Budget and limited-service hotel finance

How we fund budget and limited-service hotels

We fund budget hotels on their going-concern trade. For an acquisition or term refinance we model the maintainable EBITDARM, read it through occupancy, ADR and RevPAR, and place the request with hospitality-experienced lenders on a commercial mortgage or term loan to around 65 to 70% of value, typically over 15 to 25 years at an indicative 7 to 10% per annum. Because the limited-service model is lean and predictable, a hotel with a strong covenant, whether a brand franchise or a proven independent operator, often sees keener leverage than a volatile full-service asset. For new schemes or conversions we arrange development finance to roughly 60 to 65% of cost at an indicative 9 to 12% per annum, with the exit onto a stabilised term loan once the hotel trades to plan. Where the works are time-critical we use bridging at an indicative 0.75 to 1.30% per month. We frame every figure as indicative and never as an offer; the terms a given hotel attracts depend on its accounts, location and covenant.

Lender appetite for budget and limited-service hotels

Budget and limited-service hotels are the most widely banked hotel segment, so appetite is deep and pricing competitive. High-street and challenger banks lend on stabilised limited-service assets with a sound covenant, specialist hospitality lenders fund acquisitions and small portfolios on going-concern EBITDARM, and development-focused funders back conversions and new-build economy schemes. Branded budget hotels with a recognised franchise or management agreement, set against the scale of operators such as Premier Inn with around 850 hotels and Travelodge with around 590, give lenders a covenant story they understand quickly. We are an arranger and introducer with no exclusive tie to any lender, so we match the hotel and the operator to the funder most likely to price it keenly rather than steering every case to one bank.

The budget and limited-service hotel market

The budget segment trades on resilience. Knight Frank and HotStats put regional UK RevPAR at around £98 in Q3 2025, on occupancy of 82.8% and ADR of around £118, while London RevPAR sat at around £233 on 87.5% occupancy, evidence of steady room demand that limited-service operators capture efficiently. UK hotel investment reached £3.01bn year to date in 2025 per Savills, following a record £6.6bn in 2024 per Christie & Co, with regional price per room at around £129,000 against London at around £315,000 per Knight Frank, and a UK average of around £142,000 per Cushman and Wakefield in H1 2025. That liquidity, combined with the predictability of the limited-service model, gives lenders confidence in a well-run budget hotel as both an income asset and a future exit.