Hotel Management Companies and Equity Contributions: Benefits and Risks
By Todd Isenstadt and Hans Detlefsen
By Hans Detlefsen, Managing Director of HVS Global Hospitality Services
Hotel financing takes different forms based on the capital requirements of the developer and the availability of alternative financing sources. These factors vary with the economic climate. Typically, hotel developers attempt to finance new hotel construction projects with a combination of debt and equity. Within these two general categories of capital, various sources may be required to fund the project. This article investigates the benefits and risks of seeking equity participation from hotel management companies.