Around this time of year, most of us spend a bit more time thinking about holidays. Whether you’re squeezing in a summer break or wondering why everyone else seems to be posting poolside photos while you’re still at your desk, they’re fairly difficult to ignore.
It is also the point in the calendar when hotels are often at their busiest. Full car parks, busy restaurants and occupied bedrooms might suggest everything is going brilliantly. Sometimes that is true, and sometimes it is not.
Hotels are often viewed as property assets, but I think that misses the bigger picture. A hotel is a trading business first and a property asset second. The building provides the security, but the quality of the management, the strength of the brand, the resilience of cash flow and the sustainability of the business ultimately determine whether it is a good lending opportunity.
A hotel can occupy an outstanding property in an excellent location and still underperform if it is poorly managed. Conversely, an experienced operator can realise the potential of a more challenging asset, making sound commercial decisions that create a stronger and more resilient business than the property valuation alone might suggest.
That is partly because every hotel is made up of multiple revenue streams under the same roof. Bedrooms may be the most visible element, but food and beverage, conferences, weddings, golf, spas, leisure memberships and corporate events can all play a significant role in driving financial performance.
Each brings its own costs, staffing requirements and seasonal patterns, so strong performance is rarely the result of one successful department. More often, it reflects a management team that understands how each part of the business supports the others and where further investment is likely to produce the best return.
That is why, when we assess a hotel opportunity, the conversation starts long before we look at the valuation. We want to understand who is running the business, how they have performed historically, how they respond when trading conditions become more challenging, and where they see the next stage of growth coming from.
We saw this first-hand in our recent refinancing of Bicester Hotel Golf & Spa. The asset combined bedrooms with golf, wellness, leisure, conferences and extensive food and beverage operations, but what stood out was not simply the breadth of the facilities. It was the operator’s long-term strategy and their willingness to continue investing in the business.
Another hotel transaction we’ve recently been involved with in Birmingham presented a very different type of operation, serving a different customer base and trading environment. Even so, the underlying questions remained exactly the same: how resilient is the income, how capable is the management team, and what evidence is there that the business can continue to perform over the next five years?
The wider market data helps illustrate why those questions are so important. Knight Frank reported that revenue per available room (RevPAR), one of the industry’s key measures of trading performance, rose by 4.8% across regional UK hotels during the first quarter of 2026. When income from restaurants, bars, leisure facilities and other on-site services is included, total revenue per available room (TRevPAR) increased by an even stronger 5.2%.
Those are encouraging figures, but averages can only tell you so much. They show that the market performed well overall, not that every hotel produced the same result or faced the same operating pressures.
Looking beneath the figures is where the picture becomes more revealing. Golf and spa hotels delivered RevPAR growth of 8.0%, while leisure revenue across regional hotels rose by 8.6%.
That supports the value of creating several reasons for customers to visit rather than relying entirely on bedroom income. A well-run hotel can draw on weddings, memberships, events, food and beverage, or leisure facilities to create a broader and more balanced trading profile throughout the year.
However, stronger revenue does not remove the need for discipline. Knight Frank found that payroll costs across regional hotels rose by 6.9% year on year and accounted for 36.8% of total revenue.
That is where the quality of the operator becomes critical. Decisions around staffing, pricing, maintenance, capital investment and cost control all influence whether increased revenue is converted into sustainable profitability or simply absorbed by the costs of running the business.
Encouragingly, regional gross operating profit per available room still rose by 8.0% during the quarter, supported by revenue growth, lower utility costs and tight control over non-payroll expenditure. For me, that is one of the most useful figures in the report because it shows that good performance is not simply about attracting more guests; it is about managing the entire operation properly.
For lenders, the lesson is clear. The location, valuation and facilities will always form part of the assessment, but they cannot compensate for weak management or an unclear business plan.
The strongest hotel transactions tend to involve experienced operators who understand their customers, invest sensibly and know how every part of the business contributes to long-term performance. The property underpins the loan, but it is the business that services it.
