Preserving Ownership in a High-Interest Environment: The Rise of Revenue-Based Financing for Hospitality Projects

Revenue-based financing has seen accelerated adoption in the hospitality sector —especially among small to midsize operators and asset-light boutique brands— during the post-pandemic recovery period.

In our current era of rising global interest rates and heightened investor scrutiny, securing capital while maintaining ownership is an urgent priority for hospitality businesses. Traditional debt and equity financing frequently force businesses to choose between heavy interest burdens or relinquishing substantial equity stakes. This dilemma has fuelled interest in non-dilutive financing —solutions that enable companies to access growth capital while retaining full ownership and operational control.

Revenue-based financing (RBF) stands out as a compelling non-dilutive model. Especially amid volatile markets and unpredictable occupancy rates, RBF offers flexibility and alignment with revenue cycles, making it increasingly attractive to hospitality operators across the globe.

What Is Revenue-Based Financing?

Revenue-based financing is an innovative funding method where investors provide capital to a business in exchange for a fixed percentage of the business’s future gross revenues until a specified multiple of the original investment is repaid —typically between 1.3 to 2.5 times the initial funding.

Key features of revenue-based financing:

• Non-dilutive: No shares are sold; founders retain 100% equity and control.

• Performance-aligned repayments: Payments adjust in real time with revenue, offering relief during downturns and incentivizing long-term growth.

• No fixed interest rates: Unlike traditional loans, repayments are not tied to static interest charges or rigid amortization schedules.

• Duration: Most agreements aim for full repayment within 1 to 5 years, although the period can adjust with actual business performance.

RBF is distinct from traditional loans (which require fixed repayments) and equity financing (which involves permanent ownership dilution). Its flexible nature makes it especially well-suited to industries with fluctuating income streams such as hospitality, tourism, and travel.

Global Hospitality Rebounds, Funding Needs Accelerate

To understand the rise of revenue-based financing in the hospitality sector, we first have to look at the industry’s recovery and transformation during the post-pandemic era. COVID-19 brought the global travel and hospitality industry to a near standstill; international overnight arrivals fell by 73% in 2020, triggering an unprecedented pullback in hotel occupancy rates and revenue per available room (RevPAR).

However, between 2021 and 2024, the sector staged one of the most impressive rebounds in modern economic history. By 2024, the global travel and tourism sector contributed approximately $11.1 trillion to global GDP —roughly 10% of all economic output— according to data from the World Travel & Tourism Council (WTTC). This growth was powered by more than 1.1 billion international traveler arrivals, increased domestic tourism activity, and a surge in consumer demand for unique and upgraded travel experiences.

This recovery did not come without challenges as inflation and central bank rate hikes in key world economies led to higher borrowing costs, making traditional debt financing both more expensive and less accessible to mid-sized hospitality operators and developers. Meanwhile, equity investment —while still available— was often unsuitable for operators unwilling to give up long-term ownership in exchange for capital. These financial headwinds, coupled with increasing capital needs related to tech upgrades, sustainability compliance, and experiential renovations, set the stage for broader adoption of non-dilutive funding models like RBF.

Revenue-Based Financing Finds Its Place in Hospitality

The inherent characteristics of the hospitality industry make it well-suited for revenue-based financing. First, cash flow in hospitality is cyclical and seasonal; hotel occupancy, restaurant traffic, and tour bookings fluctuate throughout the year and tend to be closely tied to macroeconomic conditions. Revenue-based financing’s variable repayment nature works in favor of businesses with such revenue profiles, allowing borrowers to repay more during high-traffic months and automatically pay less in slow periods without incurring penalties or risking default.

Second, many hospitality businesses prioritize long-term creative vision, guest experience design, and operational autonomy—qualities that are diluted when investors assume partial ownership. By avoiding equity dilution, revenue-based financing enables founders, hoteliers, restaurateurs, and travel entrepreneurs to grow their footprint, invest in innovation, and scale their operations without losing control of their brand or direction.

Case Analysis: Hospitality Financing Deals with Revenue-Based Financing

Between 2021 and 2024, a growing number of hospitality firms began securing RBF deals to finance expansions, renovations, and re-openings as markets recovered.

• Château Soleil, Provence, France – In 2022, the 68‑key wine‑estate resort secured €5 million from a UK‑based funding group to fund a carbon‑neutral refurbishment. The note required a 6% revenue share until 1.7x payback. RevPAR lifted 22 % within 15 months, allowing management to finish repayment a year early while retaining 100 % equity.

• Mariner’s Haven Hotels, Pacific Northwest, USA – The family‑owned coastal brand tapped a US $10 million RBF facility in 2023 to open 3 waterfront properties. Repayments equalled 5 % of monthly rooms revenue capped at 1.8x —an implied 7.4 % cost of capital, cheaper than mezzanine debt.

• Adelaide Gardens Hotel, Queensland, Australia – Confronted with an 8.25 % refinancing quote, the independent 150‑room hotel chose a AUS $7 million RBF tranche in early‑2024 to finance conversion to Accor’s “Handwritten Collection.” A 4% take on total revenue (capped at 1.6×) avoided restrictive covenants and coincided with a 19% leap in direct‑booking volume.

These deals are increasingly facilitated by a combination of fintech lending platforms, private funds, and hospitality-focused financing firms. Across EMEA and APAC in particular, there's been a spike in RBF funding availability, often structured with location-specific clauses that account for regional demand cycles and currency exposure.

Challenges and Considerations of Revenue-Based Financing for Hospitality Projects

While revenue-based financing (RBF) offers flexibility and protects ownership, it comes with several important challenges hospitality operators must understand before proceeding.

1. Revenue Predictability - RBF works best for businesses with consistent and predictable revenue. Hospitality ventures with seasonal or fluctuating income may struggle, as irregular cash flow can prolong repayment or make funding terms less favorable.

2. Total Cost of Capital - Although RBF avoids fixed interest, it requires repaying a set multiple of the original investment —often 1.3x to 2.5x— which can result in a higher effective cost than traditional loans, particularly if revenues grow quickly.

3. Impact on Cash Flow - Since repayments rise with revenue, strong months may divert substantial cash to funders. Conversely, weak periods reduce payments but extend the repayment term, tying up resources long-term.

4. Funding Limits - RBF typically supports small to mid-sized projects. Larger hospitality developments may not qualify for sufficient capital and could require a hybrid funding approach with bank loans or equity.

5. Reporting and Transparency - Accurate, timely revenue reporting is essential. Multi-property operations especially must maintain reliable systems for tracking and disclosing revenue to satisfy investor oversight.

6. Limited Market Availability - RBF is still emerging in hospitality finance. Terms vary widely, and less experienced operators may face higher repayment multiples or struggle to secure agreements without a proven track record.

7. Investor Appetite - The lack of ownership dilution can be seen as a disadvantage for investors. Since they are not obtaining equity in the company, they do not have a direct say in decision-making processes and cannot benefit from a potential sale or exit of the business. This only incentivizes them to focus on the company’s revenue and profitability, potentially hindering long-term growth strategies.

Looking Ahead: A Permanent Shift?

While revenue-based financing may not replace every traditional method, its relevance and traction in the hospitality industry are poised to endure. As the structure becomes more familiar and competition among RBF providers increases, deal terms are becoming more favorable to borrowers, and innovation in repayment models—such as step-down multipliers and revenue caps—is making RBF applicable to an even wider range of businesses.

For hospitality operators navigating a complex financial future, non-dilutive financing can be more than a tactical funding solution and become part of a long-term capital strategy. As stakeholders emphasize sustainability, digitalization, and experiential transformation, the ability to fund innovation without selling core assets is a major advantage.

The past 4 years have marked a turning point in hospitality finance; the combination of a high-interest environment, rapid recovery in travel demand, and the strategic need to preserve ownership has turned revenue-based financing into a valuable tool for hotels, restaurants, and travel ventures worldwide. As global hospitality continues its upward trajectory, we believe we can expect to see RBF play a growing role in bridging the gap between ambition and access—fuelling the next generation of hospitality entrepreneurs without compromising the core of what makes their brands unique.

Capital Corp Merchant Banking brings decades of experience in international project financing, with a deep understanding of the hospitality and tourism sector’s unique cycles, capital requirements, and growth ambitions. Our longstanding global presence and proven track record managing socio-economic complexities enable us to deliver tailored solutions that anticipate market shifts and mitigate risks.

Now more than ever, as operators face rapidly evolving challenges and opportunities, partnering with a financial leader that combines global reach with hands-on commercial insight is the key to successful funding outcomes.

Ready to secure flexible capital for your project while retaining ownership? Trust Capital Corp Merchant Banking to help you navigate the current international landscape and lead your next hospitality deal to a successful close. Let’s work together to turn your vision into reality.