Many banks almost completely closed their counter for new financing applications in the spring of 2020. The focus shifted to helping existing customers. A tailor-made solution was sought for them. In most cases, the bank granted a six-month deferment of repayments.
Uncertainty about recovery
Soon after the virus outbreak, the banks increased the risk profile of hotels due to the lack of clarity about the duration of the pandemic and the recovery of the sector. As a result, the loan-to-value is lower, the interest is higher and the assessment is stricter.
Rabobank describes the situation as "sailing on a sea of uncertainty". Doubts are mainly about the business market. Most financiers expect that online meetings will partly replace business travel and that, as a result, fewer business visitors will arrive. ABN AMRO expresses concerns about sufficient good staff after the corona crisis, because many employees have left the sector due to a lack of work.
Use every minute
"Banks currently want to see before they believe," said Joost Mees, hotel expert at Colliers. "Hotel owners and operators are looking for opportunities instead. Hoteliers are looking more closely at using every square meter for every hour of the day, for example by offering workplaces during the day in the lobby, bar or restaurant. Flexible lease contracts between owners and operators are also gaining popularity. In that case, the rent largely depends on the hotel turnover and risks are better spread over both parties. The banks are also positive about that.’’
Not always no
Not all new applications are rejected by funders. NIBC is open to construction financing. New construction projects will only be completed in a few years and the corona crisis will probably be over by then. Aareal Bank even provided new financing in the past year, but with stricter conditions such as a lower loan-to-value.
Banks ask for more financial transparency in applications and look closely at all income streams. Not only overnight stays, but also those from workplaces, the restaurant, the bar, conferences and events. According to ING, hotels that adapt quickly to the changing market have the best opportunities to emerge strongly from the crisis, such as temporarily renting out vacant rooms as offices. A well-stocked savings account and wealthy shareholder(s) naturally also play a role.
Debt funds see opportunities
If you want to invest in hotels now, you have to bring more private capital. In practice, this means less bank financing for the time being. Specialized debt funds are filling the gap, according to Dutch Debt Advisors. They often do this for a higher interest rate and a larger loan-to-value than banks. This all means that borrowing money will become less attractive.
There are still banks that see opportunities and want to grow in the sector. ''The uncertainty about the future can be factored into the interest rate of the new financing," says Mees. "Once the objectives have been achieved, there will be opportunities to expand these conditions, such as the maximum available share of loan capital. A good business plan can be financed with clear argumentation, even in this day and age.''