A hotel owner can pay for room renovations with a term loan sized to the full renovation, often released in stages as floors are finished, with FF&E such as mattresses, case goods and televisions financed on an equipment loan, and a short loan or a line covering payroll and lost room revenue while floors are offline.
Flintrun Lending Group in Champaign, Illinois explains how hotels fund room renovations: term loans for the renovation, FF&E financing for furniture and mattresses, working capital for rooms offline, and what a brand PIP means. Figures are invented.
Hotel FF&E Financing When a Champaign, IL Hotel Needs Mattress Sets
Mattress sets are a routine FF&E purchase, and many hotels replace them on a schedule separate from case goods. Illustration only, invented figures: replacing 72 mattress sets at an invented $640 each costs $46,080 (our arithmetic). That can go on a short equipment note or be folded into the renovation.
FF&E, short for furniture, fixtures and equipment, covers beds, case goods, seating, lighting, televisions and similar items. Partners that specialize in hospitality often finance FF&E on its own, secured by the items.
Traveler accommodation, the Census category for hotels, motels and inns, counted 39 employer establishments in Champaign County, IL in 2023, with 709 paid employees and $19.4 million in annual payroll (CBP).
Working Capital for Hotels and Room Renovations: Notes for Champaign, IL Hotel and Motel Owners
Rooms taken offline for renovation stop earning, but payroll, utilities and loan payments continue. Working capital for hotels covers that gap. The size of the gap is the room revenue lost while each floor is offline, minus any costs that fall when rooms are closed.
Working capital loans explains how to size the gap and how partners read the request.
Motels with exterior corridors can sometimes renovate a few rooms at a time with less disruption; hotels with interior corridors may close whole floors. That choice changes the size of the gap.
A simple way to estimate lost revenue is to take the rooms offline, multiply by the property's recent occupancy and average daily rate for the same weeks last year, and add the days the work will take. That number, written down with its inputs, is far more useful to a partner than a round figure.
What Is a PIP in the Hotel Business? Walking Through a Lobby Refresh at a Champaign, IL Hotel
A PIP, or property improvement plan, is a list of upgrades a hotel brand requires, often when a property changes hands or renews its franchise. It may cover rooms, lobbies, signage, technology and exterior work, with deadlines. A PIP letter is often the starting document for a renovation loan, because it states what must be done and by when.
A lobby refresh is a common PIP item: new front desk, seating, lighting, flooring and sometimes a breakfast area. The furniture and lighting can go on FF&E financing; the flooring and millwork on the renovation loan.
Hotel loans covers PTAC units, keycard systems and other upgrades.
PIP deadlines matter to the funding schedule. If the brand expects the work finished by a set date, the loan has to close early enough for contractors to start, and the hotel should ask whether any brand extension is possible before the timeline is fixed.
Paperwork Champaign County, IL Hotel and Motel Owners Pull Together First
- Monthly revenue, occupancy and average daily rate for two to three years.
- The franchise agreement and any PIP letter.
- The renovation bid, with FF&E listed separately.
- Recent tax returns and business bank statements.
- The property deed or lease, and insurance certificates.
Partners reading a hotel request look hardest at how revenue moves through the year and whether the renovated rooms are expected to earn a higher rate. Showing last year's monthly figures beside a modest estimate for renovated rooms answers both questions in one table.
If the hotel has a bar or restaurant, the city and state liquor licenses may be asked for too; the liquor license guide explains how they fit together.
Floor by Floor: Phasing an Invented Champaign, IL Room Renovation
Illustration only, invented figures: a 72-room hotel renovates every room at an invented $7,400 per room, $532,800 in total (our arithmetic), across 3 floors of 24 rooms. A term loan at an invented annual rate of 10.2% over 84 months would cost about $8,900 a month once fully drawn (our arithmetic).
If the partner releases money floor by floor, the hotel pays interest on $177,600 for the first floor, then $355,200, then the full amount, rather than on the whole sum from day one (our arithmetic). Phasing also keeps two-thirds of the rooms earning at any time.
Compare that with the renovated rooms' expected rate increase, and ask whether the brand's PIP deadline allows phasing. See business term loans, equipment financing for FF&E, or the Champaign, IL figures, or call (217) 334-8194.
By Flintrun Lending Group · Updated
