By David Kasten and Donald Wise, Finance Industry Experts for Strategic Solution Partners
Securing funding for hotel development in today’s economy is not for the faint of heart. Developers are grappling with inflation, labor shortages, expensive debt, and evolving investor expectations. Yet, despite the hurdles, opportunity still exists for those who understand how to navigate the new financial landscape.
Strategic Solution Partners (SSP) brought together two of its Finance Industry Experts—David Kasten and Donald Wise—to share what it really takes to fund a new development project in 2026 and beyond.
The Current State of Hotel Financing
The rules of the game have shifted. Economic uncertainty has made lenders more selective and developers more cautious.
According to David Kasten, “Higher interest rates have clearly slowed transaction volume, but investors are now at a crossroads: What is the new normal, and how long do I wait?” Traditional financing is harder to secure, and alternative methods are stepping into the spotlight.
Donald Wise echoes this sentiment: “Lenders are reviewing projects on a case-by-case basis, focusing first on top-tier brands like Marriott, Hilton, IHG, and Hyatt, and then on the sponsor’s liquidity and track record. These have always been important, but now they are evaluated with far greater rigor.”
What are the key challenges? “Raising equity, securing financing, rising construction costs due to tariffs, labor shortages, and construction delays,” says Kasten. For Wise, it is also about the cold reality of developer risk: “Hotel developers today have to use their own equity or cull together friends and family. There is very little interest with full-recourse debt and higher rates.”
Getting Creative with Capital Structures
Conventional funding paths are not obsolete, but they have certainly evolved. Developers are finding success through joint ventures, long-term leases, seller financing, and increasingly creative capital stacks.
“The use of JV structures, seller financing, or even gap financing with short-term interest-only loans are becoming more common,” says Kasten. “A strong structure might look like 65% LTC debt, 5–10% developer equity, some operator or brand key money, preferred LP equity, and possibly governmental funding.”
Wise adds that innovative approaches like C-PACE financing can lower the cost of borrowing, though they come with strings attached. “C-PACE can reduce borrowing costs by a couple hundred basis points, but most lenders still will not allow it, and the pre-pay penalties can be brutal.”
Their shared advice? Make sure your capital stack is defensible, and accrue no more than 50% debt the last 30 years “to avoid sleepless nights” or, at worst, foreclosure and bankruptcy.
Forecasting Revenue the Right Way
Performance projections like RevPAR and ADR still matter, but today, investors are more interested in context.
“As important as revenue forecasts are, market comparisons offer a stronger foundation for securing financing,” Kasten explains. “A well-structured comp set shows ROI expectations and exit strategies, especially when you are repositioning a property.”
Wise agrees: “Lenders will drill down deeply on the comp set. They want to know how the subject hotel will perform against nearby properties. They might even look at local restaurants’ F&B velocity to validate assumptions.”
The key? Be grounded in reality, but persuasive in vision.
Inspiring Confidence in Risk-Averse Investors
In this climate, the developer’s credibility is just as critical as the deal itself. Confidence comes from the length of time the investor has known the developer, and the developer’s pedigree of delivering projects on time and on budget.
In the event that the relationship is new, Kasten outlines a tactical approach: “Start with a detailed market analysis. Present multiple, well-developed financing strategies. Articulate risks, and how you will mitigate them. Have a clear ROI calculation and exit strategy, especially if the debt window is 5–7 years.”
Investors need more than reassurance. They need a plan that accounts for the unknowns.
Post-Funding Performance: Metrics that Matter
Securing the funds is just the beginning. Developers must show how they will deliver after the ribbon-cutting.
Kasten recommends focusing on both traditional and financial health metrics: “Occupancy, ADR, RevPAR, and NOI are all essential, but so are debt coverage ratios and proactive, transparent communication with investors.”
Above all, Wise and Kasten agree that hospitality development in 2026 demands adaptability, realism, and the right relationships.
Final Takeaways
Hotel development may be more complex today, but it is far from impossible. The new playbook involves creative funding, deeper due diligence, and transparent forecasting. Kasten emphasizes that investors are still willing to deploy capital, but only if you have done the work to prove that it is a safe bet.
For those who can master these fundamentals, the path to funding may be winding, but it is still wide open and replete with opportunity.
This article was originally published by Hotelier Magazine on October 2025
Looking to navigate the new rules of hotel financing with confidence? Partner with SSP’s industry experts to structure capital, sharpen your projections, and position your project as a can’t-miss investment in 2026 and beyond
