A persistent obstacle to U.S. hotel development in recent years has been the lack of financing.
Hotel loans have been difficult to come by and expensive in recent years. Many smaller hotel developers who lack widescale, long-term banking relationships have been particularly challenged in trying to get projects off the ground.
In order to help smaller franchisees find that elusive financing, Hilton launched a partnership with Bridge — an online platform designed to connect businesses with lenders and streamline the application process.
Bill Fortier, Hilton's senior vice president of Americas development, said it's always been part of the business that there are good times to get financing to build hotels and there are more difficult times. But the cyclical pattern of the lodging cycle has been thrown out of its normal rhythms in recent years.
"Post-COVID, we've been in a very strange cycle," he said. "The lenders who are generally eager to invest in hotel projects pulled back and have been uncertain about what's going on."
In conjunction with a more complicated lodging cycle, regional banks that had historically been the bread-and-butter lenders for the hotel industry were sidelined by their own crisis in 2023, headlined by the respective collapse of Silicon Valley Bank, Signature Bank and First Republic Bank.
The success of Hilton and the hotel industry's other major brand companies relies on being able to get these deals to pencil and get shovels in the ground. Fortier's team immediately saw the benefit in finding ways to connect the smaller-scale lender who remained in the market with the hotel developers looking to keep their businesses going.
"We have to keep this engine going," Fortier said. "And it's hard enough for people that do it three or four times a year. It's almost impossible right now for somebody new" to the industry.
Rohit Mathur, CEO of Bridge, said his team connected with Hilton roughly two years ago to try to tackle that problem.
"We had done this for other industries where we were able to use technology to help their suppliers or franchisees, and we saw in hospitality that 60%-plus of hotels are actually not owned by large institutions," he said. "They're owned by people who own two, three, four hotels."
Mathur said the companies that are looking at a hotel project valued at $15 million or less with brands such as Tru by Hilton or Home2 Suites aren't the types of companies that have sophisticated capital markets teams to navigate the current environment.
So what the Bridge platform allows these smaller companies to do is streamline getting their information in front of active lenders in a presentable way. The platform legitimizes the profiles of these smaller companies similar to a large-scale borrower, as well as sort through thousands of potential lenders to find the handful that are interested in the hotel development project.
"We help put the materials together to make a really presentable package that a lender wants to see," Mathur said. "We get you in front of lenders that want to do those deals, then we help you compare the best options. We'll say, 'Look, here's three or four options. This is what we think is best for you.' And you make your own decisions, of course."
It's similar in a way to platforms such as Rocket Mortgage on the consumer side of financing, Mathur added.
This is a shift in approach from the hotel brand side, which left financing as the franchisees' primary responsibility, Fortier said. Brands were not able to connect borrowers with lenders at this scale.
Choice Hotels International has also announced a partnership with Bridge for similar reasons earlier this year.
Fortier said the platform is most likely to be impactful for borrowers at the lower end of the spectrum, with larger, more sophisticated full-service assets still requiring the expertise of larger investment groups.
Bay Area success story
One example of a success through the lending platform is a pair of development projects spearheaded by Texas-based 3S Hospitality Group.
Brothers Shane and Shaan Ibrahim were well through the entitlement process to build a pair of Home2 Suites hotels in California when the COVID-19 pandemic and the ensuing economic crisis disrupted their plans, leaving them unable to find financing.
Shane Ibrahim, 3S Hospitality's chief financial officer, said they were nearing the point of having to walk away from the projects as they'd run out of permit extensions without financing in place for the hotels in Vacaville, California, and Pittsburg, California — both small markets near where the brothers grew up in the Bay Area.
"We might have had to walk away losing a lot of money," he said. "Nobody likes to do that."
But 3S Hospitality was ultimately able to thread the needle and find construction financing for the hotels through Hilton's partnership with Bridge.
"If we hadn't gotten this project off the ground in the next four or five months" we would have had to walk away, Shaan Ibrahim said. "Rohit and the Bridge team came in and kind of saved us at the last moment where we were able to close the financing and get this thing off the ground."
The developments also mark a move upward in segmentation for 3S, which started its portfolio with a Sleep Inn in Killeen, Texas, that has since converted to a Spark by Hilton property.
Mathur and Fortier said they see the 3S story as a perfect highlight of what the platform can achieve in navigating the current financing environment. In terms of what's next for the partnership, they said for now they're primarily focused on getting it in front of more Hilton franchisees.
"Once you show some success, that's when you start getting the volume because they're like 'Oh, this is real,'" Mathur said.