Long Beach’s hospitality sector is thriving, with the Visitor’s Bureau heralding 2016 as “the best year ever” for tourism. It is a hot spot for events, conferences, festivals, and business travel, and there is room for significant growth.
For small business owners searching for opportunities in Southern California, the SBA 504 loan program offers favorable terms for financing a hotel purchase and taking advantage of this booming hospitality industry.
Millions of Travelers Are Flocking to Long Beach
If you visited Long Beach last year, you’d have been one of at least 6.8 million people partaking in the city’s attractions. Hotels in Long Beach had a 77.5% occupancy rate in 2016, compared to the 65% national occupancy rate. Even the average daily room rate (ADR) has risen 7.5% over the last year, but it doesn’t seem to be deterring visitors.
In fact, 2017 is shaping up to be even better for the hospitality industry, with hotel occupancy in Long Beach already reaching 80.7% by midyear. There are over 350 conventions and meetings scheduled at the newly revamped Long Beach Convention Center, and Carnival Cruise Line is planning on expanding its presence in the city, which is expected to greatly benefit the portside hospitality sector.
CBRE Hotel managing director Bruce Baltin told The Long Beach Business Review that “conventional wisdom is that, with occupancy at 70%, there is room for additional supply. Long Beach is well in that range.” New hotels are quickly moving in to meet this need, particularly at the high end of the price range: A 25-story 4-star hotel is being built in downtown Long Beach, while Staybridge Suites is putting in 125 units at the Long Beach Airport.
How to Make The Most of This Hot Hospitality Market
In order to take advantage of the Long Beach boom, business owners will have to act fast and purchase property in this competitive hospitality arena. For hoteliers who already own a building in the Long Beach area, it’s critical to stay competitive. Owners can implement property improvements, modernize aging amenities, and expand into multiple locations. A 504 loan from the Small Business Administration (SBA) will help you do just that, with as little as 15% down.
504 loans have a 10- or 20-year maturity and are fully amortized (meaning there is no balloon payment at the end). They can be used for the construction or purchase of an existing hotel, as well as for upgrades to existing facilities and equipment. This means you can buy new property in Long Beach or improve the hotel you already own in order to stay competitive. One great way to do this is to take advantage of the Green Energy Program offered by the SBA.
The Green Energy Program Increases Capital and Customers
Hotels are intensive energy users, which means that they can often be made more energy efficient. As a hotel owner, you can take advantage of the SBA’s Green Energy Program to receive increased financing with a 504 loan. In order to support ambitious projects, the SBA Green Energy Program brings two significant benefits:
1) Participants receive additional loan proceeds, up to $5.5 million total per loan
2) Most importantly, borrowers who have reached their traditional SBA 504 borrowing limit can exceed that limit and continue to do multiple projects through the green program
There are a number of ways you can qualify for the Green Energy Program. One is by buying or constructing a facility that consumes 10% less energy than your current location. For example, consider how much air conditioning a business might use during unoccupied hours in Long Beach: Are there ways to cut back? You could also buy or build a facility that produces 10% of the energy it consumes using solar and wind power systems. Since Southern California gets more sun than any other area of the United States, it’s the perfect place to invest in solar energy.
If you’re ready to start making the most of the growing hospitality sector in Long Beach, a good first step would be to prequalify for a 504 loan. Prequalifying for the 504 gives you a good idea of your potential financing options, gives you an advantage in purchase negotiations, and speeds up the closing process. Your local Certified Development Company (CDC) will help you get prequalified.
TMC Financing is the nation’s top CDC for hotel loans, and serves all of California and Nevada, including Long Beach. Our experts can answer any questions you might have about obtaining a 504 loan or other options open to you. Talk to one of our local 504 loan experts today to find out more.