Hotel Financing: Why Lease?

In the hospitality industry, style is substance. Anyone with any industry experience knows that running a successful hotel is about more than simply providing a firm mattress and a well stocked mini bar. When you are running a hotel you are part of a very competitive industry. You need every advantage you can get. What makes one hotel stand out from another? The amenities, the style, the comfort and the beauty of your establishment. When people choose a hotel, whether it be for a vacation, a romantic tryst or a business meeting, how the facilities look and how comfortable they are often become the deciding factors before a customer makes a reservation. The challenge of course is that keeping comfortable and stylish cost money. The problem is that many travelers are very cost conscious, so it is often hard to pass on all of your expenses to your guests.

That is where leasing can help.

That is where leasing can help. Purchasing new furniture, carpets, air conditioners, bedding and artwork is often the worst investment possible. The simple reason is that guests put your furniture and equipment to the test. More than any other industry your property is apt to wear out very, very quickly. More troublesome is that there is almost no market for used hotel equipment. Therefore if you purchase you are essentially compiling assets that will soon be virtually worthless. In addition you are laying out a huge amount of capital for a very limited short term reward.

Even if you buy the best equipment and furnishings available and are not worried about them wearing out, you still have to worry about style. Decorating styles change constantly. You can have the highest quality dressers in the world – but if they look like something that people only used in the late 1970s, they will still be a drag on your businesses reputation. You need the flexibility to change with the times.

Leasing changes that. With your experience you can figure out how long your various equipment and furnishings are likely to be a value to your hotel. Then you can pick a lease that matches their longevity – generally, two, four or six year lease terms. When the lease is up, you simply return your current equipment and furnishings and start a new lease with more up to date models. This allows your hotel to constantly be the crème of the crop!

The hospitality industry has always embraced leasing

The hospitality industry has always embraced leasing, because it allow hotels to turn over used or worn equipment whenever an upgrade is needed, whether partially(just air conditioners or just furniture, or just certain rooms, for example) or for the complete property.

Leasing also encompasses essentially no capital outlay. You simply pay the first and last months payments and a small fee. On the other hand purchasing new beds for hundreds of hotel rooms could end up depleting weeks of cash profits. Your business keeps more cash on hand for other purposes. In some cases, you may even be able to pay your hotel franchise fee with a leasing plan, lowering your cash outlays even more.

For many people in the hotel industry, leasing simply makes sense. And if you’re looking further for other intelligent options, whether you’re trying to buy new commercial properties, expanding an ongoing concern, or purchasing another business entity, you should note that GCR Capital also provides many types of commercial financing options.

Please take 60 seconds to explore how we can help set your hotel up with a lease that will allow you to become as competitive as possible in your difficult marketplace. You’ll sleep better at night knowing all your hospitality options!