Hotel Refinance and Equity Release in 2026

Most hotel owners we speak to in 2026 are not refinancing because something has gone wrong. They are refinancing because a facility is maturing, because trading has re-rated the asset upward, or because they want to pull capital out of a stabilised hotel to fund the next move. At Hotel Property Finance we treat all three as the same underwriting question seen from different angles: what is the maintainable cash this hotel generates, and what will a lender lend against it today. This guide covers a maturing-facility refinance, the held base-rate environment, releasing equity on a going-concern basis, where debt service cover and EBITDA cover bite, and how to get a refinance ready for credit. A hotel is a trading business sitting on a piece of commercial real estate, so hotel financing is underwritten on both at once: the bricks and the cash they generate. If you are buying rather than refinancing, read the hotel acquisition finance guide; if you are building or repositioning, the hotel development finance piece; if you run the hotel yourself, the owner-operator notes; and portfolio owners terming out several hotels at once, the hotel portfolio finance guide.

Why hotels refinance in 2026: maturity, rate and releasing equity

There are three honest reasons to refinance a hotel. The first is a maturing facility: a term loan, or a development or bridging line, coming to the end of its life and needing replacement before it expires. The second is rate and structure: the existing debt is priced or shaped badly for where the business now sits. The third is equity release, where a hotel has grown in value and the owner wants to convert some of that into cash.

The backdrop across the hospitality sector is supportive. The Hotel Debt Market Briefing for Q1 2026 described UK and continental European hotel debt markets as cautiously stable, with appetite focused on high-quality assets and experienced sponsors, and refinancing continuing to dominate transaction volumes (Hospitality Net, Q1 2026). JLL went further in its 2026 Global Hotel Investment Outlook, citing strengthening debt markets, record dry powder, rising lender appetite and better pricing (JLL, via Hospitality Net, February 2026). When refinancing dominates volumes and appetite is rising, the owner with a clean trading story has options.

The base-rate environment: pricing off a held 3.75%

Hotel term debt is almost always quoted as a margin over the Bank of England base rate or over a reference rate, so the base rate is the anchor for everything that follows. That rate is 3.75%, held since the December 2025 cut (Bank of England). For 2026 refinances we are working with senior margins of around 2.75% to 4.75% over base or reference rate, which lands the all-in cost broadly in the 6.5% to 8.5% range as indicative market commentary, not a quote. Branded, strongly trading freehold hotels with experienced operators sit at the lower end; independents, leasehold, first-time operators or weaker trading sit higher.

Public deals show that the institutional end of the market is firmly open. A syndicate of international banks coordinated a GBP 290 million senior term loan to refinance a landmark London Southbank hotel in early Q1 2026 (Hospitality Net, Q1 2026). At the operating-portfolio level, a listed hotel landlord refinanced SEK 10.4 billion and raised a further SEK 1.5 billion of new financing in Q1 2026, extending its average repayment period to 2.2 years (interim report, April 2026). Listed owners terming out and extending debt is exactly the pattern a held base rate encourages.

Equity release: turning a re-rated hotel into capital

Equity release in this context has nothing to do with consumer lifetime mortgages. For a trading hotel it means refinancing onto a larger facility because the asset is now worth more, and taking the difference out as capital. The mechanism that makes this possible is the going-concern revaluation.

Hotels are valued on a going-concern, or trading, basis by a RICS valuer, reflecting the income the operation produces, which typically sits above vacant-possession value. As maintainable EBITDA rises, the going-concern value rises with it, so a fresh revaluation can lift the value that loan to value is measured against and create headroom to borrow more at the same LTV. The sector recovery gives this weight: UK regional RevPAR reached GBP 79 for full-year 2025, up 1.9% year on year, with H2 RevPAR up 3.8% and regional occupancy at 79% in the second half (Knight Frank, 2025). Leisure revenue per occupied room rose 6.0% over the year (Knight Frank, 2025). A hotel that captured that uplift has a genuine re-rating to evidence.

A clear worked example in the market is a hotel investor that refinanced its 141-room aparthotel in Dalston, east London, with a fixed five-year GBP 16.5 million facility from a private bank after an 18-month asset-management programme and a new operator lease. That is value-add work converted into a re-rated asset and then into a term refinance.

Putting released equity to work: capex or acquisition

Released equity has to go somewhere productive, and the two routes we see most often are capex and acquisition. Recycling capital into the hotel itself, refurbishment, room upgrades, an improved food and beverage or events offer, can lift RevPAR and ADR further, feeding straight back into EBITDA and the next valuation. Alternatively, released equity becomes the deposit on the next hotel, turning one re-rated asset into the equity base for an acquisition and a wider hospitality investment programme. The European comparator is a hybrid hospitality operator, which completed an EUR 80 million refinancing with an international bank across its Italian properties in June 2025, with margins noted around the lowest in recent years (Hospitality Net, Q3 2025): refinancing proceeds underwriting further growth.

Where DSC, EBITDA cover and ICR bite at refinance

A refinance is underwritten on current trading, not on what the hotel cost. Because the underlying business and the commercial real estate are assessed together, the primary metric is EBITDA, often refined to adjusted EBITDA after a market-rate management charge and a furniture, fixtures and equipment reserve, then tested against the debt.

The headline test is debt service cover. Lenders typically look for debt service cover of around 1.4x to 1.75x on stabilised EBITDA, expressed as EBITDA divided by annual debt service. On an interest-only structure the equivalent interest cover ratio, or ICR, has to clear with similar headroom. Cover sits above 1.0x because of seasonality and ramp-up: many UK hotels, especially leisure and coastal, trade seasonally, so lenders look at a full trading year and sustainable rather than peak-month performance. Tighter or repositioning situations are often sized to a higher required cover.

Cover is also where the held base rate bites. Because annual debt service moves with the 3.75% base rate, the cover ratio is rate-sensitive. A re-rated EBITDA improves cover; a higher all-in rate erodes it. The two move against each other, which is why the strength of the trading recovery is doing real work in 2026 refinances.

Loan to value, term and the structure on a refinance

Senior term debt for a refinance is typically available at around 55% to 70% loan to value of the going-concern value, with experienced operators running branded, strongly trading freehold hotels reaching the upper end. Crucially, LTV is measured against going-concern value, not vacant possession, which is precisely why a trading uplift increases how much can be borrowed. Leasehold hotels are generally capped lower than freehold and depend heavily on the unexpired lease term.

Terms typically run 10 to 25 years, often part-amortising, with interest-only or part interest-only available for stronger operators or lower-leverage deals. Arrangement fees are typically around 1% to 2% of the facility. One point we flag on every refinance: term facilities commonly carry early repayment charges within a fixed or initial period, so timing a refinance to land after that window, or pricing the charge into the decision, can materially change whether the new deal is worth doing. All of these are indicative market bands, set case by case by individual lenders.

Refinancing development or bridging debt onto term finance

A large share of refinances are not term-to-term at all. They are the planned exit from short-term debt. Hotel development finance and hotel bridging finance are designed to be repaid, and the standard exit is a refinance onto a term facility once the hotel is built, repositioned and trading. Bridging in the hotel space runs at around 0.85% to 1.25% per month over terms up to 12 to 18 months and almost always needs a clear, evidenced exit. New or repositioned hotels usually take roughly 12 to 36 months to reach stabilised trading, so the term refinance is timed to the point where EBITDA clears cover. Lining that exit refinance up early, with the going-concern valuation and trading evidence ready, is the difference between a smooth term-out and a scramble against a maturity date.

Preparing a refinance for credit

The refinances that price best arrive at credit fully evidenced. We help owners assemble: two to three years of trading accounts showing maintainable EBITDA, with adjustments clearly explained; a current RevPAR, ADR and occupancy picture against the prior year; the operating structure spelled out, whether owner-operated, leased or split into an op-co and prop-co; confirmation of freehold or long-leasehold security; the operator’s track record; and a fresh going-concern valuation if the asset has genuinely re-rated. Christie & Co makes the same point from the lender side: banks remain selective but engaged, and look for cash-flow strength, sponsor track record and a clear strategy (Christie & Co, 2025). The owner who hands that package over gets the lower margin and the higher LTV.

Choosing between specialist, challenger and high-street lenders

Different lender camps approach a refinance differently. Specialist hospitality lenders have dedicated teams that underwrite on EBITDA, RevPAR and going-concern value, and usually carry the deepest appetite, including for first-time operators and repositioning stories. Challenger banks are competitive on stabilised, well-located hotels with experienced operators. High-street banks are generally the most conservative, focused on established operators with strong brands, freehold security and clear trading histories: a 19-hotel four-star portfolio refinancing of GBP 75 million, led by a club of high-street banks, shows that appetite is real for well-performing assets (PwC, September 2025). Matching the hotel to the right camp is most of the work.

Frequently asked questions

Can I release equity from my hotel without selling it? Yes. If the going-concern value has risen, you can refinance onto a larger facility at the same loan to value and take the difference as capital, subject to cover and any early repayment charge on the existing debt. This is general information, not advice for your specific hotel.

How much can I borrow on a hotel refinance? As an indicative band, around 55% to 70% of the going-concern value for senior term debt, higher for branded freehold hotels with experienced operators, lower for leasehold or first-time operators, and always subject to debt service cover of roughly 1.4x to 1.75x on stabilised EBITDA.

When should I start a refinance? Well before the existing facility matures, and after any early repayment charge window where possible. For a development or bridging exit, line the term refinance up as the hotel approaches stabilised trading, usually 12 to 36 months after opening or relaunch.

Talk to us about your refinance

Every figure here is indicative market commentary for UK trading hotels in 2026, not a quote or an offer, and actual terms are set case by case by individual lenders. We are a specialist hotel finance resource, not FCA authorised, and we do not give regulated financial advice; where your situation needs it, we will refer you on to a regulated adviser. If you have a maturing facility, a re-rated hotel or a development or bridging line that needs to term out, talk to a hotel finance specialist and we will help you get the refinance ready for credit.