Buying a branded hotel or motel — how big can the PIP renovation list get, and how does it fit into financing

Who sets the PIP, and why buyers can't opt out

A hotel or motel's brand isn't something you own outright once you buy — it's a franchise agreement with the brand, and that agreement typically gives the brand the right to require the property meet its current standards. That requirement list is the PIP.

A change of ownership — even renewing the same brand, or a new buyer taking over an existing franchise — usually triggers a fresh inspection and a new PIP. Brand standards get updated over time, and a property renovated to a standard from a few years ago is often being measured against a higher bar today.

This isn't optional: failing to complete the list gives the brand grounds to terminate the franchise agreement, and the branded flag you bought goes with it. The PIP isn't a renovation you can choose to skip — it's the condition of keeping the flag at all.

What's typically on a PIP list

Guest rooms and public areas: room renovations (bedding, furniture, flooring, bathrooms), lobby, meeting space, fitness room, corridors, exterior — the parts most buyers expect.

Easier to miss: building systems. HVAC, electrical, and plumbing upgrades are often more expensive than cosmetic work, and harder to judge just by looking at the property.

Also often overlooked: accessibility compliance, fire and life-safety upgrades, and brand-mandated technology (booking system integration, lock standards) — these tend to be non-negotiable compliance items, not "nice to have" upgrades.

How long a PIP takes, and whether it can be phased

Scope varies a lot: smaller renovations can wrap up in a matter of weeks, while a full-property PIP can take several months, depending on the size of the property and the scope of the list.

Most brands allow phased scheduling to limit the operational hit — not every room has to close at once. That schedule itself is worth negotiating; ask the brand for their expected timeline before you sign.

Letting it sit undone after you take over risks the brand terminating the agreement outright — this isn't a cost you can push off indefinitely. It needs to be built into your plan for the first year of ownership.

Whether lenders count it, and how it fits into the financing application

The business page covers this generally: LTV and structure on hotel financing vary by lender, and renovation and PIP costs need to be planned into the deal, not discovered after the loan closes. Specifically for PIP, whether and how much a lender counts toward financing depends on how that lender views the total project — usually folded into overall project cost, not treated as a separate line.

The key is getting the PIP list and a contractor quote before you offer. Brands typically issue a formal PIP list during due diligence — that number needs a line in the total investment budget you bring to a lender, not a surprise discovered after closing.

If the PIP total is large, it's worth negotiating a price reduction or a seller credit to help offset it — sellers often already know the list is coming due for whoever owns the property next, which makes this a realistic ask.

What to confirm before you offer, and what to bring me

Get the formal PIP list and a cost estimate from the brand during due diligence — don't estimate it by eye. Standards differ a lot by brand and property tier, and the same building can face a very different bar depending on which brand is evaluating it.

Add the PIP total to the purchase price, renovation budget, and working capital as one combined number — that's the figure a lender actually evaluates, not each piece in isolation.

Send me the PIP list along with the property's T12 operating numbers, and I can tell you which lenders are realistic for that total investment and how to structure the gap.

Common questions

Is a PIP a one-time thing, or does it come up again later?

It recurs — brand standards get updated over time, and renewing a franchise agreement or selling to the next buyer typically triggers a fresh PIP review. Clearing one at purchase doesn't mean there won't be another down the road.

Can I use my own contractor for PIP work, or does it have to go through the brand?

Depends on the specific item — some (like brand-specified furniture or lock systems) may require an approved supplier, while general renovation work can often use your own contractor. Go by the PIP list you get during due diligence rather than assuming either way.

The PIP total is huge — can I negotiate the brand down on it?

Hard compliance items (fire safety, accessibility) are usually non-negotiable, but the schedule and phasing of other items often have some room. The more common move is negotiating a price reduction or seller credit with the seller, rather than negotiating the list itself with the brand.

If the PIP doesn't get finished and the brand terminates the agreement, can the property still operate?

Yes, it can keep operating, but as an independent property once it loses the flag — the booking system and brand-driven guests go with it, and revenue typically takes a hit. That's exactly why PIP isn't a cost you can put off indefinitely.

Will a large PIP total get a hotel loan declined?

Not automatically, but it changes how a lender sizes the total project cost and how much of a funding gap you need to cover — the bigger the PIP, the more own funds or seller credit you'll typically need to show. Getting the list and quote early is the first step to making that math work.

About the author: I'm Morning Lee, a licensed mortgage broker with Dominion Lending Centres - A Better Way and a licensed realtor with Royal Pacific Realty (Kingsway) Ltd., in Greater Vancouver. I started my first business while still in university, and have run several since — computer parts, moving, logistics, and more — before moving into real estate and mortgages. Over thirty years, it's all been variations on the same thing. The read above comes from that same experience. I work in English and Mandarin; happy to talk through your situation.