Why is it so difficult to finance hotels, accommodations, and apartments?

While the standard hotel brand in the domestic accommodation industry has established its pattern, there is ongoing conflict among different brands regarding non-standard, scale, and joining policies. However, the main concern at present is not the brand's policies or interest in accepting new members but rather the source of funding for new projects. outcall massage The underlying issue is that despite having a robust membership system and established traffic, these brands struggle to make significant progress with their individual projects. Once initial funding is secured, where will the project generate revenue from?

Capital thirst of investors

The brand has been able to give social support to five million non-cash management loan enterprises including decoration, furniture, linen, etc.hong kong erotic massage, by pledging the right to operate, using another Chinese trading limited company as a guarantee liability company, borrowing three years at a 15% annual interest rate. "This is because a student has signed a contract with a mid-range brand investor who is seeking start-up capital financing for a construction project.

Despite the investor's condition allowing the agent to secure multiple capital, no one was willing to lend $3 million. This amount seemed insignificant to the owners and they were hesitant to take it on due to doubts about the project's profitability. Additionally, if the other party was unable to repay the loan, the hotel's management would be used as collateral. This would not only hinder progress on the project, but also result in a transfer of management rights. As stated by the project agent to TBO, no parties took advantage of the hotel's operating experience.

In addition, I have researched successful small and medium-sized accommodation brands, but unfortunately, their focus is not on earning $3 million in interest annually. While they may offer advantageous loan strategies, it would require them to rebrand. The project representative acknowledged the reasoning behind the brand managers' decision. However, the project has already obtained a non-cash loan of 5 million from the current brand and has committed to a letter of intent, making it impractical to switch brands at this point.

In the accommodation industry, there are many similar cases.

Generally, investors are not undercapitalized, on the other hand. During the rapid growth of economy hotels in the first 10 years, some investors have enjoyed the dividend period, completed the accumulation, and held sufficient funds for a large number of investors.

We need a project company to finance the project, just like these well-funded investors. Investors are also improving their understanding of the accommodation industry as well as their awareness of risk management prevention issues, as they follow several major economic chain brands along the way. From the perspective of optimizing the allocation of resources and asset structure, it may not make sense to put too much money into a single project.

In fact, investment remains the preferred choice to hedge against inflation despite the continuous decline of the real economy, stable cash flow, and relatively stable returns in the accommodation industry. However, investors are hesitant to commit too much liquidity to one-time housing projects because of the long return cycle.

Especially for small and medium-sized investors who have finally climbed into the middle class, it's a psychological barrier. They can certainly continue to develop if leverage is well used, but if any errors in project operations will directly result back to the original, they are impulsive and cautious. 'Mr. Feng, the partner of Hotel Property Network, is ridiculous.

Conversely, certain investors are venturing into the global market of upstream supply chain activities within the accommodation industry, such as linen washing and furniture decoration. In contrast to conventional investors with other functioning ventures that can serve as a safety net, these marginalized or even transnational investors may lack prior experience in the accommodation sector and face high costs for equity financing, making it challenging to fulfill their urgent financial requirements.

Financing environment is poor

With the update of investors' concepts and the tightening of financial institutions' lending, raising funds with lower risks and completing the process from signing properties to actual operation as much as possible within the expected period has become a thorny issue for many investors and brands.

According to Hou Feng, the executive president of New Century Hotel Enterprise Group, hotel management assets are challenging to sustain. In the past, mortgage methods were a direct source of financing, but due to Chinese banks' risk assessment of assets, it is no longer feasible. Instead, they prioritize analyzing cash flow and profits when considering financing options for hotel assets. Currently, there is a lot of research on how traditional Chinese hotels can leverage capital to expand their capabilities. However, finding reliable financing channels remains a daunting task."

According to a Shanghai-based apartment operator interviewed by TBO, the result of renovating and transforming apartment brands is that companies cannot bear the cost due to the increase in "heavy assets" such as scale, furniture, and home appliances. However, currently, most investment institutions are approaching investments with caution and prudence. They prefer investments that combine equity and debt, and have specific criteria for performance including gambling, equity pledge, and founder guarantee.

Although some B&B brands have received financing, Xiaoyu (a pseudonym) believes the amount of capital received is not large at this time. Establish a formal operations team; after a few projects are completed, new capital will still be injected, but some equity will be diluted. A single project usually raises most of its money from friends around, but many sponsors don't have much financial experience themselves. Getting a loan from a bank is even harder.

During his presentation, the hotel property rights network partner, Mr. Feng, provided a more comprehensive explanation. He noted that while banks typically offer mortgages with an annualised rate of slightly above 5 per cent, small and medium enterprises struggle to obtain loans. Additionally, if equity is used as collateral for social financing, major institutions usually charge interest rates of just over 12 per cent. These loans typically have a duration of six months to a year. However, given that the normal return on investment period is currently five years, it becomes difficult for such a short capital use period to fulfill the long-term investment needs of the accommodation industry.

Examining the current state of investment in the industry, there is a widespread belief that investment costs are on the rise. This is due to insufficient loan policies and financing options, leading to higher expenses caused by leveraging. As a result of shorter fund utilization periods, there is a continued risk of the capital chain breaking under mounting pressure for repayment. If the industry were to return to a more sensible approach, it would be inevitable for financing challenges to arise.

It is difficult for investors to raise funds, and the brand side is aware of that. Although its relevance to investors to provide funds may not be weaker than the investors themselves, from an objective perspective, such a culture of mutual learning achievements leads to more people becoming students.

standard hotel brand established traffic

7