Capital Investment

Expectations of both hotel guests and non-resident guests continue to change and intensify.
The hotel will require investment in refurbishment, facilities, and services in order to stay
competitive.

Soft goods redo’s, renovation, new facilities, and new services can be funded in three ways:

Replacement Reserve Fund: This is the annually budgeted capital investment fund for
the property. This fund is topped up each month by a percentage of total revenue. It is
the first and primary source of funding.

Investment borrowing: If the hotel is in good financial condition and able to pay for an
additional debt, funds can be borrowed from the bank to make up for any shortfalls in
the refurbishment reserve fund. A bank request and interview is required.

Owner’s Capital: When there is a high cash balance, the owner may be willing to apply
some of these funds to additional refurbishment, facilities, and services. If so, the hotel
would save the interest expenses resulting from additional bank loans.