How to Finance a Spark by Hilton Franchise: Conversion Costs
By Chris Cornella
A Spark by Hilton franchise loan is almost always a conversion loan. Spark is the premium economy brand in the Hilton family, and its 2026 Franchise Disclosure Document (FDD) says the franchisor currently offers Spark franchises for hotel conversion projects only, not new construction. That means the financing usually pairs the purchase or refinance of an existing hotel with a renovation budget set by the brand’s property improvement plan (PIP).
This article covers the 2026 FDD’s fees and investment estimate, the ongoing fees lenders build into cash flow, the SBA Franchise Directory note on management agreements and how owners combine acquisition, renovation and working capital financing.
US Professional Funding is not affiliated with, sponsored by or endorsed by Spark by Hilton; the name is used only to describe the business. Figures from the franchisor’s disclosure document can change, loan programs and terms vary by lender and borrower, and every loan is subject to approval. Nothing here is legal, tax or investment advice; review the current FDD and franchise agreement with a franchise attorney, accountant and hotel consultant.
Spark by Hilton Franchise Loan at a Glance
- Franchise application fee: $75,000 for a conversion, change of ownership or re-licensing, according to the 2026 FDD issued March 30, 2026.
- PIP fee: $10,000, paid before the franchisor prepares the property improvement plan.
- Royalty: 5.5% of Gross Rooms Revenue.
- Program fee: 3.5% of Gross Rooms Revenue, which the franchisor may change.
- Estimated initial investment: $3,251,531 to $5,906,193 for a 100-room hotel, excluding real property, including up to $203,800 paid to the franchisor or its affiliates.
- Project type: conversions of existing hotels only; new construction, major remodeling and adaptive reuse are not offered.
- Brand size: Hilton reported that Spark passed 100 open hotels in February 2025 with a pipeline of more than 230, and its current brand boilerplate cites more than 290 open locations.
- SBA Franchise Directory: listed as Spark by Hilton (code S7770), with a note on third-party management agreements.
What Is Spark by Hilton?
Hilton announced Spark on January 11, 2023, as a premium economy brand built around what it called an innovative conversion model. The brand promises a simple, reliable stay at an accessible price: a complimentary breakfast with a signature bagel bar, 24-hour digital check-in and Digital Key, a 24-hour retail market and rooms with streamlined furniture, an open closet, an in-room refrigerator and a multi-purpose work surface. At launch, Hilton reported more than 100 deals in various stages of development across the U.S.
The franchisor is Hilton Franchise Holding LLC, a Delaware limited liability company that became the franchisor of Spark hotels in the U.S. on November 11, 2022. The FDD places Spark hotels in the midscale segment, competing with national hotel and motel chains and independent hotels for business travelers, families, vacationers and groups.
Why the conversion model matters to lenders. A Spark by Hilton franchise loan starts with a building that already exists and usually has an operating history under another flag or as an independent property, which gives a lender real occupancy and revenue data. The risk shifts to the renovation: whether the PIP budget is realistic, whether the property can stay open during the work and how quickly revenue recovers after the hotel reopens under the new flag.
Spark by Hilton Franchise Costs
Franchise application fee. The 2026 FDD sets the application fee at $75,000 for a conversion, a change of ownership or a re-licensing. If an application is withdrawn or denied before approval, the fee is refunded less a $7,500 processing fee. The FDD also notes that in 2025, franchisees paid conversion application fees ranging from $0 to $75,000, so the fee actually paid can vary by deal.
PIP fee and renovation. A $10,000 PIP fee is due before the franchisor prepares the property improvement plan. The plan itself drives the largest cost in a Spark deal. The Item 7 table, which is based on a 100-guest-room conversion, estimates construction, renovation and leasehold improvements at $1,300,000 to $2,800,000 and designer and engineering fees at $52,000 to $112,000.
Technology and opening costs. Item 5 lists the OnQ property management system hardware, software and installation at $33,500 to $87,800, training at $5,000 to $15,000, an opening process services fee of $6,000 and a renovation work extension fee of $10,000 if more time is needed.
Furniture, fixtures and equipment. Guest room furniture, bedding, televisions, lobby and breakfast furnishings, the retail market and back-of-house equipment are separate Item 7 lines and a major part of the budget.
Total investment. The 2026 FDD cover page estimates the total investment for a 100-room Spark by Hilton hotel, excluding real property, at $3,251,531 to $5,906,193, including up to $203,800 paid to the franchisor or its affiliates. The verified Item 7 lines include:
- Franchise application fee: $75,000
- Property improvement plan fee: $10,000
- Construction, renovation and leasehold improvements: $1,300,000 to $2,800,000
- Designer and engineering fees: $52,000 to $112,000
- Market study, environmental assessment and real property: varies
- Furniture, fixtures and equipment, technology, training, opening costs and additional funds: see the full Item 7 table
The acquisition price of the hotel is not part of this estimate. Your real total is the purchase price, or the existing debt you are refinancing, plus the conversion budget.
Ongoing Fees and How They Affect Your Loan
Royalty and program fee. Spark charges a monthly royalty of 5.5% of Gross Rooms Revenue and a monthly program fee of 3.5% of Gross Rooms Revenue, which the franchisor may change. Together they take 9% of room revenue before payroll, utilities or debt service.
Loyalty program. The Hilton Honors fee is 2% of the eligible guest folio, waived for stays where the guest enrolls on property.
Technology fees. The FDD lists monthly OnQ connectivity of $400 to $600, OnQ hardware and software maintenance of $1,042 to $2,335 and Connected Room maintenance of $455 to $720, along with email and other charges.
Quality assurance and renovation deadlines. Item 6 lists a brand non-compliance fee of $65 to $145 per approved guest room, capped at $50,000 per six-month period, and a past due renovation fee of $10,000 every six months. Missing the PIP deadline costs real money, so lenders want the renovation schedule to be realistic.
How lenders factor these fees in. Lenders deduct franchise fees, loyalty charges, technology costs and a reserve for future furniture and equipment replacement from projected revenue before testing debt service coverage. Stress tests usually assume lower occupancy or rate than the projection.
Franchisor Requirements for New Owners
The sections of the 2026 FDD we reviewed do not publish a minimum net worth or liquidity figure for Spark. Hilton evaluates each applicant and each property, including the owner’s financial strength, the condition and location of the building and the proposed management.
The approval process. An owner submits an application with the $75,000 fee, pays the $10,000 PIP fee and receives a property improvement plan after the franchisor’s inspection. Once approved, the owner signs the franchise agreement, completes the renovation to brand standards and opens under the Spark flag. Lenders generally want to see the PIP before issuing a final commitment.
Ways to Own a Spark by Hilton
Buy and convert. A typical path is acquiring an existing hotel and converting it. The loan covers the purchase price plus the PIP. Our overview of hotel and motel acquisition financing explains how these deals are structured.
Convert a hotel you already own. An owner of an independent or differently flagged hotel can apply to convert it. Financing often takes the form of a refinance that pays off existing debt and funds the renovation. See our options for hotel debt refinancing.
Buy an existing Spark. A buyer of an operating Spark hotel goes through the change of ownership process, which carries its own $75,000 application fee and usually a new PIP. Lenders underwrite the hotel’s operating history under the brand.
Financing Options for a Spark by Hilton Franchise
SBA 7(a) loans. An SBA 7(a) loan can combine the hotel purchase, PIP renovation, franchise fees, furniture and equipment and working capital in one loan for qualifying owner-operated hotels.
SBA 504 loans. Because a hotel is long-lived real estate, an SBA 504 loan is often a strong fit for the purchase and renovation of the building. A 504 structure pairs a first mortgage with a separate debenture portion and the borrower’s contribution, and it may need separate funds for soft costs and working capital.
Conventional term loans. Owners with hotel experience and solid equity may use a conventional business loan, especially for larger properties or portfolios that exceed SBA limits.
PIP and renovation financing. For a conversion, the PIP is often funded with the acquisition loan as a holdback released in draws as work is completed. Our article on hotel PIP financing explains how lenders handle renovation budgets.
FF&E financing. Guest room furniture, televisions, breakfast and retail market equipment, laundry machines and technology can sometimes be financed separately to preserve cash.
Working capital and lines of credit. Conversions can reduce available rooms during renovation, and a hotel may need time to build demand under the new flag. A reserve or line of credit helps cover payroll, utilities and fees during that period. See hotel working capital options.
Seller financing. Some sellers carry part of the purchase price. A seller note is typically subordinate to the senior lender, and SBA and conventional programs may limit how it can be used.
SBA Loans for Spark by Hilton Franchisees
SBA lending for franchises relies on the SBA Franchise Directory, which lists brands whose franchise agreements have been reviewed for SBA eligibility. SBA lenders generally require a brand to be listed before making an SBA-guaranteed loan to one of its franchisees. Our article on SBA loans for hotels compares 7(a) and 504 for lodging deals.
Spark’s directory listing. Spark by Hilton is listed under code S7770 with this note: if the applicant also operates under a management agreement with a third party, the lender or CDC must review that agreement under SBA rules to determine whether the applicant and the management company are affiliated, and the applicant is not eligible if the management company is, or is affiliated with, the franchisor.
What the note means in plain English. Many hotel owners hire an outside management company. That is allowed, but the SBA lender will read the management agreement closely to see whether the management company effectively controls the business. If the management company is the franchisor or one of its affiliates, the deal is not eligible for SBA financing. Owners who self-manage avoid that specific issue.
Loan size and tips. The SBA 7(a) program maximum is currently $5 million, though program rules can change. Larger conversion projects may be better suited to a 504 loan or a conventional structure. Bring the PIP, contractor bids, a market study, the hotel’s historical financials and the draft management agreement, if any, to your first conversation.
How Lenders Evaluate a Spark by Hilton Deal
Personal credit and financial history. Lenders review credit, tax returns and personal financial statements for significant owners.
Net worth and liquidity. Because the FDD does not set a published minimum, lenders set the bar. They look for enough cash to cover the equity injection, PIP contingencies and post-closing reserves.
Hotel experience. Prior hotel ownership or management experience strengthens a request. First-time owners often pair with an experienced management company, which brings the SBA directory note into play. Read our article on first-time hotel buyers for how lenders view experience.
Business plan and projections. Projections should start from the hotel’s actual performance, model the renovation period, include the 5.5% royalty, 3.5% program fee and loyalty costs, and show a realistic ramp after conversion. The 2026 FDD sections we reviewed did not let us confirm what Item 19 includes, so review it directly and do not rely on brand-wide averages.
The FDD and franchise agreement. Lenders review the term, liquidated damages and transfer conditions. The FDD’s liquidated damages for termination before opening are $10,000 multiplied by the number of approved guest rooms, and terminations after opening carry larger formula-based amounts, so the franchise agreement itself is a significant obligation.
Property condition and appraisal. An appraisal, property condition report and environmental review are standard. Lenders compare the PIP scope with the property condition report to make sure nothing major is missing.
Historical financials. Expect to provide several years of profit and loss statements, competitive set reports if available and tax returns.
The PIP: Spark’s Most Important Cost
For a Spark conversion, the PIP defines the project. It typically covers exterior updates and signage, lobby and breakfast area changes, the retail market, guest room furniture and finishes, bathroom work and technology. The FDD’s $1,300,000 to $2,800,000 estimate for construction and renovation on a 100-room conversion shows how wide the range can be.
Plan for contingencies. Older buildings can reveal plumbing, mechanical or roofing problems once work starts, so lenders like a contingency line and an experienced conversion contractor.
Multi-Unit Growth
Spark’s conversion model suits owners who want to reposition several older hotels, each with its own Spark by Hilton franchise loan. Each property gets its own application and PIP, and lenders look at the owner’s combined portfolio when sizing a new deal. Our article on buying a second hotel explains how lenders view growing owners. Keep SBA exposure limits in mind when planning several SBA-financed hotels.
Real-World Scenarios
A first-time owner converting an independent motel. A buyer acquires an independent exterior-corridor property, receives a PIP and uses an SBA 7(a) loan to fund the purchase, the renovation holdback and working capital. An independent management company with a standard agreement runs the property, and the lender reviews that agreement under the directory note.
An owner reflagging an older hotel. An owner whose previous franchise is expiring converts to Spark. A refinance pays off the existing loan and funds the PIP in draws, and a working capital reserve covers the months when rooms are offline.
A portfolio owner adding a third Spark. An owner with two converted hotels buys a third. The lender underwrites combined performance and uses a conventional loan because SBA exposure is near its limit.
Common Mistakes to Avoid
- Pricing the deal before seeing the PIP
- Underestimating renovation contingencies in an older building
- Ignoring the 9% combined royalty and program fee when projecting cash flow
- Assuming any management company is acceptable for an SBA loan
- Leaving too little working capital for the renovation and ramp period
- Overlooking liquidated damages and the renovation deadline fees
For more pitfalls, read the hotel loan mistakes that cost owners the most.
Next Steps to Finance Your Spark by Hilton Franchise
Step 1: Identify a conversion candidate. Find a hotel whose location, condition and size fit the brand.
Step 2: Review the FDD. Study the 2026 FDD and franchise agreement with a franchise attorney and accountant.
Step 3: Apply and get the PIP. Submit the application and PIP fee and obtain the property improvement plan.
Step 4: Talk with a financing specialist. Decide whether a Spark by Hilton franchise loan should use SBA 7(a), SBA 504 or conventional financing. The SBA loan calculator can help with early estimates for planning only.
Step 5: Build the budget. Combine the purchase or payoff amount, PIP bids, fees, FF&E and a working capital reserve.
Step 6: Apply and close. Submit historical financials, projections, the PIP and any management agreement, then close and start renovation.
Spark by Hilton Franchise Loan FAQs
How much does a Spark by Hilton franchise cost?
The 2026 FDD estimates $3,251,531 to $5,906,193 for a 100-room hotel, excluding real property. The cost of acquiring the hotel is on top of that.
What is the Spark by Hilton franchise fee?
The application fee is $75,000 for a conversion, change of ownership or re-licensing, plus a $10,000 PIP fee. The FDD notes that 2025 conversion application fees ranged from $0 to $75,000.
What royalty does Spark by Hilton charge?
The royalty is 5.5% of Gross Rooms Revenue, plus a program fee of 3.5% of Gross Rooms Revenue.
Can I build a new Spark by Hilton hotel?
Not under the current offering. The 2026 FDD says Spark franchises are offered for conversion projects only.
How much net worth or liquidity do I need?
The FDD sections we reviewed do not publish a fixed minimum. Lenders will expect enough liquidity for the equity injection, renovation contingencies and reserves.
Can I get an SBA loan for a Spark by Hilton?
Yes, if you qualify. The brand is on the SBA Franchise Directory under code S7770, with a note requiring review of any third-party management agreement.
Can I use a management company with an SBA loan?
Yes, but the lender must review the management agreement for affiliation, and the loan is not eligible if the management company is, or is affiliated with, the franchisor.
Can I finance the PIP?
Yes. PIP costs are commonly included in acquisition or refinance loans and released in draws as work is completed.
Can a first-time hotel owner get a Spark by Hilton franchise loan?
It is possible with franchisor approval, adequate liquidity and strong management, often an experienced management company.
Does Hilton offer financing for Spark?
Review Item 10 of the current FDD for any franchisor financing. Owners generally arrange their own acquisition and renovation financing.
Can I buy an existing Spark hotel?
Yes, through the change of ownership process, which requires a $75,000 application fee and usually a new PIP.
Final Thoughts
Spark by Hilton lets owners bring an existing hotel into a large brand family through conversion. The financing turns on the PIP budget, the renovation timeline and the management structure.
US Professional Funding helps hotel owners and buyers finance acquisitions, conversions, renovations and working capital for established brands. Learn more about our franchise financing and hotel and motel financing solutions.
