Hotel mezz is available but scarce and expensive. Lenders require franchise approval of the replacement guarantor and visibility into the property-improvement-plan funding pathway.
What complicates the structure?
Franchise agreements often require approval for any change of control, including a mezz foreclosure. The intercreditor must reflect those triggers. Property-improvement-plan reserves and seasonal cash-flow volatility require lenders to underwrite stress cases that depress proceeds.
When does hotel mezz make sense?
Repositioning of full-service or upscale-select-service hotels with strong sponsor track records and a clear revenue-stabilization plan. Limited-service flagged hotels in stable markets can also support mezz at 70 to 80 percent leverage. Sponsors should model two extra years of stabilization risk into combined debt service.
Sources
- Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations · Mortgage Bankers Association · 2026-Q1
- Financial Stability Report · Board of Governors of the Federal Reserve System · 2025-11