This article from Laurelwick Lenders in Lake Havasu City, Arizona explains what a property improvement plan (PIP) is in the hotel business and how motels and small hotels fund one without a new mortgage: renovation term loans, FF&E financing and working capital. It works a PIP budget and payment with invented figures and adds Mohave County, AZ lodging counts.
What Is PIP in Hotel Business? Notes for Lodges and Inns
A PIP is a property improvement plan: the list of upgrades a hotel brand requires before a property can join the brand, change hands under the brand, or renew its franchise. It can cover guest rooms, bathrooms, the lobby, signage, technology and life-safety items, each with a deadline. Lodges and inns that are independent have no brand PIP, but many plan renovations the same way, room by room with a budget and a schedule.
A PIP is a brand document, not a loan. Funding it is the owner's job, and the deadlines make the funding plan part of the PIP itself.
Can I Get Finance on PIP? What Mohave County, AZ Numbers Suggest
Yes, the operating side of a PIP can be financed: furniture, fixtures and equipment, bathroom and room renovation work, and the working capital to carry rooms out of service. Mortgage refinancing to pull cash from the property is a separate, real estate question that Laurelwick does not handle. County Business Patterns counted 43 traveler accommodation businesses (NAICS 7211, the Census group that includes hotels and motels) with paid employees in Mohave County, AZ in 2023, with 849 employees and $20.3 million in annual payroll (County Business Patterns 2023); 20 of them had fewer than five employees.
Illustration only, invented figures: a 42-room PIP at $2,900 per room for soft goods, $3,600 for case goods and $4,100 for bathroom work comes to $10,600 per room, $445,200 for the rooms. Add $95,000 for the lobby and the invented PIP totals $540,200 (our arithmetic).
Small Business Loan for Hotel: Questions From Lodges and Inns
- Can a small business loan fund a hotel renovation? Yes, as a term loan for the work and equipment financing for FF&E.
- Will a lender read the franchise agreement? For a flagged property, yes, and the PIP itself.
- Do rooms out of service matter? Yes; lost room revenue during the work is part of the plan a lender reads.
- Does Laurelwick arrange hotel mortgages? No; property loans are commercial real estate lending.
Lodges and inns asking these questions should start from monthly revenue, occupancy and the bids. The hotel and motel page covers FF&E and working capital in more detail.
Hotel Loan Calculator for Lake Havasu City, AZ Motels and Small Hotels
A hotel loan calculation for a PIP has three parts: the amount financed, the payment, and the added revenue that should carry it. Illustration only, invented figures: an owner puts $120,000 of cash toward the $540,200 PIP and finances $420,200 over 84 months at an invented annual rate of 10%, for an invented payment of about $6,976 a month, $83,710 a year. If the renovated rooms earn $9 more a night across 11,000 occupied room-nights a year, that adds $99,000 a year (our arithmetic), which in this invented case does not cover the payment on its own.
Lenders read the same arithmetic. A partner may ask how many rooms will be out of service each month of the work, because those lost nights reduce the revenue that carries the payment during construction.
That gap is the point of the calculation: a PIP that the brand requires may not pay for itself in higher rates, and the property's existing income has to carry the rest.
Hotel Motel Financing: A Mohave County, AZ Checklist
- Get the PIP from the brand, with each item's deadline.
- Get bids for each part: rooms, bathrooms, lobby, signage, technology.
- Pull two or three years of monthly revenue and occupancy.
- Plan which rooms go out of service, and when.
- Decide which items go on equipment financing and which on a term loan.
- Set the payment against the property's thinnest month of net operating income.
Hotel motel financing for the operating side runs through equipment financing and business term loans. The county's accommodation and food services sector had 455 employer establishments in 2023 (County Business Patterns 2023).
Hotel Motel Loans for Independent Hotel Owners
Hotel motel loans for independent hotel owners differ from flagged-property loans in one way: there is no brand standard to point to, so the owner sets the scope and must show why it raises revenue. Independent owners should keep the scope tied to what guests see and pay for, and keep the bids and before-and-after rates. Nonemployer Statistics counted 72 lodging businesses without paid employees in Mohave County, AZ for 2024 (Nonemployer Statistics 2024), many of them small inns and rentals with modest renovation budgets.
Working capital covers payroll while rooms are out of service, and the hotel and motel page covers buying a motel business.
By Laurelwick Lenders · Updated
