Tariffs quietly reshaping lending dynamics

NATIONAL REPORT – In early April, the Trump Administration announced a wide-ranging tariff package that included a 10% blanket tax on all imports, as well as rates as high as 34% for China and the EU. On April 9, the Administration declared a 90-day “pause” on the implementation on many of the tariffs, but that hasn’t stopped lenders, developers, and capital markets participants from adjusting their posture. Trade policy volatility is already influencing hotel financing – from construction costs to underwriting terms.

The good news for borrowers is that this isn’t 2020. Capital remains available, and many deals are still being pushed through. But the macro backdrop of rising interest rate volatility, global trade uncertainty, and pricing pressures has led to a market that’s recalibrating in real time.

Cautious construction lending

Construction costs began to stabilize in late 2024, but the tariff announcement reintroduced pricing uncertainty, particularly around imported materials. While we haven’t seen dramatic spikes yet, lenders are proactively adjusting how they size and assess development deals.

Attractive deals with experienced sponsors, strong contractor relationships, and defined capital stacks are still getting traction.

Ryan Bosch

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So far, there has been more emphasis on contingency reserves in construction budgets, greater scrutiny of cost assumptions and GMP timing, as well as selective tightening of leverage for projects with longer timelines or thinner basis.

Lenders are still quoting construction debt, but they want to see a clear path to budget control and certainty of execution. Attractive deals with experienced sponsors, strong contractor relationships, and defined capital stacks are still getting traction.

Navigating underwriting volatility

While underwriting hasn’t tightened across the board, it has become more nuanced. The biggest challenge right now isn’t credit risk, it’s interest rate volatility and difficulty sizing deals amid fluctuating treasuries and soft forward guidance.

Across the industry, there’s more frequent repricing of debt terms tied to yield curve movements, increased use of stress testing on rate caps and SOFR-based floating debt, and tighter assumptions around NOI timing and ramp-up curves, especially for repositionings.

There is also an emerging trend worth noting: Some underwriters are assuming flat RevPAR over the next 12–24 months, even for stabilized assets. At the same time, they’re baking in continued inflationary pressure on labor and operating costs. That combination of static top-line performance paired with rising expenses results in compressed margins and reduced underwritable NOI, even if occupancy and ADR hold steady.

To be clear, this isn’t a pullback; it’s a shift toward more measured, risk-adjusted sizing. Lenders remain active and they expect borrowers to show discipline in assumptions and structuring.

Conditions for bridge loans, refis

Transitional assets and refinancing situations also remain active, but timing and structure matter more than ever.

Some underwriters are assuming flat RevPAR over the next 12–24 months, even for stabilized assets. At the same time, they’re baking in continued inflationary pressure on labor and operating costs.

Ryan Bosch

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Bridge lenders are looking closely at exit strategies and track records. For example, they may ask potential borrowers if a deal could be refinanced into permanent debt within 18-24 months if the rate environment holds steady. They want to be sure borrowers have experience navigating uncertain markets. They are partial to deals that have enough interest reserve and/or equity to ride out slower-than-expected NOI growth.

To that end, we’ve seen an uptick in blended capital stacks with preferred equity or mezzanine to reduce leverage at the senior level, as well as recourse or partial recourse structures on smaller or more transitional assets.

Again, deals are happening, but they’re more likely to close when the borrower has a clear story and conservative execution plan. Now is not the time for a risky prospect.

Location-specific impact

While the tariffs are national in scope, their impact on the hotel lending market varies by location.

Urban hotels with heavy international or group demand face more underwriting questions given soft government and corporate travel trends. Markets dependent on imported goods or labor (West Coast, border states) may see tighter capital availability on development deals. Drive-to leisure and extended-stay assets remain in favor with lenders due to their resilient demand profiles.

Deals are happening, but they’re more likely to close when the borrower has a clear story and conservative execution plan. Now is not the time for a risky prospect.

Ryan Bosch

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All that said, the story that wins in today’s environment is ultimately the one backed by local market knowledge and realistic demand assumptions.

Positioning for success

A volatile market can be particularly challenging, but there are ways that borrowers can position their deals for success. Here are four things that make a deal is attractive to lenders.

1. Refresh your numbers. It’s hard to stay on top of rapid changes, but make sure development budgets and NOI projections reflect today’s cost and rate realities.

2. Be transparent with your capital partners. Lenders appreciate sponsors who lead with clarity, not optimism. Don’t hesitate to point out potential challenges – they will appreciate that you’re considering all possibilities.

3. Build flexibility into your structure. Rate caps, hybrid debt, or preferred equity can help bridge gaps in the capital stack.

4. Lean into your local narrative. The more specific you are about your market, your comp set, and your demand drivers, the more underwritable your deal becomes. This is true in any market, with any project.

Final thoughts

While the tariffs may be paused, the market is already adapting. If you’re navigating financing in this environment, the key is to stay nimble, stay honest, and stay informed. The deals getting done today aren’t the easiest – they’re the best-prepared.

Contributed by Ryan Bosch, principal, Arriba Capital, Scottsdale, Arizona

The views and opinions expressed in this content do not necessarily reflect the opinions of Hotel Investment Today by Northstar or Northstar Travel Group and its affiliated companies.