Economic changes warrant adjustments to hotel assessments. Often hotels experience the soonest and largest losses to value since the businesses are not structured for multi-year leases, as common for other commercial property types.
We assist hotels with appeals following economic changes, property sales, audits of business property, and following a range of issues that affect property value.
Hotel brands for whom we successfully completed appeals to date include Hilton, Crowne Plaza, Marriott, Hyatt, Hampton Inn, Holiday Inn, Embassy Suites, Ramada, Staybridge Suites, Homewood Suites, Hilton Garden Inn, Best Western, Hawthorne Suites, Days Inn, and Chablis Inn.
As the U.S. hospitality market has emerged from Covid, Smith Travel Research (STR) and Tourism Economics (TE) provide hotel data both nationally and in a range of markets. As of early 2023, they identified a number of forward looking statements in their economic outlook, including the following:
“Our baseline forecast is still for a recession to start in the second quarter of this year, triggered by the Fed’s aggressive tightening cycle and the drag from tighter financial market conditions. Higher borrowing costs will also weigh on corporate profits, hiring, and business investment. The consumer will feel the effects of an increase in unemployment and a reduction in excess savings.”
Further, inflation, labor issues, and rising Federal Funds rates are all factors which affect property value for hotels. STR/TE referred to these points in early 2023 as follows:
“The December employment report painted a picture of a still-healthy labor market with some easing of wage pressures. Our forecast continues to assume a mild recession later this year, but there is the potential for a soft-landing, where the Fed returns inflation to its 2% objective without pushing the economy into a recession. Still, job growth and annual earnings growth remain above the pace the fed sees as consistent with slowing inflation, leaving the central bank on track to continue raising interest rates.”
For these reasons, even as the hotel market has widely shown gains from the greatest affects experienced at the peak of the Covid lockdowns, economic uncertainties remain.
Western Property Advisors, a leading firm specializing in property tax appeals for hospitality properties, offers professional expertise and guidance in navigating the appeal process. Their experienced team understands the intricacies of hotel valuations and has a proven track record of successfully reducing property tax assessments for hotel owners.
In the competitive market of the hospitality industry, hotel owners typically seek opportunities to optimize expenses while maintaining exceptional service. One area where potential cost savings can be explored is through the property tax assessment of hotels and other hospitality-related properties. Below we provide valuable insights into the process of appealing property assessments in California and offer guidance on how hotel owners can navigate this complex landscape to potentially reduce their property tax liabilities. If you need assistance with your hospitality property tax appeal or other property tax issue, contact us for a consultation.
Calculating property taxes for hotels can be challenging, as many taxing jurisdictions struggle to differentiate between the taxable value of the real estate and the intangible assets associated with the hotel business. This can lead to hotels paying higher property taxes than what may be fair and equitable.
In California, tax assessors often appraise commercial properties, including hotels, using the “income method,” which involves a discounted cash flow analysis. However, recent court decisions, such as the landmark case Olympic and Georgia Partners, LLC v. County of Los Angeles (California Court of Appeal, Second Appellate District, April 7, 2023), have highlighted the need to evaluate and potentially exclude certain intangible assets from hotel valuations. These assets may include rebates of transient occupancy taxes, key money payments, and other hotel enterprise assets. Hotel owners who believe their property assessments include such intangible assets may have grounds to file property tax appeals and seek reductions.
The Olympic and Georgia Partners, LLC v. County of Los Angeles decision recognizes the importance of evaluating and potentially excluding specific intangible assets from hotel valuations. In this landmark case, the court determined that the county assessor erroneously included income from certain intangible assets in the hotel property assessment. The decision sets a precedent for hotel owners to examine their own assessments and determine whether similar intangible assets have been improperly included. If you need assistance in completing an assessment of your assets in light of the precedent set in Olympic and Georgia Partners, LLC v. County of Los Angeles, contact us for a consultation.
Appealing a property tax assessment can be a complex process. It requires a thorough understanding of hotel valuation and the legal grounds for challenging assessments. Seeking guidance from experienced professionals specializing in hotel assessments can significantly enhance the chances of a successful appeal. Western Property Advisors is a leading property tax consulting firm in California. Please contact us for a consultation.
If you own a hotel or hospitality property in California and believe that your property tax assessment may include intangible assets that should be excluded, it is key to explore your options for appealing the assessment. By working with property tax advisors who specialize in hotel assessments, you can maximize potential savings and ensure fairness in your property tax obligations.
Hotel owners in California have the opportunity to challenge property tax assessments and potentially reduce their tax liabilities. By understanding the complexities of hotel valuation, staying informed about recent court decisions such as Olympic and Georgia Partners, LLC v. County of Los Angeles, and seeking assistance from property tax advisors, hotel owners can navigate the appeal process effectively. Take action today by contacting Western Property Advisors for a consultation and explore how you can optimize your hotel property tax appeal, potentially reducing your tax burden and maximizing your savings.
© All rights reserved
Director, Valuation Services
[email protected]