Avana CEO: private credit ‘powerful force’ reshaping hospitality
Private credit is emerging as a “powerful force reshaping the hospitality industry” as hoteliers seek out more financing options, according to the chief executive of private credit firm Avana Companies.
“Partnerships between private lenders and institutional investors are driving significant growth in the hospitality sector, fuelling new development and renovations,” said Sundip Patel.
The joint venture between Oaktree Capital Management and Avana Capital is one example. Launched in 2024, the partnership was formed to deploy $250m (£188.7m) in private credit to small and medium-sized enterprises in the commercial real estate sector, including hospitality.
The venture combines Oaktree’s institutional capital with Avana’s origination and servicing capabilities, to support hotel developers and owners.
“Collaborations like the Avana-Oaktree private credit partnership open new avenues for hotel developers and owners in the challenging funding environment, while also creating more flexible and accessible financing options for the industry,” said Patel.
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In Ohio, Avana’s and Oaktree Capital Management’s partnership closed a $12.5m deal for a Hilton hotel, boosting the state’s economic growth and creating jobs.
The same collaboration finalized another $12.5m Hilton hotel deal in Georgia, supporting local communities through hospitality development.
“These examples demonstrate the tangible impact of private credit partnerships on regional economic landscapes,” Patel said.
The chief executive also pointed to his firm’s recent partnership with IHG Hotels & Resorts. The two entities have launched a $250m co-lending program aimed at providing a “borrower-friendly alternative to standard financing” for new construction in the US.
Aims of the initiative are to reduce development timelines and support IHG’s substantial US pipeline of nearly 950 hotels. The program allows lending up to 75 per cent of a project’s total cost, compared to the typical 60-65 per cent cap from banks.
“This higher leverage particularly benefits developers, requiring less equity investment in construction, freeing-up the much-desired equity capital for contingencies as well as key last-mile requirements like furniture, fixtures and equipment, marketing, and other expenses,” said Patel.
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According to the Avana chief executive, one of the most significant impacts of this shift towards private credit is the expanded access it provides to small business owners.
“The broader hospitality ecosystem benefits from this trend. Increased diversity in hotel ownership drives innovation and brings fresh perspectives to the industry,” Patel said.
“New entrants to the market, empowered by access to private credit, may introduce novel concepts and operational strategies,” he added.
Looking ahead, Patel said he expected the private credit market in hospitality projects to foster increasing growth.
“While challenges remain, such as navigating economic uncertainties and regulatory environments, the industry is actively addressing these issues. For investors, opportunities in the coming years may lie in identifying promising hotel projects,” he said.
