Full Service - Resort Hotel

Definition of a Full Service - Resort Hotel

In the context of commercial real estate and mortgage lending, a Full Service - Resort Hotel is defined as a premium lodging property that provides extensive guest services and high-end amenities, typically situated in a destination location such as a beach, mountain, or specialized vacation area. Unlike limited-service hotels, these properties feature on-site food and beverage operations, room service, meeting spaces, and recreational facilities designed to keep the guest on the property for the duration of their stay.

Key Characteristics in Commercial Lending

From a commercial mortgage perspective, lenders categorize these assets as complex, high-yield, and operationally intensive. The valuation of a Full Service - Resort Hotel is based not only on room revenue but on its Total Revenue Per Available Room (TRevPAR), which includes significant contributions from ancillary sources. Key characteristics include:

• Diversified Revenue Streams: Income is generated through guest rooms, multiple restaurants, bars, banquet halls, spas, golf courses, and retail shops.
• Extensive Amenities: These properties must feature luxury infrastructure, such as expansive pool complexes, fitness centers, and specialized concierge services.
• Destination Appeal: The property’s value is heavily tied to its location (e.g., proximity to national parks, private beaches, or major ski slopes).
• High Operational Costs: These hotels require a high staff-to-guest ratio and significant Capital Expenditure (CapEx) reserves to maintain luxury standards.

Underwriting and Mortgage Considerations

Commercial mortgage underwriters view Full Service - Resort Hotels differently than standard commercial assets due to their volatility and sensitivity to economic cycles. Lenders typically focus on the following factors during the loan application process:

• Seasonality: Underwriters analyze cash flow patterns to ensure the property can service debt during "off-peak" months. A Debt Service Reserve Account (DSRA) is often required.
• Management Quality: Because these are "business-first" real estate assets, lenders often require the property to be managed by a recognized national brand or a highly experienced third-party management firm.
• Loan-to-Value (LTV) Ratios: Due to the higher risk profile compared to multi-family or office space, LTVs for resorts typically range between 55% and 65%.
• Debt Service Coverage Ratio (DSCR): Lenders generally look for a DSCR of 1.35x to 1.50x or higher to account for fluctuations in leisure travel demand.
• FF&E Reserves: Mortgages for resort properties strictly mandate a Furniture, Fixtures, and Equipment (FF&E) reserve, usually 4% to 5% of gross revenue, to ensure the property remains competitive.

Market Positioning and Risk

While Full Service - Resort Hotels offer the potential for significant appreciation and high cash flow, they are susceptible to discretionary spending shifts. In a commercial mortgage context, these properties are often financed through CMBS (Conduit) loans, bridge loans for repositioning, or specialized hospitality divisions of large commercial banks. The strength of the "barrier to entry" in the specific resort market is a primary factor in securing favorable interest rates and terms.