As Bank Lending Pulls Back, Hotel Operators Begin Financing Deals Themselves

Written by:

Rudi Davis

Date:

09 Dec 2025

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Established hotel owners are increasingly lending money to other hotel owners and operators, stepping into a role traditionally filled by banks and debt funds. As credit tightens and acquisition opportunities shrink, these experienced operators are using their own balance sheets to finance deals, effectively becoming lenders, but with the ability to step in and operate the property if needed.

According to Stephen Haase, Director of Capital Markets at Greysteel, many hotel groups with existing portfolios have created in-house lending arms to put capital to work when buying new properties no longer pencils out. Instead of using their capital to buy hotels outright, these owners are lending to other operators to acquire and upgrade properties, earning interest while retaining the right to step in if a deal fails.

“A lot of groups that we work with have opened up credit arms as well,” Haase says. “They’re looking for yield outside of putting out equity, since they’re not seeing the acquisition opportunities they like.”

Operational Expertise

Unlike traditional debt providers, operator-lenders bring a deep understanding of hotel management to their underwriting. Haase explains, “They understand the operations of a hotel and can provide some more creative capital.” This operational insight allows them to structure loans with higher leverage and flexible terms, particularly on properties or markets they know well.

Haase describes situations where an operator-lender is willing to lend more because it knows the property well and is comfortable with the downside. In those cases, the lender may cover most of the purchase and renovation costs. If the borrower can’t refinance or sell within two to three years, the lender is prepared to take over the hotel at that price. “We’re ready to step in at that level,” Haase says.

This approach creates a built-in acquisition opportunity for the lender while giving the borrower access to capital they might not find elsewhere. It also allows operator-lenders to underwrite risk with a greater understanding of the industry, as compared to banks or traditional debt funds.

For borrowers unable to secure conventional financing, these operator-backed loans can be the difference between keeping a property and facing a forced sale. “It can be a little bit tricky,” Haase acknowledges, “but there are a lot of assets out there that might be looking for a last resort.”

Why Operator-Lenders Matter Now

The rise of operator-lenders is not just a response to tighter credit markets; it signals a broader change in how capital can flow within the hotel industry. Institutional lenders have become more conservative, tightening underwriting standards and reducing leverage, particularly in hospitality, where cash flows can be volatile. Meanwhile, the pool of attractive acquisition targets has shrunk, pushing operators to find new ways to deploy capital and maintain returns.

Haase notes that this trend has been building for several years but has accelerated as acquisition opportunities have declined and traditional lenders have pulled back. The result is a bifurcated market: conservative banks on one side, and creative, operationally savvy lenders on the other.

For hotel owners and sponsors, this new landscape offers more financing options but also increased complexity. Operator-lenders often blur the line between debt and equity, structuring deals that give them the right to convert from lender to owner if a loan defaults. This optionality appeals to operators confident in their ability to turn around underperforming assets, but it requires borrowers to carefully evaluate the long-term implications of their financing choices.

Competition for Traditional Lenders

The entry of operator-lenders is also changing how lenders compete for deals. Traditional debt funds have responded by offering cheaper loans, particularly on hotel purchases that need only limited upgrades. But operator-lenders can often go a step further, especially on properties they already know or see as long-term opportunities.

Their willingness to provide higher leverage and flexible terms is rooted in their confidence as potential owners. If a deal goes sideways, they are prepared to take over and operate the property themselves. This fallback allows them to compete on structure, not just price, and to fill gaps left by banks unwilling to take on hospitality risk.

The key question, Haase says, is whether this is a temporary response to current market conditions or a lasting shift in hotel capital markets. He suggests the latter, noting that operational expertise is a durable competitive advantage. As long as institutional lenders remain cautious and acquisition opportunities remain limited, operator-lenders are likely to play a significant role.

Looking Forward

Whether operator-lenders become a dominant force or remain a niche solution will depend on how broader lending conditions evolve. If banks and debt funds loosen standards or more attractive acquisitions emerge, operator-lending may diminish. But as long as capital remains tight and returns on equity investments are hard to achieve, hotel owners will likely continue to seek yield by lending to peers.

For the industry, the rise of operator-lenders blurs traditional roles and suggests a more interconnected market, where the boundaries between owner, investor, and lender are less defined. This development could have lasting effects on how hotel transactions are structured and how risk is shared across the sector.