3,810,600. Case B follows CBRE at 2.5 percent.[2] RevPAR becomes $102.50 and rooms revenue $3,741,250. The gap is $69,350 of rooms revenue. Assume half of that gap reaches net operating income, which is $34,675. That share is our assumption for illustration. At an 8.0 percent cap rate, which sits inside the 7.5 to 8.25 percent range the Matthews Hotel Index shows for Austin select-service hotels,[14] $34,675 of income is worth about $433,000 of value. So the choice of forecast moves this hotel's indicated value by roughly $433,000, before anyone has argued about the hotel itself. That is why we show the forecasts side by side and ask which one a given underwriting follows. FAQ: - Q: What is the RevPAR forecast for 2026? A: It depends on the forecaster and the date. CoStar and Tourism Economics: 4.4 percent, as of August 7, 2026.[1] PwC: 2.9 percent in its May 2026 edition.[3] CBRE: 2.5 percent in its midyear 2026 review.[2] - Q: What is the hotel forecast for 2027? A: RevPAR growth of 2.1 percent from both CoStar and Tourism Economics and CBRE, with occupancy of 63.4 percent and 63.0 percent respectively.[1][2] - Q: Did the World Cup help U.S. hotels? A: Yes. July 2026 U.S. RevPAR rose 8.2 percent on the year, and New York City, which hosted the final, posted RevPAR up 27.1 percent.[9] In February, CoStar and Tourism Economics had estimated a 0.4 percent lift to full-year national RevPAR.[4] - Q: Why did hotel forecasts change so much in 2026? A: Results beat expectations. CoStar and Tourism Economics forecast 0.6 percent RevPAR growth in February, 2.8 percent in June and 4.4 percent in August, citing stronger leisure and business travel.[4][5][1] - Q: Does Matthews Hotel Markets publish its own hotel forecast? A: No. We publish other firms' public forecasts with their dates and do not blend them. Our own published data are the rate sheet and the Matthews Hotel Index, which report current conditions.[13][14] - Q: Is 2026 or 2027 a better year to sell a hotel? A: The forecasts cannot answer that for one hotel. They show faster revenue growth in 2026 than 2027.[1] Your price also depends on your own trailing income, your brand's improvement plan and borrowing costs on the day a buyer closes. - Q: Are hotel costs expected to keep rising? A: Yes. STR's president said in August 2026 that expenses will rise faster than inflation in both 2026 and 2027.[1] AHLA reported gross operating profit per available room at roughly 90 percent of 2019 levels in January 2026.[10] Sources: - [1] CoStar, Tourism Economics 'significantly' boost US hotel outlook (August 7, 2026) (Hotel Dive, citing CoStar and Tourism Economics, accessed 2026-09-18): https://www.hoteldive.com/news/costar-tourism-economics-raise-us-hotel-performance-outlook-2026/827318/ - [2] U.S. Real Estate Market Outlook Midyear Review 2026, Hotels (CBRE, accessed 2026-09-18): https://www.cbre.com/insights/books/us-real-estate-market-outlook-midyear-review-2026/hotels - [3] US Hospitality Directions: May 2026 (published June 25, 2026) (Hotel News Resource, republishing PwC, accessed 2026-09-18): https://www.hotelnewsresource.com/article141835.html - [4] 2026 forecast shows modest RevPAR growth amid lingering industry headwinds (February 10, 2026) (Hotel Online, citing STR and Tourism Economics (CoStar Group), accessed 2026-09-18): https://www.hotel-online.com/news/2026-forecast-shows-modest-revpar-growth-amid-lingering-industry-headwinds - [5] CoStar, Tourism Economics upgrade US RevPAR forecast for 2026 (June 2, 2026) (Hotel Dive, citing CoStar and Tourism Economics, accessed 2026-09-18): https://www.hoteldive.com/news/costar-tourism-economics-hotel-revpar-forecast-2026/821683/ - [6] U.S. Hotel Forecast Assumptions, August 2026 (August 11, 2026) (CoStar, republished by Hospitality Net, accessed 2026-09-18): https://www.hospitalitynet.org/news/4133888/us-hotel-forecast-assumptions-august-2026 - [7] Key full-year US hotel metrics fall for first time since 2020 (January 22, 2026): full-year 2025 occupancy, ADR and RevPAR (Hotel Dive, citing CoStar, accessed 2026-09-18): https://www.hoteldive.com/news/hotel-occupancy-revpar-decline-2025/810212/ - [8] US lodging industry to see slow, stable growth in 2026: report (January 9, 2026) (Hotel Dive, citing PwC, accessed 2026-09-18): https://www.hoteldive.com/news/PwC-hospitality-directions-outlook-lodging-2026/809205/ - [9] U.S. Hotels Post Strong July Gains as Occupancy, Rates and RevPAR Rise (August 26, 2026) (Hotel Online, citing CoStar, accessed 2026-09-18): https://www.hotel-online.com/news/us-hotels-post-strong-july-gains-as-occupancy-rates-and-revpar-rise - [10] AHLA releases 2026 State of the Industry (January 27, 2026) (American Hotel & Lodging Association, accessed 2026-09-18): https://www.ahla.com/news/ahla-releases-2026-state-industry - [11] U.S. hotel construction pipeline, second quarter 2026 (July 23, 2026) (Lodging Econometrics, accessed 2026-09-18): https://lodgingeconometrics.com/us-hotel-construction-pipeline-q2-2026/ - [12] Hotel financing statistics: every figure with its source and two dates (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/data/hotel-financing-statistics - [13] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates - [14] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/research/mhi/q1-2026 ### What is the difference between a hotel owner, a franchisor and a management company? URL: https://matthewshotelmarkets.com/hotel-industry/owner-franchisor-management-company Last updated: 2026-09-18 The owner holds the real estate and takes the profit or loss. The franchisor licenses a brand and its reservation system for a fee on rooms revenue. The management company runs daily operations for a fee on total revenue. At December 31, 2025, Hilton owned or leased 46 of its 9,158 properties, managed 873 and franchised or licensed 8,239.[1] Key takeaways: - Brand companies are fee businesses. Marriott says it owns or leases less than one percent of its 9,805-property system.[2] - A franchise fee is charged on rooms revenue. Hilton's 2025 Hampton disclosure lists a 6 percent royalty plus a 4 percent program fee. Marriott's 10-K says royalties typically range from four to seven percent of room revenues.[3][2] - A management fee has two parts: a base fee that is a percentage of hotel revenue and an incentive fee based on hotel profit.[1][2] - The contracts are long. Hampton's new-construction term is generally 22 years. Marriott's management agreements generally start at 20 to 30 years.[3][2] - Most franchised hotels are not run by the brand. Of 1,960 comparable Hampton hotels, 1,945 were managed by the franchisee or a non-Hilton management company.[3] #### What does the hotel owner do? The hotel owner holds the real estate, signs the loan, signs the franchise and management contracts, funds every renovation, and keeps whatever is left after everyone else is paid. The owner is the only party of the three whose return is not a fee. The franchisor is paid on rooms revenue and the manager is paid mostly on total revenue, so both are paid before the owner in a bad year. The owner also carries the capital obligations. When a brand issues a property improvement plan, the owner pays for it, and when the roof fails, the owner pays for that too. Owners range widely. Wyndham's 10-K says its franchisees run from sole proprietors to institutional investors such as public real estate investment trusts.[4] Who they are in aggregate is covered at [Who owns hotels in the United States?](/hotel-industry/who-owns-hotels). #### What does a hotel franchisor do? A hotel franchisor licenses its brand name, standards and reservation systems to the owner in exchange for fees, and it does not own or operate the hotel. Choice Hotels' fiscal 2025 10-K describes the arrangement in one sentence: franchisors license their brands to a hotel owner, giving the owner the right to use the brand name, logo, operating practices and reservations systems in exchange for a fee and an agreement to operate the hotel in accordance with the franchisor's brand standards.[5] The big brand companies are built on this model. Hilton's 10-K counts 8,239 franchised or licensed properties out of 9,158 at December 31, 2025, which is 90 percent by our arithmetic.[1] Marriott reports 7,644 franchised, licensed and other properties out of 9,805 at year-end 2025.[2] AHLA says 57 percent of all U.S. hotels are franchised.[11] A guest sees one brand. Behind the sign are thousands of separate owners. The glossary entries are at [franchise agreement](/glossary/franchise-agreement) and [franchise disclosure document](/glossary/franchise-fdd). #### How much are hotel franchise fees? Hotel franchise fees are a percentage of rooms revenue, and the two published schedules we read that state both parts, the royalty and the marketing or program fee, add up to between 7 and 10 percent. Hilton's 2025 Hampton franchise disclosure document lists a monthly royalty fee of 6 percent of gross rooms revenue and a monthly program fee of 4 percent of gross rooms revenue. The same document says Hilton may change the program fee, but not by more than one percentage point over the term of the agreement.[3] Marriott's 10-K says its franchise royalties typically range from four to seven percent of room revenues, plus up to four percent of food and beverage revenues for certain brands, along with an application fee and reimbursement for centralized programs and services.[2] Wyndham's 10-K says its direct franchisees generally pay a royalty of approximately 5 percent of gross room revenue and a marketing and reservation fee of 2 to 4 percent.[4] There are one-time fees too. The Hampton application fee is $100,000 for new development or conversion, plus $400 for each guest room over 150, and $200,000 for a change of ownership, with a $10,000 fee to prepare a property improvement plan.[3] The franchise disclosure document for any brand you are considering is the place to read its full schedule, because these fees differ by brand and by year. #### What does a hotel management company do, and how is it paid? A hotel management company runs the hotel day to day on the owner's behalf, and it is paid a base fee on revenue and usually an incentive fee on profit. The manager hires and supervises the staff, sets rates, runs sales and keeps the books. The owner still owns the results. Hilton's 10-K says its management fees generally consist of a base fee based on a percentage of the hotel's monthly gross operating revenue and, when applicable, an incentive fee based on a percentage of the hotel's operating profits.[1] Marriott's 10-K describes the same two parts: a base management fee that is a percentage of hotel revenues and an incentive management fee based on hotel profits.[2] Neither filing states the percentages, and third-party management companies do not publish theirs. What is public is what owners paid. Apple Hospitality REIT reported management fees of $47.1 million on total revenue of $1,412.4 million for 2025, which is 3.3 percent by our arithmetic.[6] Host Hotels & Resorts reported management fees of $262 million on $6,015 million of hotel revenue, about 4.4 percent.[7] Those are blended figures across many contracts, base and incentive fees together, so treat them as evidence of scale and not as a quote. #### How long do hotel franchise and management agreements last? Hotel franchise agreements commonly run 10 to 25 years and brand management agreements commonly start at 20 to 30 years, according to the brands' own filings. Hilton's Hampton disclosure sets the franchise term for new construction at generally 22 years from the effective date, and for a conversion at generally 10 to 20 years from opening. A buyer on a change of ownership generally gets the remaining term or another term Hilton approves.[3] Marriott says its franchise agreements are generally for 10 to 25 years and its management agreements are generally for initial periods of 20 to 30 years with renewal options of 10 or more years.[2] Hilton gives 20 to 30 years as the typical initial term of its management contracts.[1] Wyndham says 10 to 20 years for franchise agreements, and Choice says 10 to 30.[4][5] These terms outlast most loans and most ownership periods, so they are part of what a buyer is buying. A short remaining term, or a brand-managed hotel that cannot be delivered free of its manager, changes the buyer pool. See [Should I sell my hotel before the franchise agreement expires?](/sell-a-hotel/franchise-agreement-expiration). #### Can I manage my own franchised hotel? Yes, if the brand approves you, because the franchisor decides who is qualified to operate a hotel under its flag. Hilton's Hampton disclosure says the hotel must be operated either by the franchisee or by a third-party management company Hilton has approved. To manage it yourself you need Hilton's prior written approval and must complete its training program, and if Hilton decides at any time that you are not qualified it may require you to retain an acceptable management company.[3] In practice most Hampton owners use their own company or a third party and not the brand: of the 1,960 comparable Hampton hotels in the 2025 disclosure, 15 were company-managed and 1,945 were franchisee-managed, a category that covers the franchisee itself or a non-Hilton management company.[3] First-time buyers usually meet this requirement by hiring an approved manager, which is covered at [How do I buy my first hotel with no hotel experience?](/buy-a-hotel/first-hotel-no-experience). #### Why do hotel REITs always hire a separate manager? Hotel REITs hire a separate manager because the tax code requires it: a REIT may lease a hotel to its own taxable subsidiary only if an eligible independent contractor operates the property. Section 856(d) of the Internal Revenue Code treats rent from a qualified lodging facility leased to a taxable REIT subsidiary as good REIT income if the property is operated on the subsidiary's behalf by an eligible independent contractor. That contractor must be actively engaged in the business of operating lodging facilities for parties unrelated to the REIT. A lodging facility is a hotel, motel or other establishment where more than half the dwelling units are used on a transient basis.[8] That is why a REIT's statement shows management fees as a line, as Apple Hospitality's and Host's do.[6][7] #### What does this structure mean when I finance or sell a hotel? When you finance or sell a hotel, the franchise and management agreements are underwritten alongside the real estate, because they decide who can run the hotel and what comes off the top. A lender reads the fees as fixed charges ahead of its debt service and wants to know the flag will stay if it has to take the property, which is what a [comfort letter](/glossary/comfort-letter) addresses. As of September 17, 2026, the 10-year Treasury is 4.94 percent and SOFR is 3.85 percent, and lenders do not publish the spreads or coverage tests they apply, so the agreements in your file are part of what earns a better quote.[10] USALI's 12th edition, effective January 1, 2026, added a schedule that gathers annual mandatory brand and operator costs in one place, which makes this easier for a lender or buyer to see.[9] A buyer does not inherit your franchise. It applies for its own and takes on the brand's improvement plan. Start at [How does hotel financing work, and what does it cost right now?](/hotel-financing), [What is involved in selling a hotel?](/sell-a-hotel) or [Should I buy a branded or independent hotel?](/buy-a-hotel/branded-vs-independent). Table: Hotel owner, franchisor and management company: what each does and what the public documents say about pay and term Question | Owner | Franchisor (the brand) | Management company What it holds | The real estate, the loan and the risk | The name, standards, loyalty program and reservation system[5] | A contract to operate the hotel for the owner How it is paid | What is left after expenses, fees, reserves and debt service | Hampton: 6% royalty plus 4% program fee on gross rooms revenue.[3] Marriott: royalties typically 4% to 7% of room revenues.[2] Wyndham: about 5% plus 2% to 4%[4] | Base fee on hotel revenue plus an incentive fee on profit.[1][2] Percentages are not published What owners reported paying in 2025 | n/a | Apple Hospitality: $62.6 million of franchise fees, 4.9% of room revenue[6] | Apple Hospitality: $47.1 million, 3.3% of revenue.[6] Host: $262 million, about 4.4% of hotel revenue[7] Initial term | As long as it holds the property | Hampton: generally 22 years new-build, 10 to 20 on conversion.[3] Marriott: generally 10 to 25.[2] Wyndham: 10 to 20.[4] Choice: 10 to 30[5] | Marriott: generally 20 to 30 years plus renewals.[2] Hilton: typically 20 to 30[1] Share of the brand's system | Hilton owned or leased 46 of 9,158 properties[1] | Hilton franchised or licensed 8,239 of 9,158[1] | Hilton managed 873 of 9,158[1] First-party data point: Matthews Hotel Markets' September 2026 rate sheet records that no lender type publishes its spread, coverage floor or loan-to-value ceiling, so the fees above are some of the few hard numbers in a hotel loan file: they come off revenue before debt service priced over a 10-year Treasury of 4.94% on September 17, 2026.[10] Source: https://matthewshotelmarkets.com/rates Worked example (Hypothetical: what the brand and the manager take from a 120-room franchised hotel): Hypothetical. The hotel is invented. The fee rates are the published Hampton schedule and one REIT's reported average, and your contracts will differ. The hotel: rooms revenue of $5,000,000 and total revenue of $5,400,000. Royalty: 6 percent of gross rooms revenue is $300,000.[3] Program fee: 4 percent of gross rooms revenue is $200,000.[3] Management fee: we use 3.3 percent of total revenue, the share Apple Hospitality REIT's management fees came to in 2025,[6] which gives $178,200. A real contract would state a base percentage and an incentive formula. Total: $678,200 a year, or 12.6 percent of total revenue, paid before property taxes, insurance, a replacement reserve or the mortgage. The question for the owner is whether the flag and the operator earn that back. One public data point: Hilton reports that comparable Hampton hotels averaged a RevPAR index of 121.0 in 2024, meaning 21 percent more RevPAR than their competitive sets.[3] That is an average across the brand and says nothing certain about a single hotel. FAQ: - Q: Does Marriott or Hilton own its hotels? A: Rarely. Hilton owned or leased 46 of 9,158 properties at December 31, 2025.[1] Marriott says it owns or leases less than one percent of its system.[2] The rest are franchised, licensed or managed for other owners. - Q: What is the difference between a franchise agreement and a management agreement? A: A franchise agreement licenses the brand and systems and is paid on rooms revenue. A management agreement hands over daily operations and is paid a base fee on revenue plus an incentive fee on profit.[1][2] A hotel can have both, with different companies. - Q: How much does a hotel management company charge? A: Management companies do not publish their fees. Public owners report what they paid: Apple Hospitality REIT's 2025 management fees were 3.3 percent of its revenue and Host Hotels & Resorts' were about 4.4 percent, by our arithmetic on their reported figures.[6][7] - Q: Who employs the staff at a franchised hotel? A: Not the franchisor. Hilton's Hampton disclosure calls the franchisee an independent employer and says Hilton will not direct or supervise the personnel of the franchisee or its management company.[3] - Q: Can a brand also manage my hotel? A: Yes. Hilton managed 873 properties at December 31, 2025, and Marriott had 2,017 company-operated properties at year-end 2025.[1][2] - Q: Does the franchise transfer when I sell my hotel? A: No. Under the Hampton agreement the buyer applies for a change of ownership and pays a $200,000 application fee, and generally receives the remaining term or another term Hilton approves.[3] - Q: What is an independent hotel? A: A hotel with no franchise. The owner keeps the royalty and program fees and takes on its own marketing, distribution and standards. AHLA says 57 percent of U.S. hotels are franchised, which leaves 43 percent that are not.[11] Sources: - [1] Hilton Worldwide Holdings Inc. Form 10-K for fiscal year 2025 (filed February 11, 2026), Item 1, Business (U.S. Securities and Exchange Commission, EDGAR, accessed 2026-09-18): https://www.sec.gov/Archives/edgar/data/1585689/000158568926000007/hlt-20251231.htm - [2] Marriott International, Inc. Form 10-K for fiscal year 2025 (filed February 10, 2026), Item 1, Business (U.S. Securities and Exchange Commission, EDGAR, accessed 2026-09-18): https://www.sec.gov/Archives/edgar/data/1048286/000104828626000007/mar-20251231.htm - [3] 2025 Hampton Franchise Disclosure Document (issued March 30, 2025), Items 5, 6, 15, 17 and 19 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - [4] Wyndham Hotels & Resorts, Inc. Form 10-K for fiscal year 2025, Item 1, Business (U.S. Securities and Exchange Commission, EDGAR, accessed 2026-09-18): https://www.sec.gov/Archives/edgar/data/1722684/000172268426000007/wh-20251231.htm - [5] Choice Hotels International, Inc. Form 10-K for fiscal year 2025, Item 1, Business: The Lodging Industry (U.S. Securities and Exchange Commission, EDGAR, accessed 2026-09-18): https://www.sec.gov/Archives/edgar/data/1046311/000104631126000008/chh-20251231.htm - [6] Apple Hospitality REIT Reports Results of Operations for Fourth Quarter and Full Year 2025 (February 23, 2026) (Apple Hospitality REIT, Inc., accessed 2026-09-18): https://ir.applehospitalityreit.com/News/news-details/2026/Apple-Hospitality-REIT-Reports-Results-of-Operations-for-Fourth-Quarter-and-Full-Year-2025/default.aspx - [7] Host Hotels & Resorts, Inc. Reports Results for 2025 (February 18, 2026), consolidated statements of operations and comparable hotel results (Host Hotels & Resorts, Inc., via GlobeNewswire, accessed 2026-09-18): https://www.globenewswire.com/news-release/2026/02/18/3240651/0/en/host-hotels-resorts-inc-reports-results-for-2025.html - [8] 26 U.S.C. Section 856(d)(8) and (d)(9): qualified lodging facilities and eligible independent contractors (Legal Information Institute, Cornell Law School, accessed 2026-09-18): https://www.law.cornell.edu/uscode/text/26/856 - [9] HFTP, AHLA and GFC unveil the 12th Revised Edition of the Uniform System of Accounts for the Lodging Industry (July 11, 2024) (American Hotel & Lodging Association, accessed 2026-09-18): https://www.ahla.com/news/hftp-ahla-and-gfc-unveil-groundbreaking-12th-revised-edition-uniform-system-accounts-lodging - [10] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates - [11] Franchising: hotel franchising facts (American Hotel & Lodging Association, accessed 2026-09-18): https://www.ahla.com/issue/franchising ### What are RevPAR, ADR and occupancy, and what is a good number? URL: https://matthewshotelmarkets.com/hotel-industry/revpar-adr-occupancy Last updated: 2026-09-18 Occupancy is rooms sold divided by rooms available. ADR is room revenue divided by rooms sold. RevPAR is room revenue divided by rooms available, which equals occupancy times ADR. For 2025, CoStar reported U.S. occupancy of 62.3 percent, ADR of $160.54 and RevPAR of $100.02, in figures published January 22, 2026.[1] A good number is one that beats your competitive set. Key takeaways: - RevPAR is occupancy times ADR. For 2025: 62.3 percent times $160.54 is $100.02.[1] - The latest monthly figures we read are for July 2026: 69.7 percent occupancy, $171.74 ADR and $119.77 RevPAR, up 2.3, 5.7 and 8.2 percent on the year.[2] - National averages mix every kind of hotel. In 2025 Choice Hotels' system reported RevPAR of $52.85 and Host Hotels & Resorts' comparable hotels reported $229.24.[4][5] - Good means above your competitive set. An index of 100 is a fair share. Hilton reports that comparable Hampton hotels averaged a RevPAR index of 121.0 in 2024.[3] - RevPAR is revenue, not profit. AHLA reported in January 2026 that gross operating profit per available room was roughly 90 percent of 2019 levels.[8] #### What is hotel occupancy? Hotel occupancy is the number of rooms sold divided by the number of rooms available over the same period, written as a percentage. A 100-room hotel that sells 70 rooms tonight ran 70 percent occupancy. Over a year the same hotel has 36,500 room nights to sell. CoStar reported U.S. occupancy of 62.3 percent for 2025, down 1.2 percent from 2024, the first full-year decline since 2020.[1] The monthly figure swings with the season: for July 2026 CoStar reported 69.7 percent.[2] That swing is why a single month tells you little. Compare the same month a year earlier, or use a trailing twelve months. #### What is ADR? ADR, the average daily rate, is room revenue divided by the number of rooms sold, so it is the average price actually paid for an occupied room. ADR counts only sold rooms. An empty room does not pull it down, which is why ADR on its own can flatter a hotel that prices itself out of demand. U.S. ADR was $160.54 for 2025, up 0.9 percent, and $171.74 for July 2026, up 5.7 percent on July 2025.[1][2] CoStar's July release put the largest rate gain among the top 25 markets in New York City, which hosted the World Cup final: ADR up 24.0 percent to $351.18.[2] The glossary entry is at [ADR](/glossary/adr). #### What is RevPAR, and how do I calculate it? RevPAR, revenue per available room, is room revenue divided by rooms available, and it gives the same answer as occupancy multiplied by ADR. Choice Hotels' fiscal 2025 10-K describes RevPAR as the key industry standard for measuring hotel operating performance and defines it as the percentage of occupied rooms multiplied by the average daily room rate realized.[4] Check it against the national figures: 0.623 times $160.54 is $100.02, the 2025 U.S. RevPAR CoStar reported, down 0.3 percent on 2024.[1] RevPAR is the most quoted of the three because it cannot be gamed from one side. Cutting rate to fill rooms raises occupancy and lowers ADR, and RevPAR shows whether the trade was worth it. RevPAR counts room revenue only. Hotels with restaurants and meeting space also report total RevPAR, which counts every department. Host Hotels & Resorts reported comparable hotel RevPAR of $229.24 and total RevPAR of $382.83 for 2025.[5] The glossary entry is at [RevPAR](/glossary/revpar). #### What are the latest national occupancy, ADR and RevPAR figures? The latest full year is 2025, at 62.3 percent, $160.54 and $100.02, and the latest month we read is July 2026, at 69.7 percent, $171.74 and $119.77.[1][2] Both sets are CoStar's, from its STR benchmarking business. We read the full-year figures in Hotel Dive's report of January 22, 2026 and the July figures in Hotel Online's report of August 26, 2026, not on CoStar's own site, and we cite what we read.[1][2] In July, 22 of the top 25 markets posted RevPAR growth.[2] For the year ahead, CoStar and Tourism Economics forecast occupancy of 63.1 percent for 2026 and 63.4 percent for 2027, as of August 7, 2026.[7] The competing forecasts are set side by side at [What is the outlook for hotels in 2026 and 2027?](/hotel-industry/outlook-2026-2027). These are the figures the firms made public. Market, submarket and comp-set data are sold by subscription and are not republished here. #### What is a good RevPAR or occupancy for a hotel? A good RevPAR or occupancy is one that beats the hotels you compete with, because the absolute number is set mostly by segment and market and only partly by how well the hotel is run. Public filings show how wide the range is. For 2025, Choice Hotels reported system occupancy of 55.6 percent, ADR of $95.05 and RevPAR of $52.85 across its franchise system.[4] Apple Hospitality REIT reported 74.1 percent, $159.09 and $117.95 at its comparable select-service hotels.[6] Host Hotels & Resorts reported 70.0 percent, $327.54 and $229.24 at its comparable luxury and upper-upscale hotels.[5] None of those is good or bad. Each is a different business. The spread inside one brand is just as wide. Hilton's 2025 Hampton disclosure reports average occupancy of 71.7 percent for comparable Hampton hotels in 2024, with individual hotels ranging from 30.5 percent to 96.6 percent, and average room rates for Hampton Inn hotels ranging from $77.60 to $315.97.[3] A Hampton at 65 percent can be the best hotel in its market and one at 75 percent can be the worst in its market. That is why the question a buyer or lender asks is how the hotel ranks against its [comp set](/glossary/comp-set). #### What are MPI, ARI and RGI? MPI, ARI and RGI are index numbers that divide a hotel's occupancy, ADR and RevPAR by the same figure for its competitive set and multiply by 100, so that 100 means a fair share. Hilton's Hampton disclosure writes the formula out: hotel RevPAR divided by comp set RevPAR, times 100, equals RevPAR index, and an index above 100 means the hotel is taking more than its fair share.[3] The market penetration index does the same with occupancy and the average rate index does the same with ADR. Hilton reports that comparable Hampton hotels averaged an occupancy index of 109.8 and a RevPAR index of 121.0 in 2024.[3] Read those as the brand's own averages for the hotels it counts as comparable. They are not a promise for any one property. Index numbers are what make a hotel's performance portable. A RevPAR of $95 means nothing to a buyer who does not know the market. A RevPAR index of 110 tells that buyer the hotel outsells its neighbors by ten percent, and the first thing the buyer will check is which hotels are in the set. More at [MPI, ARI and RGI](/glossary/mpi-ari-rgi). #### Why is RevPAR not the same as profit? RevPAR is not profit because it measures room revenue before any cost, and costs have grown faster than room revenue since 2019. AHLA's 2026 State of the Industry release, dated January 27, 2026, says rising operating expenses kept gross operating profit per available room at roughly 90 percent of 2019 levels.[8] Two hotels with the same RevPAR can have very different income if one pays more for labor, carries a restaurant, or sits under a heavier property tax bill. How revenue becomes income is covered at [How do hotels make money?](/hotel-industry/how-hotels-make-money). #### How do buyers and lenders use these numbers? Buyers and lenders use RevPAR and index trends to judge whether a hotel's income will hold, and then they value and size the loan on the income itself. A rising RevPAR index supports the case that income is durable. A falling one raises the question of whether the hotel needs capital, a new manager or a different flag. The income is then capitalized to reach a value, which is covered at [What is my hotel worth, and who decides?](/hotel-valuation) and [Walk me through the math on valuing a select-service hotel](/hotel-valuation/how-to-value-a-hotel). On the debt side, the same income is tested against debt service at current rates, which starts at [What do lenders require for a hotel loan?](/hotel-financing/loan-requirements). Market-level ranges for the 14 markets we cover are in the Matthews Hotel Index.[9] Table: Occupancy, ADR and RevPAR from six public sources: the same three metrics describe very different hotels Who and what | Occupancy | ADR | RevPAR | Period All U.S. hotels, per CoStar[1] | 62.3% | $160.54 | $100.02 | Full year 2025 All U.S. hotels, per CoStar[2] | 69.7% | $171.74 | $119.77 | July 2026 Choice Hotels system[4] | 55.6% | $95.05 | $52.85 | Full year 2025 Apple Hospitality REIT, comparable hotels[6] | 74.1% | $159.09 | $117.95 | Full year 2025 Host Hotels & Resorts, comparable hotels[5] | 70.0% | $327.54 | $229.24 | Full year 2025 Comparable Hampton hotels, per Hilton[3] | 71.7% | $145.82 (Hampton Inn), $152.19 (Hampton Inn & Suites) | Not stated. RevPAR index averaged 121.0 | Full year 2024 First-party data point: The Matthews Hotel Index for Q1 2026 shows how much the market sets the number: Dallas at about 68 percent occupancy with RevPAR of $90 to $130, and Charleston at about 73 percent with RevPAR of $125 to $220, depending on segment.[9] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Hypothetical: one month at an 80-room hotel, and its three index numbers): Hypothetical. The hotel and its competitive set are made up to show the arithmetic. Rooms available: 80 rooms times 30 nights is 2,400. Rooms sold: 1,704. Occupancy is 1,704 divided by 2,400, or 71.0 percent. Room revenue: $230,040. ADR is $230,040 divided by 1,704, or $135.00. RevPAR: $230,040 divided by 2,400 is $95.85. Check it the other way: 0.71 times $135.00 is $95.85. Now the competitive set, which ran 68.0 percent occupancy at a $128.00 ADR, for a RevPAR of $87.04. MPI is 71.0 divided by 68.0, times 100, or 104.4. ARI is $135.00 divided by $128.00, times 100, or 105.5. RGI is $95.85 divided by $87.04, times 100, or 110.1. The hotel's $95.85 is below the 2025 national RevPAR of $100.02,[1] and it is still a strong hotel, because it takes 10 percent more than its fair share of the market it actually competes in. FAQ: - Q: What is a good occupancy rate for a hotel? A: One above your competitive set's. The U.S. average was 62.3 percent in 2025.[1] Comparable Hampton hotels averaged 71.7 percent in 2024, with individual hotels between 30.5 and 96.6 percent.[3] - Q: What is the average RevPAR in the United States? A: $100.02 for full-year 2025, down 0.3 percent, according to CoStar figures reported January 22, 2026.[1] For July 2026 it was $119.77, up 8.2 percent on July 2025.[2] - Q: How do you calculate RevPAR? A: Divide room revenue by rooms available, or multiply occupancy by ADR. A hotel at 71 percent occupancy and a $135 ADR has a RevPAR of $95.85. - Q: Is a higher ADR always better? A: No. ADR counts only sold rooms, so a hotel can raise ADR by pricing away demand. RevPAR shows the net effect. A rate increase that costs more in occupancy than it earns in rate lowers RevPAR. - Q: What is a good RevPAR index? A: Above 100, which means more than a fair share of your competitive set's RevPAR. Hilton reports an average of 121.0 for comparable Hampton hotels in 2024.[3] Always ask which hotels are in the set. - Q: Where can I get RevPAR data for my market? A: Hotel-level and comp-set data come from a paid STR report. National figures appear in CoStar's public monthly releases.[2] Our Matthews Hotel Index publishes ranges for 14 markets.[9] - Q: Does RevPAR include food and beverage revenue? A: No. RevPAR is room revenue only. Total RevPAR counts all departments. Host Hotels & Resorts reported comparable RevPAR of $229.24 and total RevPAR of $382.83 for 2025.[5] Sources: - [1] Key full-year US hotel metrics fall for first time since 2020 (January 22, 2026): full-year 2025 occupancy, ADR and RevPAR (Hotel Dive, citing CoStar, accessed 2026-09-18): https://www.hoteldive.com/news/hotel-occupancy-revpar-decline-2025/810212/ - [2] U.S. Hotels Post Strong July Gains as Occupancy, Rates and RevPAR Rise (August 26, 2026) (Hotel Online, citing CoStar, accessed 2026-09-18): https://www.hotel-online.com/news/us-hotels-post-strong-july-gains-as-occupancy-rates-and-revpar-rise - [3] 2025 Hampton Franchise Disclosure Document (issued March 30, 2025), Items 5, 6, 15, 17 and 19 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - [4] Choice Hotels International, Inc. Form 10-K for fiscal year 2025, Item 1, Business: The Lodging Industry (U.S. Securities and Exchange Commission, EDGAR, accessed 2026-09-18): https://www.sec.gov/Archives/edgar/data/1046311/000104631126000008/chh-20251231.htm - [5] Host Hotels & Resorts, Inc. Reports Results for 2025 (February 18, 2026), consolidated statements of operations and comparable hotel results (Host Hotels & Resorts, Inc., via GlobeNewswire, accessed 2026-09-18): https://www.globenewswire.com/news-release/2026/02/18/3240651/0/en/host-hotels-resorts-inc-reports-results-for-2025.html - [6] Apple Hospitality REIT Reports Results of Operations for Fourth Quarter and Full Year 2025 (February 23, 2026) (Apple Hospitality REIT, Inc., accessed 2026-09-18): https://ir.applehospitalityreit.com/News/news-details/2026/Apple-Hospitality-REIT-Reports-Results-of-Operations-for-Fourth-Quarter-and-Full-Year-2025/default.aspx - [7] CoStar, Tourism Economics 'significantly' boost US hotel outlook (August 7, 2026) (Hotel Dive, citing CoStar and Tourism Economics, accessed 2026-09-18): https://www.hoteldive.com/news/costar-tourism-economics-raise-us-hotel-performance-outlook-2026/827318/ - [8] AHLA releases 2026 State of the Industry (January 27, 2026) (American Hotel & Lodging Association, accessed 2026-09-18): https://www.ahla.com/news/ahla-releases-2026-state-industry - [9] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/research/mhi/q1-2026 ### Who owns hotels in the United States? URL: https://matthewshotelmarkets.com/hotel-industry/who-owns-hotels Last updated: 2026-09-18 Mostly private owners, not the brands on the signs. AAHOA says its members own 36,807 U.S. hotels, 60 percent of the total, citing a study it commissioned from Oxford Economics.[1] AHLA says 57 percent of U.S. hotels are franchised.[3] Hilton owned or leased 46 of its 9,158 properties at December 31, 2025, and public REITs own hundreds of hotels, not tens of thousands.[5] Key takeaways: - AAHOA's figure, attributed to AAHOA: members own 36,807 hotels with 3.2 million guestrooms, which it puts at 60 percent of U.S. hotels.[1] - AHLA's figure, attributed to AHLA: 57 percent of U.S. hotels are franchised, with 36,173 franchised hotels projected for 2024.[3] - The brands own almost nothing. Hilton owned or leased 46 of 9,158 properties, and Marriott says it owns or leases less than one percent of its system.[5][6] - Public REITs are large by value and small by count. Host owns 76 properties and Apple Hospitality owns 217 hotels.[7][8] - Private equity was 34 percent of U.S. hotel transactions in the first quarter of 2026, according to JLL.[11] #### Who owns most of the hotels in the United States? Private owners, many of them family businesses that hold a handful of franchised hotels, own most of the hotels in the United States by count. No government agency publishes a register of hotel owners, so the picture has to be assembled from the bodies that speak for each group, and each of them has a reason to make its group look large. We attribute every figure below to whoever published it. The shape is consistent across all of them. The brand companies own very few hotels. Public REITs and institutional funds own the biggest and most expensive hotels, which is a small share of the count. The rest, including most of the select-service and economy hotels along American highways and in secondary markets, belongs to private owners. Wyndham's 10-K describes its franchisees as ranging from sole proprietors to institutional investors such as public real estate investment trusts.[10] #### What share of U.S. hotels do AAHOA members own? AAHOA says its members own 60 percent of U.S. hotels, a figure that comes from a study AAHOA commissioned from Oxford Economics. AAHOA is the Asian American Hotel Owners Association. Its published summary of the Oxford Economics study, as it read on September 18, 2026, says members own 36,807 hotels in the United States with 3.2 million guestrooms, that those hotels are 60 percent of U.S. hotels, that 1 million employees work at member-owned hotels and earn over $51 billion a year, and that the hotels contribute $371.4 billion to U.S. GDP.[1] The page does not carry a date. When AAHOA first announced the study on August 5, 2021, the figures were 34,260 hotels, 3.1 million guestrooms and the same 60 percent, for an association of nearly 20,000 members.[2] Two cautions. It is a trade association's figure about its own members, produced by a firm it hired, and we have not seen the underlying census. And it is a share of hotels, not of rooms or of value. By our arithmetic, 3.2 million rooms across 36,807 hotels is an average of about 87 rooms a hotel, which tells you the membership is weighted to smaller select-service and economy properties. #### How many U.S. hotels are franchised? AHLA says 57 percent of U.S. hotels are franchised and projected 36,173 franchised hotels for 2024, a 34 percent increase over the prior decade.[3] In a statement on July 21, 2026, AHLA's chief executive put the share at nearly 60 percent and said franchised hotels support more than 2.8 million jobs.[4] Franchised does not mean owned by the brand. It means the opposite: an independent owner has licensed the name. A franchised Hampton or Holiday Inn Express belongs to a local owner or an investment group that pays the brand a fee on rooms revenue. The contracts are explained at [What is the difference between a hotel owner, a franchisor and a management company?](/hotel-industry/owner-franchisor-management-company). The AAHOA and AHLA figures overlap heavily, since most AAHOA members own franchised hotels. They are two views of the same fact: most U.S. hotels are branded, and most branded hotels are owned by private businesses. #### Do Marriott, Hilton and the other brands own their hotels? No. Marriott, Hilton and the other large brand companies own almost none of the hotels that carry their names. Hilton's 10-K for fiscal 2025 counts 9,158 properties with 1,351,351 rooms at December 31, 2025. Of those, 46 properties with 15,287 rooms were owned or leased, 873 were managed for other owners and 8,239 were franchised or licensed.[5] Marriott's 10-K counts 9,805 properties with 1,779,936 rooms at year-end 2025 and says the company owns or leases very few of them, less than one percent of its system.[6] In Hilton's 2025 Hampton disclosure, 1,945 of 1,960 comparable Hampton hotels in the U.S. were managed by the franchisee or a non-Hilton management company.[9] This is a deliberate business model. A fee on someone else's rooms revenue needs little capital and keeps coming in a downturn, while owning the building ties up capital and carries the losses. #### How much of the hotel industry do REITs own? Public hotel REITs own a small number of hotels that are large and valuable, so their share of rooms and value is far bigger than their share of the hotel count. Host Hotels & Resorts, which calls itself the largest lodging REIT, owns 71 properties in the United States and five abroad with about 41,700 rooms.[7] Apple Hospitality REIT owns 217 hotels with 29,583 guest rooms across 37 states and the District of Columbia.[8] By our arithmetic that is about 549 rooms per Host property and 136 per Apple Hospitality hotel, against about 87 for the average AAHOA member hotel.[1] Together the two REITs own 293 hotels. AAHOA's count for its members is 36,807. REITs also operate under a rule private owners do not face. The Internal Revenue Code lets a REIT lease a hotel to its own taxable subsidiary only if an eligible independent contractor operates the property, so a REIT always pays a separate manager.[12] #### Who is buying hotels right now? Private equity accounted for 34 percent of U.S. hotel transactions in the first quarter of 2026, according to JLL. It is the one buyer-type share in the public summary we read.[11] JLL counted $5.6 billion of U.S. hotel transaction volume in that quarter across 227 transactions, up 14.4 percent by dollars and 35 percent by count on a year earlier, and still 47 percent below the 2022 peak.[11] Single-asset trades were $5.4 billion of the total.[11] Transaction data of this kind captures the larger deals best. The sale of a 70-room highway hotel from one private owner to another is the most common hotel trade in the country and the least likely to appear in a national league table. If you are on either side of one, start at [What is involved in selling a hotel?](/sell-a-hotel) or [How do I buy a hotel?](/buy-a-hotel). #### How many hotels are there in the United States? There is no single free, public count of U.S. hotels, and the public figures that exist imply a total somewhere above 60,000. AAHOA's 36,807 hotels at 60 percent implies about 61,300 hotels in total.[1] AHLA's 36,173 franchised hotels at 57 percent implies about 63,500.[3] Both are our arithmetic on the associations' own figures. The Bureau of Labor Statistics counts 78,789 private establishments in the accommodation subsector in the first quarter of 2026, a preliminary figure, but that subsector also includes RV parks, recreational camps and rooming houses.[13] The count most of the industry uses is STR's census, which is a licensed product, so we do not reproduce it. The size of the industry in dollars and jobs is at [How big is the US hotel industry in 2026?](/hotel-industry/industry-size-2026). #### Why does it matter who owns hotels? Who owns a hotel matters because the owner type decides how a hotel is financed, how it is sold and who the likely buyer is. A private owner with a few hotels typically borrows from banks and SBA lenders and sells to a buyer like itself. As of September 2026 the maximum SBA 7(a) rate is 10.00 percent and the 25-year SBA 504 debenture priced at 6.54 percent.[14] An institutional owner borrows in the CMBS, life company and debt fund markets and sells through a marketed process to funds and REITs. Lender types are compared at [Who are the biggest hotel lenders, and which type fits my deal?](/hotel-financing/hotel-lenders-by-type), and the financing overview is at [How does hotel financing work, and what does it cost right now?](/hotel-financing). What a given hotel is worth to each kind of buyer is covered at [What is my hotel worth, and who decides?](/hotel-valuation). Table: Who owns U.S. hotels: each public claim, who makes it, and its date Claim | Figure | Who says so | Date Hotels owned by AAHOA members | 36,807 hotels, 3.2 million guestrooms, 60% of U.S. hotels | AAHOA, citing Oxford Economics[1] | Undated page, read September 18, 2026 The same study when first announced | 34,260 hotels, 3.1 million guestrooms, 60% of U.S. hotels | AAHOA, citing Oxford Economics[2] | August 5, 2021 Share of U.S. hotels that are franchised | 57%, with 36,173 franchised hotels projected for 2024 | AHLA[3] | 2024 figures Hotels Hilton owns or leases | 46 of 9,158 properties | Hilton 10-K[5] | December 31, 2025 Hotels Marriott owns or leases | Less than 1% of 9,805 properties | Marriott 10-K[6] | Year-end 2025 Host Hotels & Resorts | 76 properties, about 41,700 rooms | Host results release[7] | February 18, 2026 Apple Hospitality REIT | 217 hotels, 29,583 rooms, 37 states and D.C. | Apple Hospitality results release[8] | February 23, 2026 Private equity share of hotel transactions | 34% in Q1 2026 | JLL, reported by Hotel Dive[11] | May 14, 2026 Accommodation establishments, NAICS 721 | 78,789 private establishments, preliminary | Bureau of Labor Statistics[13] | First quarter 2026 First-party data point: The Matthews Hotel Index for Q1 2026 prices the segment most private owners hold: stabilized select-service cap rates of 7.5% to 8.25% in Austin, against 7.0% to 8.0% for full-service hotels in the same market.[15] Source: https://matthewshotelmarkets.com/research/mhi/q1-2026 Worked example (Worked arithmetic: what the association figures imply, and what they do not): This uses published figures only. Nothing here is hypothetical, and nothing here is a census. AAHOA: 36,807 member-owned hotels is said to be 60 percent of U.S. hotels.[1] 36,807 divided by 0.60 is 61,345. So AAHOA's own numbers imply about 61,300 hotels in the country. AHLA: 36,173 franchised hotels is said to be 57 percent of U.S. hotels.[3] 36,173 divided by 0.57 is 63,461. So AHLA's numbers imply about 63,500. The two totals are within 4 percent of each other, which is some comfort that both associations are working from a similar base. Both percentages are rounded, so neither total is precise. Rooms per hotel: AAHOA's 3.2 million rooms over 36,807 hotels is about 87 rooms.[1] Apple Hospitality's 29,583 rooms over 217 hotels is about 136.[8] Host's roughly 41,700 rooms over 76 properties is about 549.[7] What this does not tell you: the share of rooms or of value that any group owns. A 60 percent share of hotels, at 87 rooms each, is a smaller share of rooms and a much smaller share of value. FAQ: - Q: Is AAHOA's 60 percent figure reliable? A: It is a trade association's figure about its own members, from a study it commissioned from Oxford Economics, and the underlying census is not public.[1] It has been stable: AAHOA gave the same 60 percent when it first announced the study on August 5, 2021.[2] - Q: Does Hilton own Hampton Inn hotels? A: Hilton owns the brand, not the buildings. It owned or leased 46 properties across all its brands at December 31, 2025.[5] In its 2025 disclosure, 1,945 of 1,960 comparable Hampton hotels were managed by the franchisee or a non-Hilton manager.[9] - Q: What is the largest hotel owner in the United States? A: Host Hotels & Resorts describes itself as the largest lodging REIT, with 76 properties and about 41,700 rooms.[7] By hotel count, Apple Hospitality REIT is larger with 217 hotels.[8] We do not publish a ranking of private owners, because no public source supports one. - Q: How many hotels are franchised? A: AHLA says 57 percent of U.S. hotels are franchised and projected 36,173 franchised hotels for 2024.[3] In July 2026 its chief executive described the share as nearly 60 percent.[4] - Q: How many hotels are there in the U.S.? A: No free public census exists. AAHOA's and AHLA's own figures imply roughly 61,300 to 63,500 hotels, by our arithmetic.[1][3] The Bureau of Labor Statistics counts 78,789 accommodation establishments, which includes RV parks and rooming houses.[13] - Q: Why do REITs own so few hotels? A: REITs buy large, high-value hotels. Host averages about 549 rooms a property, by our arithmetic.[7] A REIT must also lease each hotel to a taxable subsidiary and hire an eligible independent contractor to run it.[12] Sources: - [1] Oxford Economics Study: the economic impact of AAHOA Member-owned hotels (Asian American Hotel Owners Association (AAHOA), accessed 2026-09-18): https://www.aahoa.com/resources/oxford-study - [2] New AAHOA/Oxford Economics Study Details Extent of AAHOA Members' Economic Impact and Industry Influence (August 5, 2021) (AAHOA, republished by Hospitality Net, accessed 2026-09-18): https://www.hospitalitynet.org/news/4105842/new-aahoaoxford-economics-study-details-extent-of-aahoa-members-economic-impact-and-industry-influence - [3] Franchising: hotel franchising facts (American Hotel & Lodging Association, accessed 2026-09-18): https://www.ahla.com/issue/franchising - [4] AHLA Statement on House Committee Passage of American Franchise Act (July 21, 2026) (American Hotel & Lodging Association, accessed 2026-09-18): https://www.ahla.com/news/ahla-statement-house-committee-passage-american-franchise-act - [5] Hilton Worldwide Holdings Inc. Form 10-K for fiscal year 2025 (filed February 11, 2026), Item 1, Business (U.S. Securities and Exchange Commission, EDGAR, accessed 2026-09-18): https://www.sec.gov/Archives/edgar/data/1585689/000158568926000007/hlt-20251231.htm - [6] Marriott International, Inc. Form 10-K for fiscal year 2025 (filed February 10, 2026), Item 1, Business (U.S. Securities and Exchange Commission, EDGAR, accessed 2026-09-18): https://www.sec.gov/Archives/edgar/data/1048286/000104828626000007/mar-20251231.htm - [7] Host Hotels & Resorts, Inc. Reports Results for 2025 (February 18, 2026), consolidated statements of operations and comparable hotel results (Host Hotels & Resorts, Inc., via GlobeNewswire, accessed 2026-09-18): https://www.globenewswire.com/news-release/2026/02/18/3240651/0/en/host-hotels-resorts-inc-reports-results-for-2025.html - [8] Apple Hospitality REIT Reports Results of Operations for Fourth Quarter and Full Year 2025 (February 23, 2026) (Apple Hospitality REIT, Inc., accessed 2026-09-18): https://ir.applehospitalityreit.com/News/news-details/2026/Apple-Hospitality-REIT-Reports-Results-of-Operations-for-Fourth-Quarter-and-Full-Year-2025/default.aspx - [9] 2025 Hampton Franchise Disclosure Document (issued March 30, 2025), Items 5, 6, 15, 17 and 19 (Hilton Franchise Holding LLC, accessed 2026-09-18): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - [10] Wyndham Hotels & Resorts, Inc. Form 10-K for fiscal year 2025, Item 1, Business (U.S. Securities and Exchange Commission, EDGAR, accessed 2026-09-18): https://www.sec.gov/Archives/edgar/data/1722684/000172268426000007/wh-20251231.htm - [11] Luxury trades drove US hotel transaction uptick in Q1: JLL (May 14, 2026) (Hotel Dive, citing JLL, accessed 2026-09-18): https://www.hoteldive.com/news/luxury-trades-drove-us-hotel-transaction-uptick-q1-jll/820221/ - [12] 26 U.S.C. Section 856(d)(8) and (d)(9): qualified lodging facilities and eligible independent contractors (Legal Information Institute, Cornell Law School, accessed 2026-09-18): https://www.law.cornell.edu/uscode/text/26/856 - [13] Industries at a Glance: Accommodation, NAICS 721 (data extracted September 18, 2026) (U.S. Bureau of Labor Statistics, accessed 2026-09-18): https://www.bls.gov/iag/tgs/iag721.htm - [14] Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets, accessed 2026-09-18): https://matthewshotelmarkets.com/rates - [15] Matthews Hotel Index, Q1 2026 (Matthews Hotel Markets (first-party), accessed 2026-09-18): https://matthewshotelmarkets.com/research/mhi/q1-2026 ## Calculators ### What is my hotel worth? A hotel value estimator that gives a screening range URL: https://matthewshotelmarkets.com/tools/hotel-value-estimator Last updated: 2026-09-18 A first-pass hotel value is NOI divided by a cap rate band, less any PIP still to fund. The Matthews Hotel Index for Q1 2026, published April 15, 2026, puts select-service hotels at 7.50% to 8.75% across its 14 markets.[1] On $1,050,000 of NOI with a $1,100,000 PIP, that is $10,900,000 to $12,900,000. Matthews Hotel Markets calls that a screening range, not a valuation. Formula: noiUsed = noi, or revenue x noiMargin / 100 when noi is 0 band = Matthews Hotel Index band for your segment and market (all-markets band when the market has none for the segment) valueLow = noiUsed / (bandHigh / 100) - pip valueHigh = noiUsed / (bandLow / 100) - pip perKeyLow = valueLow / keys perKeyHigh = valueHigh / keys Worked example (Pre-computed worked example (server-rendered): hypothetical 78-key select-service hotel): Hypothetical hotel, using the estimator's own default inputs so the example and the live tool agree. The hotel, its NOI and its PIP are invented. The cap rate band is not: it is the Q1 2026 Matthews Hotel Index.[1] Inputs: 78 keys. NOI $1,050,000. Segment select-service. Market left on all 14 markets. PIP still to fund $1,100,000. Band. Select-service across all 14 markets: 7.50% to 8.75%. Low end. $1,050,000 / 0.0875 = $12,000,000. Less the $1,100,000 PIP = $10,900,000, or $139,744 per key. High end. $1,050,000 / 0.0750 = $14,000,000. Less the $1,100,000 PIP = $12,900,000, or $165,385 per key. Screening range: $10,900,000 to $12,900,000. The two ends are $2,000,000 apart on the same hotel, which is why this is a screening range and a broker opinion of value is the next step. The revenue path gives the same NOI: $3,500,000 of total revenue at a hypothetical 30 percent NOI margin is $1,050,000. A screening range, not a valuation, an appraisal or a broker opinion of value. Cap rate bands are the Matthews Hotel Index, Q1 2026. The hotel inputs shown at the start are hypothetical. The estimate ignores brand, condition, ground leases, market supply, deferred capital work and management encumbrance. FAQ: - Q: How do I estimate what my hotel is worth? A: Divide NOI by a cap rate band for your segment and market, then subtract any PIP still to fund. That gives a screening range. A broker opinion of value built from comparable sales narrows it. - Q: Why does the estimator give a range and not one number? A: Because the Matthews Hotel Index publishes cap rate bands, not single rates, and Q1 2026 select-service spans 7.50% to 8.75% across its markets.[1] One number would claim precision the data does not have. - Q: What cap rate does the estimator use? A: The Q1 2026 Matthews Hotel Index band for your segment and market.[1] If that market publishes no band for your segment, it falls back to the band across all 14 markets and tells you. - Q: My hotel is not in one of the 14 markets. Can I still use it? A: Yes. Leave the market on all 14 markets. The index has no national figure, so that band is the lowest low to the highest high among its markets, and a hotel elsewhere can fall outside it. - Q: Why is the PIP subtracted from the value? A: The index bands describe stabilized, PIP-current hotels.[1] A buyer who inherits brand-required work prices it into the bid. A buyer may price it above or below cost, so treat the subtraction as a first pass. - Q: What NOI margin should I enter? A: Your own, from a trailing twelve-month statement, after a management fee and an FF&E reserve. The 30 percent default is a hypothetical placeholder, not a benchmark. If you know NOI, type it and skip the margin. - Q: Is this a hotel appraisal or a broker opinion of value? A: Neither. It is arithmetic on a published band. It ignores brand, condition, ground leases, supply, deferred capital work and management contracts. A broker opinion of value prices those against named comparable sales. - Q: Do I have to give my email to see the result? A: No. There is no sign-up, the result shows as you type, and the numbers stay in your browser. ### How big a loan can my hotel support? A hotel loan sizing calculator URL: https://matthewshotelmarkets.com/tools/hotel-loan-sizing-calculator Last updated: 2026-09-18 A hotel lender sizes the loan three ways and lends the smallest result. DSCR caps it at NOI divided by the test and the loan constant. Debt yield caps it at NOI divided by the test. LTV caps it at a percent of value. Lenders do not publish those tests, so enter yours.[1] Matthews Hotel Markets' September 2026 rate sheet has the 10-year Treasury at 4.94% on September 17, 2026.[2] Formula: rate = indexRate + spread monthlyRate = rate / 100 / 12 n = amortYears x 12 loanConstant = (monthlyRate / (1 - (1 + monthlyRate) ^ -n)) x 12 loanByDscr = noi / testDscr / loanConstant loanByDY = noi / (testDebtYield / 100) loanByLtv = value x testLtv / 100 maxLoan = the smallest of the tests you entered equity = value - maxLoan SBA 504 mode, hotel (13 CFR 120.910, 120.920; SOP 50 10 8): bankLoan = projectCost x 50% (minimum) borrower = projectCost x 15% (20% if the business is two years old or less) debenture = the smaller of the remainder and $5,000,000 uncovered = remainder - debenture Worked example (Pre-computed worked example (server-rendered): hypothetical hotel at the calculator's defaults): Hypothetical, using the calculator's own default inputs so the example and the live tool agree. The 1.35x, 10 percent and 65 percent tests are this hypothetical's assumptions, not lender requirements or market figures. The rate is the 10-year Treasury alone with a zero spread, which no lender quotes, so read the DSCR line as a ceiling. Inputs: NOI $1,050,000. Appraised value $12,000,000. Index 4.94% plus spread 0.00% = 4.94%, 25-year amortization. Tests: DSCR 1.35x, debt yield 10.00%, LTV 65.00%. DSCR test. Maximum debt service = $1,050,000 / 1.35 = $777,778. The loan constant at 4.94% over 25 years is 0.069732. Loan = $11,153,822. Debt yield test. $1,050,000 / 0.10 = $10,500,000. LTV test. $12,000,000 x 0.65 = $7,800,000. The binding constraint is LTV / LTC, so the loan is $7,800,000. Implied equity = $12,000,000 less $7,800,000 = $4,200,000. At that loan the DSCR is 1.93x and the debt yield is 13.46%. SBA 504 mode on the same $12,000,000 as total project cost: bank first lien at 50 percent = $6,000,000, debenture at 35 percent = $4,200,000, borrower contribution at 15 percent = $1,800,000.[3][4] For a business two years old or less the contribution is $2,400,000 and the debenture $3,600,000.[3] On a $16,000,000 project, 35 percent would be $5,600,000, so the $5,000,000 cap binds and $600,000 has to come from a larger bank loan or more equity.[5] Indicative arithmetic only. The three tests are yours: the defaults are hypothetical and no lender publishes them. Not a loan quote, a commitment or an offer of credit. SBA 504 figures are regulatory minimums and caps, not a lender's terms. FAQ: - Q: How do lenders decide how much to lend on a hotel? A: They size the loan under a DSCR test, a debt yield test and an LTV or LTC test, then lend the smallest result. The test that produces the smallest loan is the binding constraint. - Q: What DSCR, debt yield and LTV should I enter? A: The ones your lender stated. No lender type publishes a DSCR floor, a debt yield floor or an LTV ceiling, and our rate sheet marks those cells not yet published.[1] The defaults are hypothetical placeholders. - Q: Why is the spread field empty? A: Because lenders do not publish hotel spreads, and we will not print one we cannot source.[1] The index is public: the 10-year Treasury was 4.94% on September 17, 2026.[2] Type the spread from your own quote. - Q: What does binding constraint mean? A: It is the sizing test that limits the loan. If LTV binds, a higher appraisal helps and a lower rate does not. If DSCR binds, rate and amortization matter. If debt yield binds, only NOI moves the loan. - Q: How much equity do I need to buy a hotel? A: Price less the loan the binding test allows, plus closing costs, reserves and any PIP. The calculator shows the first part. Under SBA 504 the minimum borrower contribution on a hotel is 15 percent of project cost, or 20 percent for a business two years old or less.[3] - Q: What is the largest SBA 504 debenture on a hotel? A: $5,000,000.[5] The bank first lien sits alongside it and must be at least 50 percent of project cost, so the project can be far larger than the debenture.[4] - Q: Can I use LTC instead of LTV? A: Yes. Enter total project cost or purchase price in the value field and your lender's loan-to-cost test in the LTV field. The arithmetic is the same. - Q: Is this a loan quote? A: No. It is arithmetic on the numbers you type. It is not a quote, a commitment or an offer of credit, and a lender will underwrite its own NOI. ### Hotel refinance vs sell calculator: which path leaves me more cash? URL: https://matthewshotelmarkets.com/tools/refinance-vs-sell Last updated: 2026-09-18 Size the new loan from NOI, then price the sale from the same NOI. Maximum refinance proceeds are NOI divided by your lender's DSCR test, divided by the loan constant. Net sale proceeds are value at your cap rate, less the PIP, sale costs and the payoff. Matthews Hotel Markets' September 2026 rate sheet shows the 10-year Treasury at 4.94% on September 17, 2026.[1][2] Formula: monthlyRate = rate / 100 / 12 n = amortYears x 12 loanConstant = (monthlyRate / (1 - (1 + monthlyRate) ^ -n)) x 12 maxLoan = noi / testDscr / loanConstant refiNet = maxLoan - loanBalance - pip value = noi / (capRate / 100) salePrice = value - pip saleCosts = salePrice x saleCostPct / 100 netSale = salePrice - saleCosts - loanBalance gap = netSale - refiNet Worked example (Pre-computed worked example (server-rendered): hypothetical 78-key select-service hotel): Hypothetical, using the calculator's own default inputs so the example and the live tool agree. The 1.35x test, the 7.25 percent rate, the 8.25 percent cap rate and the 2 percent sale cost are this hypothetical's assumptions, not market figures. Inputs: NOI $1,050,000. Loan balance $8,400,000. New rate 7.25 percent, 25-year amortization, lender DSCR test 1.35x. Cap rate 8.25 percent, sale costs 2 percent, PIP $1,100,000. Refinance. Maximum debt service = $1,050,000 / 1.35 = $777,778. The loan constant at 7.25 percent over 25 years is 0.086737. Maximum refinance proceeds = $777,778 / 0.086737 = $8,967,100. Less the $8,400,000 payoff and the $1,100,000 PIP = negative $532,900. The owner brings $532,900 and keeps the hotel. Sale. Value = $1,050,000 / 0.0825 = $12,727,273. Less the $1,100,000 PIP = $11,627,273. Sale costs at 2 percent = $232,545. Less the $8,400,000 payoff. Net sale proceeds before tax = $2,994,727. The gap = $2,994,727 minus negative $532,900 = $3,527,627. Selling puts about $3.53M more cash in hand today than refinancing, before tax, and the hotel's $1,050,000 of NOI goes to the buyer. The paired page, `/hotel-financing/refinance-or-sell`, runs the same hotel with a smaller PIP price reduction and lands on a different sale number, which is the point of changing the inputs. Indicative only, before tax and before refinance closing costs. Every default is hypothetical. Not a loan quote, an offer of credit, a valuation or tax advice. FAQ: - Q: How do I calculate maximum refinance proceeds on a hotel? A: Divide annual NOI by your lender's DSCR test to get maximum debt service, then divide by the loan constant at the new rate and amortization. In the hypothetical above, $1,050,000 of NOI at a 1.35x test, 7.25 percent and 25 years supports $8,967,100. - Q: How do I calculate net proceeds from selling a hotel? A: Take value, which is NOI divided by the cap rate, subtract any PIP the buyer will price in, subtract sale costs, then subtract the loan payoff. The result is before tax. Tax depends on your adjusted basis, so run that with a CPA.[3] - Q: What DSCR test should I enter? A: The one your lender stated in writing. No lender type publishes a DSCR floor, and our rate sheet marks that cell not yet published for every lender type.[1] The 1.35x default is a hypothetical placeholder. - Q: Does a bigger gap mean I should sell? A: No. The gap is only the extra cash a sale produces today, before tax. Refinancing keeps the asset and its income. Compare the gap, after tax, with what the hotel would earn you if you kept it. - Q: Why is the PIP subtracted from both columns? A: Because it is a cost on both paths. If you keep the hotel you fund or reserve for it. If you sell, a buyer prices the work into the bid. Set the field to zero if the PIP is already funded and complete. - Q: What does the calculator not include? A: Capital gains and depreciation recapture tax, refinance closing costs, prepayment charges on the old loan, and the debt yield and LTV tests. Each one can change the answer, so treat the output as a first pass. - Q: What rate should I use for the new loan? A: A quoted rate if you have one. Fixed-rate quotes are struck over the Treasury curve, and the 10-year Treasury was 4.94% on September 17, 2026.[2] Lenders do not publish their hotel spreads, so we do not print one.[1] ### Hotel DSCR calculator: will my loan size? URL: https://matthewshotelmarkets.com/tools/dscr-calculator Last updated: 2026-09-18 DSCR is net operating income divided by annual debt service. No hotel lender type publishes its DSCR floor, so enter the test your own lender stated rather than a number off the internet. Matthews Hotel Markets' September 2026 rate sheet marks that cell not yet published for all seven lender types.[1] The 10-year Treasury was 4.94% on September 17, 2026.[2] Formula: monthlyRate = rate / 100 / 12 n = amortYears x 12 monthlyPayment = loanAmount x monthlyRate / (1 - (1 + monthlyRate) ^ -n) annualDebtService = monthlyPayment x 12 dscr = noi / annualDebtService verdict = dscr >= testDscr ? "Clears the test" : "Below the test" maxDebtService = noi / testDscr constantPerDollar = (monthlyRate / (1 - (1 + monthlyRate) ^ -n)) x 12 maxLoan = maxDebtService / constantPerDollar Worked example (Pre-computed worked example (server-rendered): hypothetical 95-key select-service hotel): Hypothetical, using the calculator's own default inputs so the example and the live tool agree. The 1.35x test below is this hypothetical lender's stated test, not a published industry floor. Annual NOI: $1,600,000. Loan amount: $12,000,000. Rate: 7.25 percent, amortization 25 years. Monthly payment: $86,737. Annual debt service: $1,040,842. DSCR = $1,600,000 / $1,040,842 = 1.54x. Against this lender's 1.35x test, it clears with room to spare. Max loan at that test = ($1,600,000 / 1.35) divided by the annual constant of about $0.0868 per dollar at this rate and term, or roughly $13,664,000. So this hypothetical borrower could take about $1.66M more loan and still clear the coverage test. Whether they should depends on the debt yield and LTV tests, which are the other two constraints, covered on `/hotel-financing`. Indicative only. Not a loan quote, an offer of credit, or a commitment to lend. FAQ: - Q: What is a good DSCR for a hotel loan? A: There is no published answer. No hotel lender type publishes a DSCR floor.[1] A good DSCR is one that clears the specific test your lender stated, with enough room that a soft quarter does not put the loan in default. - Q: How do I calculate DSCR? A: Divide annual net operating income by annual debt service (twelve months of loan payments). The calculator above runs the full amortization math for you from NOI, loan amount, rate and term. - Q: What DSCR do hotel lenders require in 2026? A: Nobody publishes it. We checked all seven lender types on our own September 2026 rate sheet and every coverage cell is marked not yet published.[1] Ask your lender for its test in writing, then enter that number above. - Q: What happens if my DSCR is below the test? A: The loan amount is reduced, more equity is required, or the deal does not qualify at that lender. There is no shortcut around the math; the fix is more equity, a longer amortization, or higher NOI. - Q: Does DSCR use trailing or projected NOI? A: It depends on the lender, so ask. In our experience, permanent lenders generally use trailing twelve-month NOI, while bridge and debt fund lenders will sometimes use a stabilized, forward-looking NOI, which can support more proceeds on a transitional asset. - Q: Is DSCR more important than LTV on a hotel loan? A: Neither is universally more important. A lender runs DSCR, debt yield, and LTV independently and lends the lowest of the three results, so whichever test is binding on your specific deal is the one that matters most. - Q: How does a longer amortization change DSCR? A: A longer amortization lowers the annual payment on the same loan amount and rate, which raises DSCR, or equivalently supports a larger loan at the same DSCR test. ### Hotel debt yield calculator: how big a loan does my NOI support? URL: https://matthewshotelmarkets.com/tools/debt-yield-calculator Last updated: 2026-09-18 Debt yield is net operating income divided by the loan amount, as a percent. It ignores the rate, the amortization and the appraisal. A hotel with $1,600,000 of NOI and a $12,000,000 loan has a 13.33% debt yield. No lender type publishes its floor, so Matthews Hotel Markets' September 2026 rate sheet prints none.[1] Type the test your lender stated. Formula: debtYield = noi / loanAmount x 100 verdict = debtYield >= testDebtYield ? "Clears the test" : "Below the test" maxLoan = noi / (testDebtYield / 100) room = maxLoan - loanAmount Worked example (Pre-computed worked example (server-rendered): hypothetical 95-key select-service hotel): Hypothetical, using the calculator's own default inputs so the example and the live tool agree. It is the same hypothetical hotel as the worked example on `/tools/dscr-calculator`. The 10 percent test is this hypothetical lender's stated test, not a published industry floor. Annual NOI: $1,600,000. Loan amount: $12,000,000. Debt yield = $1,600,000 / $12,000,000 = 13.33%. Against this lender's 10.00% test, it clears. Maximum loan at that test = $1,600,000 / 0.10 = $16,000,000. That is $4,000,000 more than the request. Now compare tests. On the DSCR calculator, the same NOI at a hypothetical 1.35x test, 7.25 percent and 25 years supports about $13,664,000. That is smaller than $16,000,000, so for this hypothetical lender DSCR is the binding test, not debt yield. If the rate fell far enough, the DSCR loan would grow past $16,000,000 and debt yield would bind instead, because the debt yield number does not move with the rate. Indicative only. Every default is hypothetical. Not a loan quote, an offer of credit, or a commitment to lend. FAQ: - Q: How do I calculate debt yield? A: Divide annual net operating income by the loan amount and express it as a percent. $1,600,000 of NOI on a $12,000,000 loan is a 13.33% debt yield. - Q: What debt yield do hotel lenders require? A: No lender type publishes one, so we do not print a number.[1] CMBS sizing shows up deal by deal in offering documents filed with the SEC.[2] Ask your lender for its test in writing and enter it above. - Q: How do I find the maximum loan from a debt yield test? A: Divide NOI by the test. At a hypothetical 10% test, $1,600,000 of NOI supports a $16,000,000 loan. At a hypothetical 12% test, the same NOI supports $13,333,333. - Q: Does the interest rate change debt yield? A: No. The formula has no rate and no amortization in it. A rate change moves the DSCR test and leaves the debt yield test where it was. - Q: Is debt yield the same as cap rate? A: No. Cap rate is NOI divided by price. Debt yield is NOI divided by the loan. Because the loan is smaller than the price, debt yield is the larger percent on the same hotel. - Q: How can I improve my debt yield? A: Raise NOI or borrow less. Rate buydowns, longer amortization and a higher appraisal do nothing to it, which is the reason lenders use it. - Q: Which NOI does the lender use? A: Ask, because it varies by lender. Expect NOI after a management fee and an FF&E reserve, which is lower than the NOI on many owner statements. Enter the lender's version, not yours. ### Hotel cap rate calculator: cap rate, value and price per key URL: https://matthewshotelmarkets.com/tools/cap-rate-calculator Last updated: 2026-09-18 Cap rate is net operating income divided by price. Value is NOI divided by a cap rate. Price per key is price divided by room count. A hotel with $1,050,000 of NOI offered at $12,000,000 is an 8.75% cap rate, and at 78 keys that is $153,846 per key. Matthews Hotel Markets' September 2026 rate sheet shows the 10-year Treasury at 4.94% on September 17, 2026.[1][2] Formula: capRateAtPrice = noi / price x 100 pricePerKey = price / keys value = noi / (capRate / 100) valuePerKey = value / keys Worked example (Pre-computed worked example (server-rendered): hypothetical 78-key select-service hotel): Hypothetical, using the calculator's own default inputs so the example and the live tool agree. The $12,000,000 price and the 8.25 percent cap rate are this hypothetical's assumptions, not market figures. Inputs: NOI $1,050,000. Offered price $12,000,000. 78 keys. Cap rate to test: 8.25 percent. From the price. Cap rate = $1,050,000 / $12,000,000 = 8.75%. Price per key = $12,000,000 / 78 = $153,846. From the cap rate. Value = $1,050,000 / 0.0825 = $12,727,273. Value per key = $12,727,273 / 78 = $163,170. Read together: if comparable hotels really are trading at 8.25 percent, the $12,000,000 offer is $727,273 under that value, about $9,324 per key. If they are trading at 8.75 percent, the offer is at the market. The arithmetic cannot tell you which is true. Comparable sales can. Indicative only. Every default is hypothetical. Not an appraisal, a broker opinion of value, or an offer to buy or sell. FAQ: - Q: How do I calculate the cap rate on a hotel? A: Divide annual net operating income by the price. $1,050,000 of NOI at a $12,000,000 price is 8.75%. Use NOI after a management fee and an FF&E reserve. - Q: How do I value a hotel from its NOI? A: Divide NOI by a cap rate drawn from comparable sales. At a hypothetical 8.25% cap rate, $1,050,000 of NOI is worth $12,727,273. The cap rate is the input that needs evidence. - Q: What is price per key? A: Price divided by the number of guest rooms. $12,000,000 for 78 keys is $153,846 per key. It lets you compare hotels of different sizes and check a cap rate result against recent sales. - Q: What is a good cap rate for a hotel? A: There is no single answer. It depends on segment, market, brand and PIP status, and it is set by what buyers pay. This page does not print one. See our hotel cap rates page for the bands our index reports. - Q: Does a higher cap rate mean a better deal? A: For a buyer it means more income per dollar of price, usually in exchange for more risk. For a seller it means a lower price. On $1,050,000 of NOI, moving from 8.00% to 9.00% lowers value by $1,458,333. - Q: Should I use trailing or projected NOI? A: Match the cap rate you are comparing against. Most quoted sale cap rates refer to trailing twelve-month NOI. A projected NOI divided by a trailing cap rate overstates value. ## Glossary ### Hotel Cap Rate URL: https://matthewshotelmarkets.com/glossary/cap-rate Last updated: 2026-09-18 A hotel cap rate is the property's stabilized net operating income divided by its purchase price, expressed as a percentage. It is the unlevered first-year yield a buyer accepts. A hotel capitalization rate, or cap rate, is the ratio of stabilized net operating income (NOI) to purchase price. A $20 million hotel producing $1.6 million of NOI prices at an 8.0 percent cap rate. Cap rates compare hotel investments to other yield-bearing assets and to each other across markets, brands, and chain scales. FAQ: - Q: What is a typical hotel cap rate in 2026? A: Stabilized PIP-current select-service hotels in Sun Belt secondary markets are trading in the 7.50 to 8.50 percent cap range as of Q1 2026, per HVS US Market Pulse. Full-service trophy assets in primary metros price 7.00 to 8.00 percent. Resort and lifestyle assets in supply-constrained markets price tighter, often 6.00 to 7.50 percent. - Q: How is hotel NOI calculated for cap rate purposes? A: Hotel NOI is total revenue (rooms, F&B, ancillary) minus operating expenses (department costs, undistributed expenses, franchise and brand fees, management fees, property taxes, and insurance). It excludes capital expenditures, debt service, depreciation, and income taxes. The number used in a cap rate calculation should be stabilized, not trailing twelve months in a transition period. - Q: Why are select-service hotel cap rates tighter than full-service? A: Select-service NOI is more legible and predictable. Limited F&B exposure, lean labor, and a known PIP cycle make underwriting faster and the cash flow more durable. Buyers accept tighter cap rates for assets they can underwrite in 60 days versus full-service properties that require multiple quarters of F&B and group-pace analysis. - Q: How do interest rates affect hotel cap rates? A: Cap rates and the 10-year Treasury move directionally together with a two-to-four-quarter lag. Roughly 50 to 75 percent of a sustained Treasury move translates into hotel cap rates over time, though risk premiums and segment-specific factors influence the exact transmission. Cap rates compressed about 50 basis points off the 2024 peak through Q1 2026. - Q: What is the difference between going-in cap rate and exit cap rate? A: The going-in cap rate is the yield at acquisition, calculated against the purchase price. The exit cap rate is the assumed yield at sale, used in underwriting models to derive the residual value. Sponsors typically underwrite exit caps 25 to 50 basis points wider than going-in caps to be conservative on residual. Sources: - HVS US Hotel Market Pulse (HVS): https://www.hvs.com/insights/ - CBRE H2 2025 US Cap Rate Survey (CBRE Research): https://www.cbre.com/insights/reports/us-cap-rate-survey-h2-2025 - STR U.S. Hotel Performance Reports (STR): https://str.com/data-insights/news - AHLA 2026 State of the Hotel Industry (AHLA): https://www.ahla.com/resource/2026-state-industry - Capitalization Rate Definition (Investopedia): https://www.investopedia.com/terms/c/capitalizationrate.asp - Federal Reserve H.15 Selected Interest Rates (Federal Reserve): https://www.federalreserve.gov/releases/h15/ ### RevPAR (Revenue Per Available Room) URL: https://matthewshotelmarkets.com/glossary/revpar Last updated: 2026-09-18 RevPAR is revenue per available room. It equals occupancy multiplied by ADR, or rooms revenue divided by total available room nights. It is the headline performance metric in hotel investment. Revenue per available room, or RevPAR, is a hotel's rooms revenue divided by total available room nights in the period. Equivalently, it is occupancy times ADR. RevPAR captures how well a property is monetizing its room inventory and is the primary year-over-year performance benchmark used by STR, public REITs, and underwriters. FAQ: - Q: What is a good RevPAR for a hotel? A: It depends entirely on the chain scale and market. Select-service hotels in Sun Belt secondary markets typically run $90 to $130 RevPAR. Full-service downtown urban properties run $150 to $250. Trophy resort and lifestyle assets can exceed $400 stabilized RevPAR. The right benchmark is always the STR competitive set, not an absolute number. - Q: What is the difference between RevPAR and ADR? A: ADR (average daily rate) is rooms revenue divided by occupied rooms. RevPAR is rooms revenue divided by available rooms. ADR captures pricing per night sold. RevPAR captures revenue per night of inventory, occupied or not. RevPAR equals occupancy times ADR. - Q: How is RevPAR used in hotel valuation? A: Underwriters project forward RevPAR by year, multiply by available room nights to get forward rooms revenue, then layer in F&B and ancillary revenue, then apply a flow-through assumption to derive NOI. NOI divided by an exit cap rate produces the residual value. RevPAR growth is the single largest driver of forward IRR in most hotel underwriting models. - Q: What is RevPAR index? A: RevPAR index, often shown as MPI, ARI, or RGI on STR reports, is a property's RevPAR divided by the competitive set's RevPAR, multiplied by 100. An index of 110 means the property is outperforming its comp set by 10 percent. An index of 90 means it is underperforming by 10 percent. - Q: Why do hotels report RevPAR instead of just revenue? A: RevPAR normalizes for hotel size and reporting period, so a 90-key hotel can be compared to a 300-key hotel and a Q1 reporting period can be compared to a Q3 reporting period. Total rooms revenue tells you how big the business is. RevPAR tells you how productively each room is being monetized. Sources: - STR US Hotel Performance Reports (STR): https://str.com/data-insights/news - AHLA State of the Hotel Industry 2026 (AHLA): https://www.ahla.com/resource/2026-state-industry - HVS US Hotel Market Pulse (HVS): https://www.hvs.com/insights/ - CBRE Hotels Research (CBRE Research): https://www.cbre.com/insights/sectors/hotels - RevPAR Definition (Investopedia): https://www.investopedia.com/terms/r/revpar.asp ### ADR (Average Daily Rate) URL: https://matthewshotelmarkets.com/glossary/adr Last updated: 2026-09-18 ADR, or average daily rate, is a hotel's rooms revenue divided by the number of occupied rooms in the same period. It measures pricing power per night sold. Average daily rate (ADR) is total rooms revenue divided by the number of paid occupied rooms in a given period. ADR isolates pricing from volume. A hotel running $200 ADR is selling each occupied room at an average $200 nightly rate, regardless of how many rooms were occupied. ADR pairs with occupancy to produce RevPAR. FAQ: - Q: How is hotel ADR calculated? A: ADR equals total rooms revenue divided by the number of paid occupied rooms in the same period. STR, brand-system reports, and public REIT disclosures all use this definition, though treatment of complimentary rooms and loyalty redemptions varies slightly across sources. - Q: What is a typical hotel ADR in 2026? A: It depends on chain scale and market. Select-service hotels in Sun Belt secondary markets typically run $130 to $180 stabilized ADR. Full-service downtown urban properties run $200 to $300. Trophy resort and lifestyle assets in destination markets can stabilize at $400 or more, with peak-week pricing exceeding $1,000 in markets like Miami Beach and Scottsdale. - Q: What is the difference between ADR and rate? A: Rate is the price for a single room on a single night. ADR is the weighted-average rate across all occupied rooms in a period. A hotel might publish a $189 best-available-rate for a Tuesday night and a $359 rate for a Saturday night during a major event, then report a $217 ADR for that month after blending all channels and rate plans. - Q: Does ADR include resort fees and other surcharges? A: Generally no. Resort fees, parking, and ancillary charges are typically excluded from ADR and reported separately. ADR is a rooms-only revenue metric. For full-picture revenue benchmarking, operators look at TRevPOR (total revenue per occupied room) alongside ADR. - Q: Why does ADR matter to hotel investors? A: ADR pricing power signals the durability of demand and the competitive position of the property. Markets with structurally rising ADR command tighter cap rates because forward NOI growth is more credible. Markets with flat or declining ADR get marked down even when current cash flow looks healthy. Sources: - STR US Hotel Performance Reports (STR): https://str.com/data-insights/news - AHLA State of the Hotel Industry 2026 (AHLA): https://www.ahla.com/resource/2026-state-industry - HVS US Hotel Market Pulse (HVS): https://www.hvs.com/insights/ - CBRE Hotels Research (CBRE Research): https://www.cbre.com/insights/sectors/hotels - Average Daily Rate Definition (Investopedia): https://www.investopedia.com/terms/a/average-daily-rate.asp ### PIP (Property Improvement Plan) URL: https://matthewshotelmarkets.com/glossary/pip Last updated: 2026-09-18 A PIP, or property improvement plan, is the brand-mandated capital scope a franchisor requires a hotel owner to complete to maintain or earn a franchise license. It typically runs every 7 to 10 years. A property improvement plan (PIP) is a franchise-issued list of required capital upgrades a hotel owner must execute to keep, renew, or transfer a brand license. PIPs cover guest rooms, public space, exterior, FF&E, and brand-standard technology. Costs typically run $15,000 to $40,000 per key for select-service and substantially higher for full-service. FAQ: - Q: How much does a hotel PIP cost? A: Select-service PIPs typically run $15,000 to $40,000 per key depending on brand, scope, and renovation cycle stage. Full-service PIPs can exceed $75,000 per key. New brand-design rollouts, like Hilton's H4 Hampton refresh or IHG's Express Renovation program, push costs to the higher end of the range. - Q: How often are PIPs required? A: Routine PIPs are typically issued every 7 to 10 years for select-service hotels and every 5 to 7 years for full-service. Additional PIPs are triggered by change of ownership, franchise renewal, brand-standard updates, and material physical-condition deficiencies identified during quality-assurance inspections. - Q: Can a hotel buyer negotiate the PIP? A: Limited. Franchisors negotiate at the margin on non-core scope items, such as technology platforms with weak ROI or signage timing. Core scope, guestroom finishes, bedding, bathroom upgrades, and brand-standard FF&E, is rarely negotiable. The most successful negotiations focus on timeline extensions and phasing rather than scope reductions. - Q: What happens if a PIP is not completed? A: Failure to complete a PIP on the franchisor's timeline is a default under the franchise agreement. Consequences range from QA score penalties and reservation-system suspension to license termination. A terminated brand license eliminates loyalty-program access, central reservations, and brand-marketing channels, typically reducing property value by 15 to 30 percent. - Q: How do PIPs affect hotel valuation? A: PIPs are underwritten as additional basis. A buyer paying $20 million for an asset with a $3 million PIP underwrites a $23 million all-in basis. Cap rates quoted on the purchase price assume the buyer absorbs the PIP. PIP-current assets trade at 50 to 100 basis points tighter cap rates than PIP-due assets in the same submarket. Sources: - HVS PIP Cost Estimating Guides (HVS): https://www.hvs.com/insights/ - AHLA Lodging Industry Investment Council (AHLA): https://www.ahla.com/resource-center - CBRE Hotels Research (CBRE Research): https://www.cbre.com/insights/sectors/hotels - Hotel Franchise Disclosure Documents (FDD) Overview (FTC): https://www.ftc.gov/business-guidance/resources/amended-franchise-rule-faqs - Hospitality Net PIP Coverage (Hospitality Net): https://www.hospitalitynet.org/news/term/property-improvement-plan.html ### BOV (Broker Opinion of Value) URL: https://matthewshotelmarkets.com/glossary/bov Last updated: 2026-09-18 A hotel BOV, or broker opinion of value, is a written valuation prepared by a hotel investment-sales broker that estimates the price an asset would clear in the current market, supported by comp set, financial analysis, and a buyer-pool view. A broker opinion of value (BOV) is a hotel-specific valuation produced by a brokerage at the request of an owner. The deliverable typically includes a transaction-comp analysis, an as-is and as-stabilized cash flow projection, a cap-rate-based and per-key valuation range, a buyer-pool assessment, and a recommended go-to-market strategy. BOVs are confidential, free, and produced ahead of formal disposition. FAQ: - Q: How long does a hotel BOV take to complete? A: Typical turnaround is two to four weeks from the date the owner shares trailing twelve-month financials, STR data, and physical-condition information. Complex full-service or portfolio BOVs can take six to eight weeks. Brokers sometimes deliver a preliminary range within one week, with the full deliverable following. - Q: Do BOVs cost money? A: No. BOVs are produced free as part of the broker's business-development process. The broker invests underwriting time in exchange for the opportunity to be retained on the disposition. Owners are not committed to a sale by requesting a BOV. - Q: What information does a hotel broker need to produce a BOV? A: Trailing twelve months and year-to-date P&L, current STR competitive-set report, capital-expenditure history, current PIP status and cost estimates, franchise agreement summary, brand standards correspondence, property tax bills, and a current rent roll if applicable. The more information available, the more accurate the valuation. - Q: How accurate are hotel BOVs? A: A well-prepared BOV from an active broker typically prices within 3 to 7 percent of the eventual transaction value. Accuracy depends on the broker's depth of market knowledge, the quality of the financial information provided, and the stability of the cap-rate environment between BOV date and trade date. - Q: Should an owner solicit multiple BOVs? A: Yes, on assets where the owner is genuinely considering a sale or wants to test the market. Two or three BOVs produce a price range and let the owner compare strategic fit, buyer-pool depth, and marketing approach across brokerages. A spread of 5 to 10 percent between BOVs is normal; spreads above 15 percent warrant a closer look at the underlying assumptions. Sources: - HVS Hotel Valuation Methodology (HVS): https://www.hvs.com/article/category/172-valuation - USPAP (Uniform Standards of Professional Appraisal Practice) (The Appraisal Foundation): https://appraisalfoundation.org/pages/uspap - AHLA Hotel Investment Resources (AHLA): https://www.ahla.com/resource-center - CBRE Hotels Research (CBRE Research): https://www.cbre.com/insights/sectors/hotels - Broker Price Opinion Definition (Investopedia): https://www.investopedia.com/terms/b/broker-price-opinion.asp ### IOM / Investment Memorandum / OM URL: https://matthewshotelmarkets.com/glossary/iom Last updated: 2026-09-18 An IOM (investment offering memorandum), also called an OM or offering memorandum, is the marketing book a hotel broker produces to present an asset to qualified buyers during a confidential disposition process. An investment offering memorandum (IOM, OM, or IM) is the principal marketing document used in a hotel disposition. It presents the property, market, financial performance, and investment thesis to qualified buyers under NDA. A typical hotel OM runs 40 to 80 pages and includes property summary, market analysis, financial detail, transaction comps, and investment highlights. FAQ: - Q: What is the difference between an IOM, an OM, and an IM? A: All three terms refer to the same document. Investment offering memorandum (IOM), offering memorandum (OM), and information memorandum (IM) are used interchangeably across hotel investment-sales brokerages. CBRE, JLL, HVS, Marcus & Millichap, and Eastdil Secured all use slightly different conventions, but the document is the same. - Q: How long is a typical hotel OM? A: Select-service OMs typically run 40 to 60 pages. Full-service and resort OMs run 60 to 100 pages. Portfolio OMs covering multiple assets can exceed 150 pages. Length is driven by the complexity of the asset, the depth of the market analysis, and the volume of operating data. - Q: When is the OM distributed during a hotel sale? A: After listing engagement and after the buyer pool has been qualified and NDAs executed. The standard sequence is: listing engagement, OM production (typically two to four weeks), teaser distribution, NDA execution with interested parties, OM release, LOI process. OMs are not pre-released to buyers without NDA. - Q: What information does an OM include that a BOV does not? A: OMs include marketing-quality photography, full physical-condition documentation, detailed franchise and brand-standards summaries, transaction process and timeline, expanded comparable-sales analysis, and contact information for the broker team. BOVs are internal underwriting documents focused on valuation; OMs are external marketing documents focused on transaction execution. - Q: Can a buyer rely on the OM during due diligence? A: Buyers should treat the OM as the starting point for underwriting, not the final word. Independent due diligence on financials (third-party audit or accountant review), STR reports, franchise standing letters, PIP letters, environmental reports, and physical-condition assessments is standard. Material discrepancies between OM data and due diligence findings are the most common cause of price re-trade or deal break. Sources: - HVS Hotel Sales Process Resources (HVS): https://www.hvs.com/article/category/172-valuation - AHLA Hotel Transaction Resources (AHLA): https://www.ahla.com/resource-center - CBRE Hotels Capital Markets (CBRE Research): https://www.cbre.com/services/sectors/hotels/capital-markets - Offering Memorandum Definition (Investopedia): https://www.investopedia.com/terms/o/offeringmemorandum.asp - JLL Hotels & Hospitality Research (JLL): https://www.jll.com/en-us/property-types/hotels-hospitality ### Debt Service Coverage Ratio (DSCR) URL: https://matthewshotelmarkets.com/glossary/dscr Last updated: 2026-09-18 Debt service coverage ratio is net operating income divided by annual debt service. A 1.35x DSCR means a hotel produces 35 percent more cash than the loan needs. DSCR is the cash-flow cushion a lender requires between a hotel's net operating income and its annual principal and interest payment. No hotel lender type publishes its minimum, so get your lender's test in writing.[1] Because DSCR is computed against the payment rather than the price, a rate increase reduces the loan a given NOI can support. FAQ: - Q: What is a good DSCR for a hotel loan? A: There is no published answer. No hotel lender type publishes a DSCR floor, and our rate sheet at /rates marks it not yet published.[1] Clear your own lender's stated test with room for a soft quarter. - Q: How do I calculate DSCR? A: Divide annual net operating income by annual principal and interest payments on the senior loan. Both figures must cover the same twelve-month period. - Q: Do lenders use trailing or projected NOI for DSCR? A: Bridge lenders often size to a pro forma, stabilized NOI; permanent lenders more often size to trailing twelve-month NOI, sometimes with a haircut for stabilization risk. - Q: What happens if my hotel's DSCR is below the lender's test? A: The loan amount is reduced until the ratio clears, or the borrower brings more equity, extends amortization, or improves NOI before closing. - Q: Is DSCR or debt yield the harder test? A: It depends on the loan's rate, amortization and the appraisal. Whichever of DSCR, debt yield, and loan-to-value produces the smallest loan amount is the one that actually binds. Sources: - Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets (first-party)): /rates - 7(a) loan program: terms, conditions, and eligibility (U.S. Small Business Administration): https://www.sba.gov/sba-lenders/#7a-terms - Risk Management Manual of Examination Policies (Federal Deposit Insurance Corporation): https://www.fdic.gov/risk-management-manual-examination-policies - 12 CFR 34.43, appraisals required; transactions requiring a state certified or licensed appraiser (Legal Information Institute, Cornell Law School): https://www.law.cornell.edu/cfr/text/12/34.43 ### Debt Yield URL: https://matthewshotelmarkets.com/glossary/debt-yield Last updated: 2026-09-18 Debt yield is a hotel's net operating income divided by the loan amount, expressed as a percentage. It measures the lender's return if it had to take the asset back. Debt yield is NOI divided by loan amount. It is the one sizing test that does not depend on rate, amortization or an appraisal, which is why CMBS lenders lean on it. Lenders do not publish their hotel floors. At a hypothetical 10 percent test, $2.0 million of NOI supports a $20 million loan. FAQ: - Q: What is debt yield? A: Net operating income divided by loan amount, expressed as a percentage. It is the return a lender would earn on the loan balance if it took the property back at closing. - Q: What debt yield do hotel lenders require? A: We have not found a lender type that publishes one, so ask your lender for its test in writing. In CMBS, sizing is disclosed deal by deal in offering documents filed with the SEC.[2] - Q: How is debt yield different from cap rate? A: Cap rate divides NOI by purchase price. Debt yield divides the same NOI by the loan amount, a smaller number, so debt yield is always higher than the cap rate on a levered deal. - Q: Why do CMBS lenders use debt yield? A: It does not depend on an appraisal, an interest rate, or an amortization schedule, all of which can be flattered. It is the one test a borrower cannot improve by negotiating terms. - Q: Which test usually binds on a hotel loan? A: Whichever of debt yield, DSCR and LTV produces the smallest loan amount for that specific deal. It varies by rate environment and by how the appraisal compares to the purchase price. Sources: - 12 CFR 34.43, appraisals required; transactions requiring a state certified or licensed appraiser (Legal Information Institute, Cornell Law School): https://www.law.cornell.edu/cfr/text/12/34.43 - EDGAR full-text search (U.S. Securities and Exchange Commission): https://www.sec.gov/edgar/search/ ### Net Operating Income (NOI) URL: https://matthewshotelmarkets.com/glossary/noi Last updated: 2026-09-18 Hotel net operating income is total revenue minus operating expenses, including franchise fees, management fee, taxes, insurance and an FF&E reserve. It excludes debt service, depreciation and income taxes. NOI is the annual cash a hotel produces from operations, before financing and taxes. It includes a management fee and an FF&E reserve whether or not the owner pays them. It is the numerator in a cap rate and in every lender sizing test, the most consequential number in a hotel deal. FAQ: - Q: How do I calculate hotel NOI? A: Total revenue minus departmental expenses, undistributed expenses, franchise and brand fees, a management fee, property taxes, insurance and an FF&E reserve. See the line-by-line build at /hotel-valuation/how-to-value-a-hotel. - Q: Does NOI include an FF&E reserve? A: Yes, at the percentage of revenue the franchise, management agreement or lender requires. Owner-prepared statements often omit it, and buyers add it back. - Q: Should I include a management fee if I self-manage? A: Yes. Buyers underwrite a market management fee regardless of how the current owner operates, since the buyer may bring in a different operator. - Q: What is the difference between NOI and cash flow? A: NOI excludes debt service, depreciation and capital expenditures. A hotel can show healthy NOI and still have negative cash flow after loan payments and a major renovation. - Q: Do property taxes get reassessed when a hotel sells? A: Often, yes, in many jurisdictions, including California, based on the sale price rather than the prior assessment.[3] Buyers underwrite the reassessed figure, not the seller's current tax bill. Sources: - HFTP, AHLA and GFC unveil the 12th Revised Edition of the Uniform System of Accounts for the Lodging Industry (adopted January 1, 2026) (American Hotel & Lodging Association): https://www.ahla.com/news/hftp-ahla-and-gfc-unveil-groundbreaking-12th-revised-edition-uniform-system-accounts-lodging - 2025 Hampton Franchise Disclosure Document (issued March 30, 2025), Items 5, 6 and 17 and Franchise Agreement section 12.2.2 (Hilton Franchise Holding LLC): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - Change in ownership, frequently asked questions (Proposition 13 reassessment) (California State Board of Equalization): https://www.boe.ca.gov/proptaxes/faqs/changeinownership.htm ### Loan-to-Value (LTV) URL: https://matthewshotelmarkets.com/glossary/ltv Last updated: 2026-09-18 Loan-to-value is the loan amount divided by the hotel's appraised value, as a percentage. A $6.5 million loan on a $10 million appraisal is 65 percent LTV. LTV is the share of a hotel's value that the lender finances. Federal guidelines cap a bank's internal limit at 85 percent for improved property, but no hotel lender publishes its own ceiling, and it is set by the lender.[1][4] The denominator is the appraisal or the price, whichever is lower. FAQ: - Q: What does LTV mean on my hotel term sheet? A: It is the maximum loan as a percentage of the hotel's appraised value. If the term sheet says 65 percent LTV and the appraisal comes in at $9.0 million, the loan cannot exceed $5.85 million, whatever the purchase price is. - Q: What is the maximum LTV on a hotel loan? A: No lender type publishes one. Federal guidelines cap a bank's internal limit at 85 percent for improved property,[1] but hotel limits are set by the lender, below that. Our rate sheet at /rates marks them not yet published.[4] - Q: My appraisal came in below the purchase price. What happens to my loan? A: The lender sizes to the lower number, so proceeds fall. You can bring more cash, renegotiate the price, dispute the appraisal with better comparable sales, or move to a lender whose binding test is DSCR rather than LTV. - Q: How much do I have to put down on a hotel with an SBA 504 loan? A: At least 15 percent of project cost, because SBA treats a hotel as a limited or single purpose property. It is 20 percent if the business is also two years old or less.[3] - Q: Is LTV or DSCR more important to a hotel lender? A: Neither on its own. The lender runs LTV, DSCR and often debt yield, and the test that produces the smallest loan sets the proceeds. Use /tools/dscr-calculator to see which one binds on your numbers. Sources: - 12 CFR Part 365, Appendix A: Interagency Guidelines for Real Estate Lending Policies (Legal Information Institute, Cornell Law School): https://www.law.cornell.edu/cfr/text/12/appendix-A_to_subpart_A_of_part_365 - 12 CFR 34.43, appraisals required; transactions requiring a state certified or licensed appraiser (Legal Information Institute, Cornell Law School): https://www.law.cornell.edu/cfr/text/12/34.43 - 13 CFR 120.910, How much must the Borrower contribute? (Legal Information Institute, Cornell Law School): https://www.law.cornell.edu/cfr/text/13/120.910 - Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets (first-party)): /rates ### FF&E Reserve URL: https://matthewshotelmarkets.com/glossary/ffe-reserve Last updated: 2026-09-18 An FF&E reserve is money set aside each year, usually quoted as a percentage of total revenue, to replace a hotel's furniture, fixtures and equipment. HVS called 4 percent of revenues typical in 2014. The FF&E reserve, also called the reserve for replacement, funds the periodic replacement of beds, case goods, carpet, televisions and equipment. Buyers, appraisers and lenders deduct it before NOI whether or not the owner funds it. HVS described a typical reserve as 4 percent of revenues in January 2014; your lender or franchisor sets the actual figure.[1] FAQ: - Q: What is an FF&E reserve on a hotel P&L? A: A yearly allowance, stated as a percentage of total revenue, for replacing furniture, fixtures and equipment. It sits below operating profit and above NOI in a buyer's or lender's underwriting. - Q: What percentage should my hotel's FF&E reserve be? A: HVS called 4 percent of revenues typical in January 2014.[1] Your actual figure is set by your lender, franchise agreement or management agreement. Read those documents before assuming a number. - Q: My broker added an FF&E reserve I do not actually pay. Why? A: Because every buyer and lender will. A value built on NOI without the reserve does not survive underwriting, so the honest number is the one with the reserve in it. See /hotel-valuation/how-to-value-a-hotel. - Q: Does my lender hold the FF&E reserve in escrow? A: Often, yes, on CMBS and many bank loans, with monthly deposits and draws against invoices. The amount and the release terms are set by the lender in the loan agreement. - Q: Can I use the FF&E reserve to pay for a PIP? A: Usually you can draw it toward eligible items, but it is rarely enough. Plan the PIP as its own capital need. See /hotel-financing/pip-and-renovation-loans. Sources: - Hotel Capitalization Rates and the Impact of Cap Ex, Suzanne R. Mellen, January 2014 (HVS): https://www.hvs.com/Jump/?f=3501.pdf&c=6766&rt=2 - HFTP, AHLA and GFC unveil the 12th Revised Edition of the Uniform System of Accounts for the Lodging Industry, July 11, 2024 (American Hotel & Lodging Association): https://www.ahla.com/news/hftp-ahla-and-gfc-unveil-groundbreaking-12th-revised-edition-uniform-system-accounts-lodging - 2025 Hampton Inn and Hampton Inn & Suites Franchise Disclosure Document, issued March 30, 2025 (Hilton Franchise Holding LLC): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf ### MPI, ARI and RGI (STR Index Scores) URL: https://matthewshotelmarkets.com/glossary/mpi-ari-rgi Last updated: 2026-09-18 MPI, ARI and RGI are index scores that compare a hotel's occupancy, ADR and RevPAR with its competitive set. A score of 100 is fair share; above 100 means the hotel is taking more than its share. MPI is the occupancy index, ARI is the ADR index and RGI is the RevPAR index. Each is the hotel's figure divided by the competitive set's figure, times 100. Hilton's 2025 Hampton disclosure document reports an average RevPAR Index of 121.0 for comparable Hampton hotels in 2024.[1] FAQ: - Q: What do MPI, ARI and RGI mean on my STR report? A: MPI is your occupancy against your comp set, ARI is your ADR against it, and RGI is your RevPAR against it. Each is your number divided by theirs, times 100. 100 is fair share.[1] - Q: What is a good RGI for a hotel? A: Above 100 means you take more than your fair share of RevPAR. For scale, Hilton reported an average RevPAR Index of 121.0 across comparable Hampton hotels in 2024, with a range of 39.5 to 334.4.[1] - Q: Why does a buyer want my STR index scores? A: They show whether revenue comes from the hotel or from the market. A hotel with a 90 RGI has upside a new operator can claim. A hotel at 125 is already outperforming and is priced on what it earns. See /sell-a-hotel/documents-needed. - Q: My RGI dropped but my RevPAR went up. How? A: Your competitors' RevPAR rose faster than yours. The index is relative, so a rising market can hide a loss of share. - Q: Can I share my STR report with a buyer? A: Check your STR or CoStar subscriber terms first. Sellers commonly provide the reports in a diligence room under a confidentiality agreement. We do not republish subscriber data. Sources: - 2025 Hampton Inn and Hampton Inn & Suites Franchise Disclosure Document, issued March 30, 2025 (Hilton Franchise Holding LLC): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf ### Price Per Key URL: https://matthewshotelmarkets.com/glossary/per-key Last updated: 2026-09-18 Price per key is a hotel's price divided by its number of guest rooms. A 96-key hotel that sells for $11.5 million trades at about $119,800 per key. Per-key value is the unit price of a hotel: total price divided by room count. It lets a buyer compare a 60-key hotel with a 140-key hotel and compare a purchase with the cost to build. Hilton's 2025 disclosure document puts an 89-room Hampton at $15.2 million to $22.2 million to develop, excluding land.[1] FAQ: - Q: What does price per key mean? A: The hotel's price divided by its guest room count. At $11.5 million for 96 rooms, it is about $119,800 per key. - Q: How much is my hotel worth per key? A: Work from income first: NOI divided by a market cap rate, then divide by keys. Then compare with recent sales of similar hotels and with the cost to build. See /hotel-valuation/how-to-value-a-hotel. - Q: What does it cost per key to build a new select-service hotel? A: Brand disclosure documents publish estimates. Hilton's 2025 Hampton document shows $15.2 million to $22.2 million for an 89-room prototype, about $171,000 to $249,000 per key, excluding land.[1] - Q: Why did a hotel near mine sell for a much higher price per key? A: Usually a higher NOI per room, a newer building, a stronger brand or less capital needed after closing. Per key compresses all of that into one number, which is why it needs the income behind it. - Q: Should I include the PIP in my price per key? A: Yes, when comparing deals. A buyer's real basis is price plus required capital. HVS found that capital averaged 12 to 15 percent of price on hotels it appraised at sale in 2013.[2] Sources: - 2025 Hampton Inn and Hampton Inn & Suites Franchise Disclosure Document, issued March 30, 2025 (Hilton Franchise Holding LLC): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - Hotel Capitalization Rates and the Impact of Cap Ex, Suzanne R. Mellen, January 2014 (HVS): https://www.hvs.com/Jump/?f=3501.pdf&c=6766&rt=2 ### Going-Concern Value URL: https://matthewshotelmarkets.com/glossary/going-concern-value Last updated: 2026-09-18 Going-concern value is the value of a hotel as an operating business: real estate, furniture and equipment, and intangibles together. Federal appraisal guidelines dated December 2, 2010 say it may not stand in for market value of the real property. A hotel sells as a running business, so its price covers three things: the real property, the FF&E, and intangibles such as the franchise, the workforce and the reservation flow. Going-concern value is the total. The 2010 interagency guidelines define it as the value of a business entity rather than of the real property.[1] FAQ: - Q: What does going-concern value mean in my hotel appraisal? A: It is the value of the hotel as an operating business, including real estate, FF&E and intangibles. The 2010 interagency guidelines define it as the value of a business entity rather than the real property.[1] - Q: Why did my appraiser split the value into real estate, FF&E and business value? A: Because federally regulated lenders cannot treat going-concern value as the market value of the real property.[1] The split lets the lender see what its mortgage actually secures. - Q: Will my bank lend against the going-concern value or just the real estate? A: That is set by the lender. Ask before the appraisal is ordered, because the answer can move proceeds by more than a million dollars on a mid-size hotel. - Q: Is a broker opinion of value a going-concern value? A: Yes. A BOV prices the hotel the way buyers do, as an operating business, from its NOI. See /hotel-valuation/broker-opinion-of-value. - Q: Does going-concern value matter for property taxes? A: Yes. Property tax applies to real property, so owners often appeal assessments that capture business or franchise value. Rules vary by state, so use a local property tax adviser. Sources: - Interagency Appraisal and Evaluation Guidelines, December 2, 2010 (SR 10-16 attachment) (Board of Governors of the Federal Reserve System, OCC, FDIC, OTS and NCUA): https://www.federalreserve.gov/boarddocs/srletters/2010/sr1016a1.pdf - 12 CFR 34.42, definitions (market value, appraisal) (Legal Information Institute, Cornell Law School): https://www.law.cornell.edu/cfr/text/12/34.42 - SOP 50 10 8, Lender and Development Company Loan Programs (effective June 1, 2025), Section C, Ch. 1: debenture limits (p. 350) and Limited or Special Purpose Property, which lists hotels (pp. 354-355) (U.S. Small Business Administration): https://legacy.sba.gov/document/sop-50-10-lender-development-company-loan-programs ### Franchise Comfort Letter URL: https://matthewshotelmarkets.com/glossary/comfort-letter Last updated: 2026-09-18 A comfort letter is a three-party agreement among a hotel franchisor, the owner and the lender. It gives the lender notice of franchise defaults and time to cure them. Hilton's 2025 Hampton document lists a $3,500 processing fee. A franchise agreement is personal to the owner, so a lender that forecloses does not automatically keep the flag. The comfort letter fixes that. In Hilton's 2025 form, the lender gets copies of default notices, 15 extra days to cure, and up to 180 more days to complete a foreclosure.[1] FAQ: - Q: My lender is asking for a comfort letter from the brand. What is that? A: A short agreement among the franchisor, you and the lender. It gives the lender notice of franchise defaults, extra time to cure, and a path to keep the flag through a foreclosure.[1] - Q: How much does a franchise comfort letter cost? A: It is set by each brand. Hilton's 2025 Hampton disclosure document lists $3,500 for a lender comfort letter and $1,500 for an assignment.[1] Your lender's counsel will also bill time to negotiate it. - Q: How long does it take to get a comfort letter? A: Brands do not publish a turnaround time. Request it as soon as the lender is chosen, because it needs the lender's legal name and notice address and is often one of the last closing items. - Q: Can the brand still terminate my franchise if there is a comfort letter? A: Yes. In Hilton's form the franchisor may still terminate if a default damages its reputation, if a court requires it, or if the lender's additional period expires with no arrangement in place.[1] - Q: Do SBA and bank loans need a comfort letter too? A: Most lenders on a franchised hotel ask for one, whatever the loan program. Whether it is required is set by the lender. See /hotel-financing/loan-requirements. Sources: - 2025 Hampton Inn and Hampton Inn & Suites Franchise Disclosure Document, issued March 30, 2025 (Hilton Franchise Holding LLC): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf ### Franchise Disclosure Document (FDD) URL: https://matthewshotelmarkets.com/glossary/franchise-fdd Last updated: 2026-09-18 A Franchise Disclosure Document is the 23-item disclosure a franchisor must give a prospective franchisee at least 14 calendar days before signing or paying. For a hotel it is the public source for brand fees, terms and build costs. The FTC's Franchise Rule requires every franchisor to hand over a current FDD at least 14 calendar days before the prospect signs a binding agreement or pays.[1] The document has 23 numbered items.[2] A hotel buyer reads Items 5, 6, 7, 17 and 19 first: fees, investment, term and transfer rules, and performance data. FAQ: - Q: What is an FDD and why does my lender want it? A: It is the franchisor's federally required disclosure document, 23 items long.[2] Lenders use it to confirm fees, remaining term, transfer rules and the comfort letter form. - Q: How long do I have to review a hotel FDD before signing? A: At least 14 calendar days between receiving the current FDD and signing a binding agreement or paying the franchisor.[1] - Q: Where can I find a hotel brand's FDD? A: Ask the brand's development team, or search the public franchise registration databases that some states run. We link Hilton's 2025 Hampton document in the sources below.[3] - Q: What are typical hotel franchise fees? A: They vary by brand, so read the brand's own Item 6. Hilton's 2025 Hampton document lists a 6 percent royalty and a 4 percent program fee on gross rooms revenue.[3] - Q: I am buying an existing Hampton Inn. Do I get a new FDD? A: Yes. A change of ownership is a new franchise application, and the brand delivers its current FDD. Hilton's 2025 document lists a $200,000 change of ownership application fee.[3] See /sell-a-hotel/documents-needed. Sources: - 16 CFR 436.2, Obligation to furnish documents (Legal Information Institute, Cornell Law School): https://www.law.cornell.edu/cfr/text/16/436.2 - 16 CFR 436.5, Disclosure items (Legal Information Institute, Cornell Law School): https://www.law.cornell.edu/cfr/text/16/436.5 - 2025 Hampton Inn and Hampton Inn & Suites Franchise Disclosure Document, issued March 30, 2025 (Hilton Franchise Holding LLC): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf ### Key Money URL: https://matthewshotelmarkets.com/glossary/key-money Last updated: 2026-09-18 Key money is a cash payment a hotel brand makes to an owner for signing or converting to its flag. It is usually forgiven in equal parts over the franchise term, such as 1/20th a year over 20 years. Brands call it a development incentive. Hilton's 2025 Hampton disclosure document says the incentive is not a loan but a contingent liability: it bears no interest and need not be repaid unless the franchise ends early or the hotel is transferred. The repayable balance falls by an equal share each year.[1] FAQ: - Q: What is key money in a hotel franchise deal? A: A cash incentive from the brand for choosing its flag, documented as a note and forgiven in equal yearly parts over the franchise term.[1] - Q: Do I have to pay key money back if I sell my hotel? A: Under Hilton's 2025 Hampton terms, yes, the then-current repayable amount is due on a transfer unless the brand lets the buyer assume the note.[1] Check your own note. - Q: How much key money can I get for converting my hotel? A: Brands do not publish amounts. Hilton's document says incentives are offered at its sole discretion when business circumstances warrant.[1] Size, market and how much the brand wants the location drive the offer. - Q: When is key money actually paid? A: Under Hilton's 2025 Hampton terms, within 30 days after the hotel opens under the brand, if the PIP is complete and the application fee is paid.[1] It does not fund the renovation itself. - Q: Will my lender count key money as equity? A: That is set by the lender. Because the money arrives after opening, it usually cannot fund the PIP draw schedule. See /hotel-financing/pip-and-renovation-loans. Sources: - 2025 Hampton Inn and Hampton Inn & Suites Franchise Disclosure Document, issued March 30, 2025 (Hilton Franchise Holding LLC): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - 16 CFR 436.5, Disclosure items (Legal Information Institute, Cornell Law School): https://www.law.cornell.edu/cfr/text/16/436.5 ### SOFR (Secured Overnight Financing Rate) URL: https://matthewshotelmarkets.com/glossary/sofr Last updated: 2026-09-18 SOFR is the benchmark rate for most floating-rate commercial loans. It measures the cost of borrowing cash overnight against Treasury securities. It was 3.85 percent on September 17, 2026. The New York Fed publishes SOFR each business day at about 8:00 a.m. Eastern. It is a volume-weighted median of overnight Treasury repo transactions.[1] A floating-rate hotel loan is quoted as SOFR plus a spread. SOFR was 3.85 percent on September 17, 2026; the spread is set by the lender.[2] FAQ: - Q: What does SOFR plus 350 mean on my term sheet? A: Your interest rate floats at the SOFR index plus 3.50 percentage points. With SOFR at 3.85 percent on September 17, 2026, that is 7.35 percent.[2] The rate resets, usually monthly. - Q: What is SOFR today? A: The New York Fed publishes it each business day at about 8:00 a.m. Eastern.[1] Our rate sheet at /rates shows 3.85 percent for September 17, 2026.[2] - Q: Is a SOFR loan or a fixed-rate loan better for my hotel? A: A SOFR floater suits a short hold or a renovation, because it usually prepays cheaply. A fixed rate suits a stabilized hotel held for years. See /hotel-financing/bridge-loans and /hotel-financing/hotel-loan-rates. - Q: Do I need a rate cap on a SOFR loan? A: Most floating-rate lenders require one. The strike and term are set by the lender, and the cap's price moves with the market. - Q: What replaced LIBOR on hotel loans? A: SOFR. It is calculated from actual overnight Treasury repo transactions rather than bank estimates.[1] Sources: - Secured Overnight Financing Rate (SOFR) (Federal Reserve Bank of New York): https://www.newyorkfed.org/markets/reference-rates/sofr - Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets (first-party)): /rates ### Prime Rate URL: https://matthewshotelmarkets.com/glossary/prime-rate Last updated: 2026-09-18 The prime rate is the base rate banks use to price many business loans, including SBA 7(a) loans. Major banks moved it to 7.00 percent effective September 17, 2026. The Federal Reserve says the prime rate is determined by individual banks, many of which set it partly on the federal funds target.[1] Its H.15 release reports the rate posted by a majority of the top 25 U.S. banks.[2] BNY raised its prime rate from 6.75 to 7.00 percent effective September 17, 2026.[3] FAQ: - Q: What is the prime rate right now? A: 7.00 percent at major banks, effective September 17, 2026, up from 6.75 percent.[3] Our rate sheet at /rates tracks it.[6] - Q: My SBA loan is prime plus 2.75. What is my rate? A: Add the spread to the current prime rate. At 7.00 percent prime, prime plus 2.75 is 9.75 percent. It resets when prime moves, on the schedule in your note. - Q: Who decides the prime rate? A: Each bank sets its own. The Federal Reserve reports the rate posted by a majority of the top 25 U.S. banks, and says many banks base it partly on the federal funds target.[1][2] - Q: What is the highest rate a bank can charge on an SBA 7(a) hotel loan? A: For a variable-rate loan over $350,000, the base rate plus 3.0 percent.[5] With prime at 7.00 percent that is 10.00 percent.[6] - Q: Will my payment drop if the Fed cuts rates? A: If your loan floats over prime, yes, after banks lower prime and your note's reset date arrives. A fixed-rate loan does not change. See /hotel-financing/hotel-loan-rates. Sources: - What is the prime rate, and does the Federal Reserve set the prime rate? (Board of Governors of the Federal Reserve System): https://www.federalreserve.gov/faqs/credit_12846.htm - Selected Interest Rates (Daily), H.15 (Board of Governors of the Federal Reserve System): https://www.federalreserve.gov/releases/h15/ - BNY increases prime lending rate to 7.00%, September 16, 2026 (BNY via PR Newswire): https://www.prnewswire.com/news-releases/bny-increases-prime-lending-rate-to-7-00-302881066.html - Federal Reserve issues FOMC statement, September 16, 2026 (Board of Governors of the Federal Reserve System): https://www.federalreserve.gov/newsevents/pressreleases/monetary20260916a.htm - 7(a) loan program: terms, conditions, and eligibility (U.S. Small Business Administration): https://www.sba.gov/sba-lenders/#7a-terms - Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets (first-party)): /rates ### SBA 7(a) Loan URL: https://matthewshotelmarkets.com/glossary/sba-7a Last updated: 2026-09-18 An SBA 7(a) loan is a bank loan of up to $5 million with a partial federal guaranty. Owner-operators use it to buy, refinance or renovate a hotel, with real estate terms up to 25 years. The bank makes the loan and SBA guarantees 75 percent of any 7(a) loan over $150,000, which caps SBA's exposure at $3.75 million.[1] Real estate maturities run to 25 years. A variable rate on a loan over $350,000 cannot exceed the base rate plus 3.0 percent, which is 10.00 percent as of September 17, 2026.[1][3] FAQ: - Q: Can I buy a hotel with an SBA 7(a) loan? A: Yes, if you will operate it and the business meets SBA's size and eligibility rules. The loan caps at $5 million and real estate can amortize over 25 years.[1] See /hotel-financing/sba-7a-vs-504. - Q: What is the interest rate on an SBA 7(a) hotel loan? A: It is negotiated with the bank under SBA's cap. For a variable-rate loan over $350,000 the cap is the base rate plus 3.0 percent,[1] which is 10.00 percent with prime at 7.00 percent.[3] - Q: How much do I need to put down on an SBA 7(a) hotel loan? A: SBA does not publish a 7(a) equity percentage for this case. It is set by the lender.[3] SBA 504 does publish one: at least 15 percent for a hotel. - Q: Is there a prepayment penalty on a 7(a) loan? A: On maturities of 15 years or more: 5 percent of the prepaid amount in year one, 3 percent in year two, 1 percent in year three, then none.[1] - Q: Do I have to personally guarantee an SBA loan? A: Generally yes, if you hold at least 20 percent of the business.[2] Sources: - 7(a) loan program: terms, conditions, and eligibility (U.S. Small Business Administration): https://www.sba.gov/sba-lenders/#7a-terms - 13 CFR 120.160, Loan conditions (guarantees) (Legal Information Institute, Cornell Law School): https://www.law.cornell.edu/cfr/text/13/120.160 - Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets (first-party)): /rates ### SBA 504 Loan URL: https://matthewshotelmarkets.com/glossary/sba-504 Last updated: 2026-09-18 An SBA 504 loan is a two-part financing: a bank first mortgage plus a fixed-rate second funded by an SBA-backed debenture. A hotel buyer puts in at least 15 percent. The 25-year debenture priced at 6.54 percent in September 2026. 504 loans fund buildings, land and long-life equipment, not working capital, and come only through Certified Development Companies.[1] On a hotel, the bank lends at least 50 percent of project cost,[3] the borrower contributes at least 15 percent,[2] and the CDC debenture fills the rest at a fixed rate. FAQ: - Q: How does an SBA 504 loan work for a hotel? A: A bank lends at least 50 percent in first position, a Certified Development Company lends up to 35 percent in second position from an SBA-backed debenture, and you contribute at least 15 percent.[2][3] - Q: What is the SBA 504 rate right now? A: The 25-year debenture priced at 6.54 percent on September 10, 2026, fees included. See /rates.[5] The bank's first-lien rate is set by the lender. - Q: How much down payment does a 504 hotel loan need? A: At least 15 percent of project cost, because a hotel is a limited or single purpose property. 20 percent if the business is also two years old or less.[2] - Q: What is the biggest hotel I can finance with SBA 504? A: The debenture is capped, not the project. SBA's page lists a $5.5 million maximum,[1] and /hotel-financing/sba-7a-vs-504 explains the $5 million cap that applies to a hotel.[4] The bank's first lien sits on top of that. - Q: Should I use 504 or 7(a) for my hotel? A: 504 gives a long fixed rate on the second lien and needs 15 percent down. 7(a) is one loan, can include working capital, and usually floats. See /hotel-financing/sba-7a-vs-504. Sources: - 504 loans (U.S. Small Business Administration): https://www.sba.gov/loans/504-loans/ - 13 CFR 120.910, How much must the Borrower contribute? (Legal Information Institute, Cornell Law School): https://www.law.cornell.edu/cfr/text/13/120.910 - 13 CFR 120.920, Required participation by Third Party Lenders (Legal Information Institute, Cornell Law School): https://www.law.cornell.edu/cfr/text/13/120.920 - SOP 50 10 8, Lender and Development Company Loan Programs (effective June 1, 2025), Section C, Ch. 1: debenture limits (p. 350) and Limited or Special Purpose Property, which lists hotels (pp. 354-355) (U.S. Small Business Administration): https://legacy.sba.gov/document/sop-50-10-lender-development-company-loan-programs - Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets (first-party)): /rates ### Defeasance URL: https://matthewshotelmarkets.com/glossary/defeasance Last updated: 2026-09-18 Defeasance releases a hotel from a CMBS mortgage by replacing the property with government securities that make the remaining loan payments. Tax rules bar it within 2 years of the securitization's startup day. In a defeasance the loan is not paid off. The borrower buys a portfolio of government securities that produces every remaining payment, pledges it to the trust, and the lien on the hotel is released. Treasury regulations let a securitized mortgage keep its tax status through this swap if four conditions are met.[1] FAQ: - Q: What does defeasance mean on my CMBS hotel loan? A: You can release the hotel from the mortgage by pledging government securities that make every remaining payment. The loan stays in the trust.[1] - Q: How much does it cost to defease a hotel loan? A: The cost of the securities above your loan balance, plus third-party fees. It falls as Treasury yields rise toward or above your note rate. Get a quote from a defeasance consultant for your payment schedule. - Q: When can I defease my loan? A: Not within 2 years of the securitization's startup day under the REMIC rules,[1] and only as your loan documents allow. Most notes state a specific lockout end date. - Q: Is defeasance or yield maintenance cheaper? A: They are built on similar math, so costs are often close. Yield maintenance usually has a minimum fee. Defeasance has higher transaction costs but no floor. Your note says which applies. - Q: I want to sell my hotel but have a CMBS loan. What are my options? A: Defease, or have the buyer assume the loan if the documents allow. See /hotel-financing/cmbs-loans and /hotel-financing/refinance-or-sell. Sources: - 26 CFR 1.860G-2, Other rules (qualified mortgages; defeasance at paragraph (a)(8)) (Legal Information Institute, Cornell Law School): https://www.law.cornell.edu/cfr/text/26/1.860G-2 - Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets (first-party)): /rates ### Yield Maintenance URL: https://matthewshotelmarkets.com/glossary/yield-maintenance Last updated: 2026-09-18 Yield maintenance is a prepayment charge that pays the lender the interest it loses when a fixed-rate loan is repaid early. Agency loan documents set it at the greater of 1 percent of the balance or the calculated amount. If a borrower repays a 6.50 percent loan when the lender can only reinvest at 4.50 percent, the lender loses the difference for the remaining term. Yield maintenance charges the present value of that lost interest. The formula, the reference Treasury and any minimum are set by the lender in the note. FAQ: - Q: What does yield maintenance mean on my loan documents? A: If you repay early, you owe the lender the present value of the interest it loses by reinvesting at a lower Treasury yield. The exact formula is in your note. - Q: How do I calculate my yield maintenance penalty? A: Take the gap between your note rate and the reference Treasury yield, apply it to the balance, and discount over the remaining term. Then compare with any minimum. Ask your servicer for a payoff quote before relying on your own math. - Q: Is there a way to avoid yield maintenance when I sell my hotel? A: A loan assumption by the buyer avoids it if the lender consents. Otherwise wait for the open window near maturity, which most notes include. See /hotel-financing/refinance-or-sell. - Q: Why is my prepayment penalty so large? A: Rates fell since you closed, or many years remain, or both. Each makes the lender's lost interest larger. - Q: Do SBA loans have yield maintenance? A: 7(a) loans use a published step-down instead: 5, 3 and 1 percent of the prepaid amount in the first three years on maturities of 15 years or more.[2] Sources: - Multifamily Selling and Servicing Guide, Part V, Section 213.02, Yield Maintenance Prepayment Premiums (effective September 14, 2026) (Fannie Mae): https://mfguide.fanniemae.com/node/8236 - 7(a) loan program: terms, conditions, and eligibility (U.S. Small Business Administration): https://www.sba.gov/sba-lenders/#7a-terms - Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets (first-party)): /rates ### Non-Recourse Carve-Outs (Bad-Boy Guaranty) URL: https://matthewshotelmarkets.com/glossary/non-recourse-carve-outs Last updated: 2026-09-18 Non-recourse carve-outs are exceptions that make a guarantor personally liable on an otherwise non-recourse loan. They come in 2 kinds: liability for the lender's actual loss, and full recourse for the entire debt. On a non-recourse loan the lender looks only to the hotel for repayment. The carve-out guaranty lists acts that bring the sponsor back in. A law firm summary dated August 18, 2023 groups them as bad-boy acts and insolvency actions.[1] FAQ: - Q: What does a bad-boy guaranty mean on my term sheet? A: You stay free of personal liability unless you commit a listed act. Some acts make you liable for the lender's loss. Others make you liable for the entire loan.[1] - Q: Which carve-outs trigger full recourse? A: It is negotiated, but voluntary bankruptcy, collusive involuntary bankruptcy, unauthorized transfers or financing, and breaches of separateness covenants are commonly placed there.[1] - Q: Can I negotiate non-recourse carve-outs? A: Yes, before the term sheet is signed. Ask to move items like late taxes or mechanics' liens into the loss tier, add cure rights, and limit liability to periods when you control the hotel. - Q: Are SBA hotel loans non-recourse? A: No. Holders of at least 20 percent of the business generally must guarantee an SBA loan.[2] - Q: Who has to sign the carve-out guaranty? A: A person or entity the lender accepts, often with minimum net worth and liquidity tests. Those tests are set by the lender. See /hotel-financing/loan-requirements. Sources: - Non-Recourse Carve-Outs: Borrower and Guarantor Considerations, August 18, 2023 (ArentFox Schiff LLP): https://www.afslaw.com/perspectives/alerts/non-recourse-carve-outs-borrower-and-guarantor-considerations - 13 CFR 120.160, Loan conditions (guarantees) (Legal Information Institute, Cornell Law School): https://www.law.cornell.edu/cfr/text/13/120.160 ### Mezzanine Debt URL: https://matthewshotelmarkets.com/glossary/mezzanine-debt Last updated: 2026-09-18 Mezzanine debt is a loan that sits between the first mortgage and the owner's equity. It is secured by the ownership interests in the borrower, not the hotel. In the example below it lifts total debt from 60 to 75 percent of value. A mezzanine lender takes a pledge of the equity in the company that owns the hotel. If the loan defaults, it forecloses on that pledge under UCC Article 9 and becomes the owner, subject to the first mortgage.[1] Rates and proceeds are set by the lender and are not published.[3] FAQ: - Q: What is mezzanine debt in a hotel deal? A: A loan behind the first mortgage, secured by a pledge of the ownership interests in the borrowing entity rather than by the hotel itself. - Q: What happens if I default on a mezzanine loan? A: The lender can sell the pledged ownership interests under UCC Article 9, in a commercially reasonable sale, and the buyer takes control of the company that owns the hotel.[1] - Q: What interest rate does mezzanine debt carry? A: Higher than the senior loan. Rates are set by the lender and are not published. Our rate sheet at /rates marks them not yet published.[3] - Q: Will my senior lender allow mezzanine debt? A: Only if the loan documents permit it or the lender consents, and it will require an intercreditor agreement. Raise it before the senior term sheet is signed. - Q: Does the hotel brand need to approve a mezzanine loan? A: Often, yes. A mezzanine foreclosure changes control of the franchisee. Hilton publishes a separate mezzanine lender comfort letter form in its 2025 Hampton disclosure document.[2] Sources: - UCC 9-610, Disposition of collateral after default (Legal Information Institute, Cornell Law School): https://www.law.cornell.edu/ucc/9/9-610 - 2025 Hampton Inn and Hampton Inn & Suites Franchise Disclosure Document, issued March 30, 2025 (Hilton Franchise Holding LLC): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - Matthews Hotel Markets September 2026 rate sheet (Matthews Hotel Markets (first-party)): /rates ### Competitive Set (Comp Set) URL: https://matthewshotelmarkets.com/glossary/comp-set Last updated: 2026-09-18 A competitive set is the group of nearby hotels a property is benchmarked against in its STR report. Hilton's 2025 Hampton disclosure document says each hotel generally must identify at least 3 competitors. The hotel chooses its comp set, and STR reports the set's combined occupancy, ADR and RevPAR without showing any one competitor's numbers. Index scores compare the hotel with that aggregate. Hilton's 2025 Hampton document notes that a comp set does not represent every hotel in a geographic area.[1] FAQ: - Q: What is a comp set on my STR report? A: The group of competing hotels you selected. STR combines their occupancy, ADR and RevPAR into one benchmark and compares your hotel with it. - Q: How many hotels should be in my comp set? A: STR sets the minimums in its subscriber rules. Hilton's 2025 Hampton document says each of its hotels generally must identify at least 3 competitive hotels.[1] - Q: Who picks the comp set, me or the brand? A: The hotel identifies it, usually with input from the brand or management company.[1] A buyer may build its own version during diligence. - Q: Why does a buyer question my comp set? A: Because the index is only as meaningful as the set. If the set leaves out your real competitors, a 115 RGI tells the buyer little. See /sell-a-hotel/documents-needed. - Q: Can I change my comp set before I sell? A: You can, within STR's rules, but a recent change that raises your index will be noticed. Keep the history and the reason. Sources: - 2025 Hampton Inn and Hampton Inn & Suites Franchise Disclosure Document, issued March 30, 2025 (Hilton Franchise Holding LLC): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf ### Gross Operating Profit (GOP) URL: https://matthewshotelmarkets.com/glossary/gop Last updated: 2026-09-18 Gross operating profit is hotel revenue minus departmental and undistributed operating expenses. It comes before management fees, property taxes, insurance and the FF&E reserve, so it is always higher than NOI. In the example below it is 49.0 percent of revenue. GOP measures what the on-site operation earns before ownership costs. It follows the Uniform System of Accounts for the Lodging Industry, whose 12th Revised Edition took effect January 1, 2026.[1] Management fees and non-operating items such as property taxes, insurance and rent come after GOP.[2] FAQ: - Q: What does GOP mean on my hotel P&L? A: Gross operating profit: revenue less departmental and undistributed operating expenses, before management fees and ownership costs such as taxes, insurance and reserves.[2] - Q: What is the difference between GOP and NOI? A: NOI is lower. From GOP, subtract the management fee, property taxes, insurance, rent and an FF&E reserve. Buyers and lenders value the hotel on NOI. See /hotel-valuation/how-to-value-a-hotel. - Q: What is GOPPAR? A: GOP per available room: GOP divided by rooms times days in the period. In the example here, $1,912,000 over 35,040 available room nights is $54.57. - Q: What is a good GOP margin for a hotel? A: It depends on service level. Select-service hotels run higher margins than full-service hotels because they carry little food and beverage. We do not publish a benchmark we cannot source. See /hotel-valuation/select-service-vs-full-service. - Q: Does my P&L need to follow USALI to sell my hotel? A: It is not required, but buyers and lenders will recast it that way. The 12th Revised Edition took effect January 1, 2026.[1] See /sell-a-hotel/documents-needed. Sources: - HFTP, AHLA and GFC unveil the 12th Revised Edition of the Uniform System of Accounts for the Lodging Industry, July 11, 2024 (American Hotel & Lodging Association): https://www.ahla.com/news/hftp-ahla-and-gfc-unveil-groundbreaking-12th-revised-edition-uniform-system-accounts-lodging - USALI P&L structure (Summary Operating Statement): a practical guide, February 23, 2026 (Hospitality Finance Network): https://hospitalityfinancenetwork.com/usali-pl-structure-summary-operating-statement-a-practical-guide/ ### Ground Lease URL: https://matthewshotelmarkets.com/glossary/ground-lease Last updated: 2026-09-18 A ground lease is a long-term lease of the land under a hotel. The hotel owner owns the building and pays ground rent. For an SBA 504 loan, the lease must run at least as long as the debenture, up to 25 years. Under a ground lease the owner holds a leasehold, not fee simple title. Ground rent is paid before debt service and lowers NOI, and the building reverts to the landowner when the lease ends. Lenders and brands both test the remaining term. SBA requires it to equal or exceed the 504 debenture term.[1] FAQ: - Q: What does it mean if a hotel is on a ground lease? A: The seller owns the building and the right to use the land for the lease term, not the land itself. You take over the lease, pay ground rent, and the improvements go to the landowner at expiration. - Q: Can I get a loan on a hotel with a ground lease? A: Yes, if the remaining term is long enough. For SBA 504 the lease, with options you control, must run at least as long as the debenture.[1] Other lenders set their own minimum. - Q: How does ground rent affect my hotel's value? A: It reduces NOI dollar for dollar. At an assumed 8.25 percent cap rate, $120,000 of rent is about $1.45 million of value. - Q: Will the brand approve a hotel on leased land? A: Hilton's 2025 Hampton agreement accepts a long-term ground leasehold with a term equal to the franchise term.[2] Other brands have their own rules. - Q: What should I check in a ground lease before buying? A: Remaining term and who controls the options, rent escalations, leasehold mortgage rights, lender notice and cure rights, and what happens to the building at expiration. Use a real estate attorney. See /sell-a-hotel/documents-needed. Sources: - 13 CFR 120.870, Leasing Project Property (Legal Information Institute, Cornell Law School): https://www.law.cornell.edu/cfr/text/13/120.870 - 2025 Hampton Inn and Hampton Inn & Suites Franchise Disclosure Document, issued March 30, 2025 (Hilton Franchise Holding LLC): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf ### Hotel Franchise Agreement URL: https://matthewshotelmarkets.com/glossary/franchise-agreement Last updated: 2026-09-18 A hotel franchise agreement is the long-term license that lets an owner operate under a brand in exchange for fees. Hilton's 2025 Hampton terms run 22 years for new construction, with a 6 percent royalty on rooms revenue. The agreement grants the flag, the reservation system and the standards, and it binds the owner to fees, renovations and transfer rules. It does not pass to a buyer automatically. Hilton's 2025 Hampton disclosure document lists a $200,000 change of ownership application fee and liquidated damages of up to 60 months of royalties.[1] FAQ: - Q: Does the franchise transfer when I sell my hotel? A: No. The buyer applies to the brand for a new or assigned agreement. Hilton's 2025 Hampton document lists a $200,000 change of ownership application fee.[1] See /sell-a-hotel/how-to-sell-a-hotel. - Q: How long does a hotel franchise agreement last? A: It depends on the brand and the deal. Hilton's 2025 Hampton terms are generally 22 years for new construction and 10 to 20 years for a conversion.[1] - Q: What does it cost to leave my hotel brand early? A: Read the liquidated damages clause. Under Hilton's 2025 Hampton terms, termination after year two and before the final 60 months costs the hotel's average monthly royalty times 60.[1] - Q: My franchise expires in four years. Can I still refinance? A: Lenders want the flag in place for the loan term. Whether a short remaining term is acceptable is set by the lender. Talk to the brand about an extension before you go to market. See /hotel-financing/refinance. - Q: Will the brand require a PIP when I sell? A: Usually. A change of ownership is the brand's chance to bring the hotel to current standards. See /hotel-financing/pip-and-renovation-loans. Sources: - 2025 Hampton Inn and Hampton Inn & Suites Franchise Disclosure Document, issued March 30, 2025 (Hilton Franchise Holding LLC): https://hmd-wp.go-vip.net/wp-content/uploads/2025/03/2025-US-FDD-Hampton.pdf - 16 CFR 436.5, Disclosure items (Legal Information Institute, Cornell Law School): https://www.law.cornell.edu/cfr/text/16/436.5 ## Matthews Hotel Index methodology ### Q1 2026 URL: https://matthewshotelmarkets.com/research/mhi/q1-2026 Published: 2026-04-15 Q1 2026 marked the first full quarter of compressed bid-ask in two years. Sun Belt secondary markets continued to outperform primary metros on RevPAR recovery while pricing more aggressively on cap rate. Select-service is the most actively bid category by transaction count; resort and lifestyle is the tightest cap rate band by spread. Construction-loan freeze that lasted from late 2022 to early 2025 is now fully thawed for sponsors with track records, but supply pipeline remains constrained. Methodology: Cap rate ranges reconcile the CBRE H2 2025 U.S. Cap Rate Survey with HVS U.S. Market Pulse Q1 2026 commentary and Matthews internal underwriting on active mandates. ADR, RevPAR, and occupancy bands aggregate STR press-release headline metrics with metro-level chain-scale sub-segment commentary. Transaction counts combine Matthews-executed transactions with publicly recorded transactions in each MSA. Ranges reflect stabilized, PIP-current product unless otherwise noted.