Article Originally Published in HotelBusiness.com

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Hotel owners are facing one of the most demanding operating environments in decades. Interest rates remain high, property valuations are resetting and the costs of running a hotel—particularly energy—continue to rise. Meanwhile, guests have elevated expectations, lenders are more selective and the pressure to maintain profitability in an uncertain market has never been more significant.

In this climate, hotel owners can no longer afford to delay strategic upgrades that make their properties more efficient, resilient and competitive. Sustainable innovation is no longer nice to have; it’s quickly becoming essential for long-term success. Fortunately, hotel owners now have a powerful tool to help them implement these upgrades without draining their reserves or disrupting cash flow: CPACE financing.

Energy is among the most volatile and burdensome line items in a hotel’s operating budget. The rising cost of utilities—from climate control to lighting to laundry—cuts directly into margins. According to recent projections, U.S. natural gas prices alone are expected to increase by nearly 50% in the coming year. These rising costs can add up fast for hotels, especially older properties.

However, energy costs are also one of the most addressable threats. Owners who invest in energy-efficient systems, solar panels, HVAC upgrades or water conservation measures can significantly reduce operating expenses. More importantly, they gain more control over those expenses, becoming less reliant on grid pricing and utility volatility.

This is where CPACE (Commercial Property Assessed Clean Energy) financing comes into play. CPACE enables hotel owners to access long-term fixed-rate financing for eligible improvements like energy efficiency, renewable energy and resiliency upgrades. Unlike traditional loans, CPACE is repaid through a special property tax assessment over a period that can extend up to 30 years. That means no upfront capital outlay, non-recourse financing and the potential to pass along costs to future owners if the asset is sold.

By using CPACE, hotel owners can make the upgrades they need today without disrupting operations or tying up cash reserves.

These improvements do more than reduce costs. Properties that are upgraded with efficiency and resiliency in mind tend to command stronger interest from guests, brand partners and investors. As consumers become more conscious of sustainability and more sensitive to comfort and reliability, hotels that can market lower carbon footprints, modernized systems and energy independence stand out in a crowded market.

There’s also growing evidence that sustainability enhances asset value. Properties that have made these upgrades are often better positioned for refinancing or disposition. Buyers are looking closely at operating expenses and capital needs. A hotel with a new roof, efficient systems and solar capabilities is far more attractive than one that faces deferred maintenance and high utility bills.

Sustainable innovation also offers protection against increasingly frequent and severe weather events. Hurricanes, heatwaves, floods and freezes can cause major disruption. Hotels that integrate battery storage, microgrids and storm-resistant features can maintain operations, reduce damage and serve as safe havens in times of crisis. That kind of resilience doesn’t just protect the bottom line—it enhances a hotel’s reputation and guest loyalty.

Hotel owners don’t have to tackle everything at once. The key is starting with the most impactful and cost-effective improvements. CPACE makes that possible. It’s an accessible scalable financing solution that aligns with the long-term nature of hotel ownership and investment.

In a tightening market where margins are under pressure and capital is harder to come by, CPACE offers hotel owners a path forward. It provides a way to modernize properties, cut expenses, increase competitiveness and build resilience—all without adding traditional debt to the balance sheet.

Today’s environment demands more from hotel owners. With sustainable innovation and the strategic use of CPACE financing, those demands can become an opportunity—not just to survive but to grow stronger and more competitive in the years ahead.

Peachtree Group

Peachtree Group is a direct balance sheet lender focused on funding first mortgage bridge loans, mezzanine loans, preferred equity investments, and commercial property assessed clean energy (CPACE) financing. Jared Schlosser is responsible for Peachtree's hotel originations platform and its CPACE program.

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