Securing financing in today’s capital markets is one of hotel owners and developers’ greatest hurdles. Post-pandemic optimism has collided with a far more complex economic landscape defined by stubbornly high interest rates, cautious lenders and evolving risk appetites. While banks and CMBS lenders once anchored most hotel capital stacks, private credit has stepped into a central role, becoming not only an alternative but often the primary solution in today’s environment.
The rise of private credit
Private credit has significantly increased its footprint in hospitality financing over the past few years, fueled by market dislocation and structural shifts in lending behavior. A major catalyst was the wave of regional bank failures, which triggered a pronounced pullback in bank lending. Even before that, traditional lenders were becoming more selective, largely avoiding hospitality deals that didn’t involve top-tier clients.
Hotel assets have long been viewed as higher risk due to operating volatility, seasonal cash flows and the potential for rapid changes in performance. That caution has only intensified. Meanwhile, CMBS lenders have raised their debt yield thresholds, disqualifying many hospitality opportunities. The result is a massive liquidity gap that private credit is decisively filling.
The reality of getting deals done today
Traditional lending has picked up modestly but remains limited and highly relationship driven. Getting a deal done is still incredibly difficult if you don’t have a deep, pre-existing relationship with a bank. Lenders favor repeat borrowers, low leverage and prime locations. Most banks prioritize capital preservation over new origination volume, leaving a large swath of the market underserved.
This is an environment where private credit thrives. These lenders, often backed by private equity platforms or specialty finance firms, can offer tailored, flexible and fast capital solutions. They’re better able to price to risk, structure to fit each unique deal and close with speed and certainty. Private credit works particularly well in transitional situations—assets coming out of renovation, new construction projects, recapitalizations or any deal that doesn’t neatly fit into the traditional lending “box.”
The future of private credit
Looking ahead, macroeconomic conditions will continue to shape the credit landscape. If we enter a recessionary environment or see further policy uncertainty, expect traditional lending to tighten further, pushing more deal flow into the private credit channel. At the same time, innovation in private credit is accelerating. Structures like CPACE (commercial property assessed clean energy) financing, creative preferred equity solutions and other blended capital strategies are becoming more mainstream, especially in construction and heavy repositioning projects.
Private credit shines in deals that are too complex or nuanced for traditional channels. Whether it’s a transitional hotel, a sponsor without a big bank relationship or a business plan that requires customized structuring, private credit is not just a fallback. It’s a strategic, purpose-built solution that reflects how hospitality capital markets evolve.
Peachtree Group
Peachtree Group is a direct balance sheet lender focused on funding first mortgage bridge loans, mezzanine loans, preferred equity investments and commercial property assessed clean energy (CPACE) financing. Jared Schlosser is responsible for Peachtree’s hotel originations platform and its CPACE program.
Provided by Jared Schlosser, EVP Hotel and CPACE, Peachtree Group
