How to Finance a Destination by Hyatt Franchise: Resort Deals
By Marc Cornella
A Destination by Hyatt franchise loan usually finances a one-of-a-kind hotel or resort that keeps its own personality while joining a global reservation and loyalty system. That makes these deals different from a standard select-service project: many involve converting an existing independent property, funding a renovation to brand standards and planning for the seasonal swings of leisure destinations.
This article covers what Hyatt discloses about its franchise terms, the costs owners should plan for, how SBA and conventional financing may fit, what the brand’s SBA Franchise Directory notes mean and how lenders evaluate a Destination by Hyatt deal. US Professional Funding is not affiliated with, sponsored by or endorsed by Destination by Hyatt or Hyatt; the name is used only to describe the business. Figures from the franchisor’s disclosure document and company reports can change, loan programs vary, and every loan is subject to approval. Nothing here is legal, tax or investment advice.
Destination by Hyatt Franchise Loan at a Glance
- Franchisor: Hyatt, through its franchising entity, which places Destination by Hyatt in its Classics Portfolio
- Concept: a collection of independent, one-of-a-kind hotels and resorts, from upscale to luxury, shaped by the character of their surroundings
- Initial fees: Hyatt’s annual report says franchisees generally pay an initial application fee and/or a design services fee; brand amounts are in Item 5 of the Franchise Disclosure Document (FDD)
- Royalty: across Hyatt’s franchise agreements, typically 2.75% to 5% of gross rooms revenues, with some agreements structured differently, per the annual report
- Franchise term: typically 20 years, with franchisees typically having the option of a 10-year successor agreement
- Estimated initial investment and net worth requirements: not verified; see Item 7 of the FDD
- SBA Franchise Directory: listed as Destination by Hyatt under code S8537, with notes on the Hyatt comfort letter and management agreements
What Is Destination by Hyatt?
Destination by Hyatt was formerly known as Destination Hotels and was renamed in 2021 to reflect its global reach. In that announcement, Hyatt described the brand as a diverse collection of independent hotels, resorts and residences that are “individual at heart,” spanning upscale to luxury, in more than 50 locations. Hyatt’s annual report describes it today as a collection of one-of-a-kind hotels and resorts shaped by the distinctive character of their surroundings, where design, experiences and service reflect a deep sense of place.
In practice, the collection includes resorts, golf properties and boutique city hotels. Because each property is meant to feel individual, owners usually keep their hotel’s own name and story while gaining access to Hyatt’s distribution, loyalty program and sales support. Hyatt’s 2021 announcement named properties ranging from boutique hotels of under 150 rooms to resorts of more than 200 rooms.
Why the collection model matters to lenders. A collection brand adds Hyatt’s booking channels and loyalty members without forcing a standard prototype. Lenders view that as a potential lift to occupancy and rate, but they still underwrite the specific property, market and operator. Our article on branded vs. independent hotels explains how a flag affects valuation and financing.
Destination by Hyatt Franchise Costs
We could not access the current Destination by Hyatt FDD, so this article does not quote an investment range. Item 7 of the FDD provides the official estimate. Because most projects are conversions or acquisitions of distinctive properties, costs vary widely. Expect the budget to include:
- Application fee and/or design services fee (Item 5)
- Purchase price of the hotel or resort, or the value of a property you already own
- Renovation or property improvement work required to meet brand standards
- Furniture, fixtures and equipment for guest rooms, restaurants, spas and public spaces
- Technology, reservation and property management system integration
- Signage and brand identity work
- Pre-opening or transition costs, including training and marketing
- Working capital and reserves, especially for seasonal resorts
Amenity-heavy properties. Resorts in the collection may include golf courses, spas, pools, multiple restaurants, event lawns and residences. Each amenity adds capital needs and operating complexity, and lenders will want separate projections for major departments.
Conversion and renovation. Joining the collection usually requires bringing a property up to Hyatt’s standards. The scope depends on the hotel’s condition and positioning. Our article on hotel PIP financing explains how owners fund brand-required work.
Ongoing Fees and How They Affect Your Loan
Hyatt’s annual report says royalties are typically a percentage of gross rooms revenues ranging from 2.75% to 5%. In some cases, the fee is based on gross room revenues generated through Hyatt reservation and booking channels, typically 7%, and some agreements use 6% of gross room revenues plus 3% of gross food and beverage revenues. Franchisees also pay for services such as centralized reservations, digital and technology, digital media and national advertising. The brand-specific formula is in Item 6 of the FDD.
For a Destination by Hyatt franchise loan, the fee structure matters more than usual. A resort with large food, beverage, spa and golf revenue may be affected differently depending on whether fees apply to rooms only or to other departments. Lenders deduct franchise fees, management fees and a furniture and equipment reserve before calculating debt service coverage.
Franchisor Requirements for New Owners
Hyatt does not publish fixed net worth or liquidity minimums for Destination by Hyatt in the materials we reviewed. The annual report says Hyatt approves the plans for, and the location of, franchised hotels and reviews their operation to ensure standards are maintained. For a collection brand, expect Hyatt to evaluate whether the property is distinctive enough, its location and condition, the owner’s financial strength and the proposed management team.
Ways to Own a Destination by Hyatt
Converting an independent hotel or resort. This is the most natural path for a collection brand. The owner keeps the property’s identity and adds Hyatt’s systems. Lenders finance the renovation and sometimes refinance existing debt at the same time. See our article on conversion franchise financing.
Buying a property and joining the collection. An investor may acquire an independent resort with the plan to flag it. Lenders will want Hyatt’s approval, or at least clear progress toward it, before closing. Our page on hotel acquisition financing outlines purchase structures.
Buying an existing Destination by Hyatt. A resale requires Hyatt’s approval of the new owner and may trigger a property improvement plan.
New development. Ground-up projects are less typical for a collection brand but possible for distinctive resort concepts. See hotel start-up financing.
Financing Options for a Destination by Hyatt Franchise
SBA 7(a) loans. SBA 7(a) loans can cover property purchase, renovation, fees and working capital. The 7(a) program maximum is currently $5 million, and program rules can change. Smaller boutique properties may fit, while larger resorts usually need other structures.
SBA 504 loans. For owner-operated hotel real estate and renovations, SBA 504 loans pair a first-position loan with a certified development company loan and a borrower contribution, subject to program rules.
Conventional loans. Many resort transactions use conventional business loans, including acquisition, renovation and bridge loans that convert to permanent financing once the property stabilizes under the brand.
Refinancing. Owners converting a property they already own may refinance existing debt and fund renovations together. See hotel debt refinancing.
Equipment financing. Guest room furniture, kitchen equipment, spa and fitness equipment, golf carts and technology can sometimes be financed separately, though the primary lender will count that debt.
Working capital. Seasonal resorts need cash to carry payroll and fixed costs through slower months. A line of credit can help. See hotel working capital.
Seller financing. On an acquisition, a seller may carry part of the price. Seller notes are typically subordinate to the primary loan, and SBA rules may limit them.
SBA Loans for Destination by Hyatt Franchisees
SBA-backed loans are made by participating lenders with an SBA guarantee on part of the loan. The SBA Franchise Directory helps lenders confirm that a franchise relationship is eligible.
The listing. Destination by Hyatt appears on the SBA Franchise Directory under code S8537. A listing does not approve any borrower or guarantee a loan.
Note one: the comfort letter. The directory says the Hyatt Comfort Letter has been approved by the SBA. A comfort letter is an agreement between the franchisor and the lender that typically covers notice of defaults and the lender’s ability to keep the hotel operating under the brand if problems arise. Because the SBA has approved Hyatt’s form, lenders can use it without a separate review.
Note two: management agreements. If the applicant also operates under a management agreement with a third party, the lender or certified development company must review that agreement under SOP 50 10 to determine whether the applicant and the manager are affiliated. The applicant is not eligible if the management company is, or is affiliated with, the franchisor, and the SBA has not reviewed any Hyatt management documents. Many resorts use professional managers, so this note matters. An independent management company may work, but a property managed by Hyatt itself would not qualify for SBA financing.
Our SBA loan calculator can help with early planning estimates.
How Lenders Evaluate a Destination by Hyatt Deal
Personal credit and financial history. Lenders review each principal’s credit, tax returns and other real estate holdings, and significant owners usually sign guarantees.
Net worth and liquidity. Expect lenders to require meaningful equity plus reserves sized for seasonal cash flow and renovation contingencies.
Hospitality experience. Experience running resorts, food and beverage outlets, spas or golf operations carries weight. Many owners rely on an experienced third-party manager.
Feasibility and projections. Projections should cover occupancy, rate, revenue per available room, each major department, franchise and management fees, seasonality and the expected impact of joining Hyatt’s system.
The FDD and franchise agreement. Lenders review the term, successor rights, fee formulas, transfer rules, Item 10 franchisor financing and termination provisions.
Real estate. Expect an appraisal, environmental review and property condition assessment. Resorts may also involve shoreline, land use or residential components that require extra review.
Multi-Property Growth
Owners with one Destination by Hyatt property may add others, often through conversions. Lenders look at the first property’s performance, global cash flow and remaining liquidity. Because SBA limits apply across a borrower’s SBA loans, larger portfolios generally move to conventional financing.
Real-World Scenarios
A family-owned resort. A family that has run an independent coastal resort for years applies to join the collection. A conventional loan refinances existing debt and funds the renovation, while a line of credit supports the off-season.
A boutique hotel investor. An investor buys a small historic hotel and converts it. Because the project fits within program limits, an SBA 504 loan finances the real estate and renovation, and the investor hires an independent manager.
An experienced hotel group. A group acquires a golf resort and flags it. The deal exceeds SBA limits, so it uses a conventional acquisition loan with a renovation holdback.
Common Mistakes to Avoid
- Underestimating renovation costs needed to meet brand standards
- Assuming SBA financing works when the property is managed by the franchisor
- Ignoring how fees apply to food, beverage and other departments
- Holding too little working capital for seasonal markets
- Closing on a purchase before brand approval is clear
For more, read the hotel loan mistakes that cost owners the most.
Next Steps to Finance Your Destination by Hyatt Franchise
Step 1: Request the current FDD. Review Items 5, 6, 7, 10, 17 and 19 with a franchise attorney.
Step 2: Assess your property. Identify what makes it distinctive and what renovations may be required.
Step 3: Commission a market study. Show how joining the collection may affect performance.
Step 4: Choose your management approach. Keep the SBA management note in mind.
Step 5: Talk with a financing specialist. Compare SBA, conventional and refinance options.
Step 6: Coordinate approvals. Align Hyatt’s approval with your loan approval and closing timeline.
Destination by Hyatt Franchise Loan FAQs
How much does it cost to join Destination by Hyatt?
The estimate is in Item 7 of the current FDD, which we could not verify. Costs depend mainly on the property’s price and the renovation required.
What is the Destination by Hyatt franchise fee?
Hyatt’s annual report says franchisees generally pay an initial application fee and/or a design services fee. Item 5 lists the amounts.
What royalty does Destination by Hyatt charge?
Across Hyatt’s franchise agreements, royalties are typically 2.75% to 5% of gross rooms revenues, with some agreements structured differently. Check Item 6.
Can I keep my hotel’s name?
The collection is built around individual properties with their own identity. Confirm naming terms with Hyatt.
Can I get an SBA-backed Destination by Hyatt franchise loan?
Possibly. The brand is listed under code S8537, and Hyatt’s comfort letter is SBA-approved. A property managed by Hyatt or an affiliate would not be eligible.
Does Hyatt offer financing?
Item 10 of the FDD discloses any franchisor financing. Most owners arrange their own loans.
How long is the franchise agreement?
Hyatt’s annual report says the standard term is typically 20 years, with franchisees typically having the option of a 10-year successor agreement.
Final Thoughts
A Destination by Hyatt franchise loan typically funds a distinctive property’s conversion, renovation or acquisition. Owners who budget carefully, understand the fee structure, pick a management setup that fits the SBA note and plan for seasonality give lenders the confidence they need.
US Professional Funding helps hotel owners finance acquisitions, conversions, renovations and working capital. Learn more about our franchise financing and hotel and motel financing.
