How to finance a hotel project: between debt, equity and partnership
Structuring the right financial levers to secure ROI and create long-term value
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Key Takeaways
Quick Facts About the Article
invested in the first nine months of 2025, an increase compared to recent years
European hotel investors anticipate an increase in their allocations in 2025–2026
the amount of certain hotel refinancing deals in the third quarter of 2025 with banks such as BNP Paribas
In Brief
In This Article
In a hotel market undergoing profound transformation—rising construction costs, stricter bank requirements, and higher return expectations—financing a hotel project has become a strategic exercise in its own right. For investors, lenders, and financial partners, it is no longer just about funding an asset, but about structuring a deal capable of creating long-term value.
Bank debt, equity, partnerships: these levers no longer stand in opposition. They combine, adapt, and reinvent themselves to meet the needs of increasingly hybrid projects. At Moon Hospitality, we support this evolution by designing financial structures tailored to the operational realities of contemporary hospitality.
1. Hotel project financing through debt: a still-structuring cornerstone
Understanding the structuring role of debt in hotel financing
Bank debt remains the central pillar of hotel financing. Despite a more constrained economic environment, banks continue to support projects built on a solid financial structure, a clear positioning, and a proven ability to generate sustainable revenues.
Bank analysis is no longer limited to the asset’s real estate value alone; it now incorporates the quality of the project, the strength of operations, and the operator’s long-term vision.
The role of banks today
When assessing a hotel financing project, lenders primarily evaluate:
the asset’s location and market potential,
the operator’s experience and track record,
the consistency of the business plan (CAPEX, OPEX, ramp-up scenario),
the level of equity invested, a key indicator of alignment with investors.
Loan-to-Value (LTV) ratios generally range between 50% and 65%, with particular attention paid to the project’s ability to generate recurring and secure cash flows.
Advantages and limitations of debt
The advantages of bank debt:
a powerful leverage effect to optimize equity returns,
a lower cost of capital than equity,
a structuring framework that disciplines financial management.
Key points of attention:
increased sensitivity to economic cycles,
contractual rigidity (covenants, repayment schedules, guarantees),
lower risk tolerance for atypical or innovative projects.
Observed trend: banks now favor projects that incorporate revenue diversification—food & beverage, social spaces, coworking, events—seen as a lever for resilience and cash-flow security.
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2. Equity and hotel project financing: a driver of value creation
Equity at the heart of value creation strategies
Equity refers to the own funds contributed by private investors, family offices, or investment funds. It plays a central role in the overall balance of hotel financing, strengthening the project’s financial solidity and its credibility with banking partners.
Over the years, equity has become an essential lever. It helps absorb the operational risk inherent to hotel projects, finance repositioning or renovation phases, and support concept changes or upscaling initiatives required to adapt to evolving market expectations.
In urban lifestyle hospitality, equity is often the driving force behind the transformation of existing assets into high value-added projects, capable of generating sustainable performance beyond real estate appreciation alone.
In practical terms, equity makes it possible to:
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Securing the financial structure and facilitating access to bank debt
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Financing long-term value-creating investments
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Aligning interests between investors, operators, and partners
In terms of returns, equity investors typically target an annual return of between 8% and 15%, depending on the project’s risk profile. This is complemented by a value creation at exit strategy, driven by operational optimization, EBITDA improvement, and the asset’s strategic repositioning.
3. Partnerships and new hotel financing structures
Partnerships as a lever for alignment and performance
Partnerships are now the third pillar of hotel financing. They take various forms: joint ventures, co-investments, and operator–investor alliances.
Why these structures are gaining momentum
- Sharing financial and operational risk
- Long-term alignment of interests
- Access to complementary expertise
- Greater agility in governance
These structures are particularly well suited to hybrid projects combining accommodation, food & beverage, and social spaces.
Moon Hospitality’s analysis
Structuring long-term financial performance
A sound financial structure is, above all, an aligned one.
At Moon Hospitality, we favor structures that combine debt, equity, and strategic partnerships, designed to evolve over time. This approach makes it possible to optimize ROI while securing the asset’s long-term value.
Comparison of hotel financing levers
Each financing lever plays a specific role in structuring a hotel project. Their complementarity makes it possible to optimize both financial performance and risk management.
Bank debt
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Key role: generating leverage to optimize invested equity
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Main advantage: a cost of capital generally lower than that of equity
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Key point of attention: strong banking constraints (covenants, guarantees, contractual rigidity)
Equity
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Key role: strengthening financial solidity and enhancing project credibility
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Main advantage: strong value creation potential in the medium to long term
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Key point of attention: potential equity dilution for project sponsors
Partnership
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Key role: aligning the strategic and operational interests of stakeholders
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Avantage principal : le partage du risque financier et opérationnel
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Key point of attention: governance must be carefully structured to avoid imbalances
Conclusion: Structuring sustainable hotel financing
Hotel project financing can no longer be standardized. It must be tailored to the asset’s positioning, its market, and its ambitions. By intelligently combining debt, equity, and partnerships, it becomes a powerful lever for performance and value creation.
Are you considering a hotel project or an investment opportunity?
Let’s discuss tailor-made financial structures and high-potential projects with Moon Hospitality.
