Denver Hotel Owners Lean On Upfront Incentives As Financing Gets Tougher

In an uneven hotel market not yet recovered from the pandemic, hotel owners and developers are increasing their usage of bridge funding provided by hotel brands to complete the capital stack.

Key money, an upfront payment from a hotel operator or brand to a hotel's prospective new owner, is becoming more prevalent, though it isn't a silver bullet. These types of payments have existed for years, but their use is ramping up in a tough financing environment.

These payments can help finance deals, but investors and developers still need to do their due diligence to make sure a deal makes sense, according to panelists at Bisnow’s Denver Hotels and Tourism Update on May 27.

“Key money has always been a tool that we’ve used for deals,” Marriott U.S. West Region Vice President Anne Bertsch said at the event. “I wouldn’t say every deal would get key money, but it is certainly becoming a more and more critical part of the stack. In general, we are getting a lot of pressure to provide bigger key money checks.”

Even management companies are coming forward with key money, something that wasn’t very common until the last few years, Brownstein Hyatt Farber Schreck shareholder Reid Galbraith said at the event, held at the Westin Downtown Denver.

Before 2024, fewer than 5% of the deals that Denver-based hospitality property management firm Stonebridge Cos. handled included key money. Now, more than 50% of the company’s term sheets use the funding mechanism, Stonebridge Cos. General Counsel C.J. Chapman said.

It helps “bridge the gap” for investors and is often seen by developers as evidence of cooperation, Blackridge Group principal Scott McChesney said. It shows the brand or operator supports the project and is willing to put their own money forward to back the property, he added. 

WalshDupart, a private real estate acquisition and investment firm, is currently developing five Marriott hotels in the Rocky Mountain region. Without key money from Marriott, those projects would not have happened, WalshDupart principal Grant Dupart said.

“The conversation has become very collaborative as the markets have started to become tighter and more difficult to develop,” he said. "Developing in 2025 and 2026 is very difficult. It’s hard to raise equity, it’s hard to get debt, it’s hard to make deals where key money definitely bridges the gap, but the reality is it doesn’t fix deals.”

Key money is often “a couple percentage points” of the total development cost, but it doesn’t move the needle that much, Dupart said. 

“It helps us to raise equity to have a brand like Marriott behind you … but at the end of the day, the deals still have to work on their own, and there’s no amount of key money that has ever made a deal a significantly better deal than it was going into it in our opinion,” Dupart added.

Even with key money and other funding vehicles, buyers, underwriters, brands and operators are being more conservative with their money than they were before the pandemic, the panelists said. 

“We don’t want every deal, we just want the right deal,” Voyage Capital Group CEO Jai Desai said. “There is opportunity if you look in the right places.”

Last year, U.S. hotel transaction volume increased 17.5% year-over-year to $24B, trending about 30% less than pre-pandemic benchmarks, according to JLL’s 2025 U.S. Hotel Investment Trends Report. Revenue per available room — a metric industry leaders use to track a hotel’s top-line revenue — continued to decline in 2025 due to a loss of inbound international travel, according to CBRE’s September 2025 U.S. Hotels State of the Union.

While 2026 hotel occupancy rates and RevPAR are posting modest gains year-over-year, the hotel industry is lagging behind 2019 levels, according to CBRE’s Q1 2026 report. 

“It certainly feels like 2025 was a lot worse than we all expected it to be on the RevPAR side for hotels, and so now we’re coming into 2026, and the first quarter blew everyone’s expectations away in terms of performance for the hotel industry. And now we’re all getting really excited about potentially finding new deals,” DuPart said. “But the reality is there’s just not a lot to look at.”

Traditional deals are harder to come by due to difficult debt and capital markets, interest rates and seller expectations as they relate to the value of the asset. Broker books are also thin, so deals are coming directly from lenders or asset managers and owners, DuPart said.

“I think there are deals to be had in the market. You just have to get creative,” Chapman said.