What's Happening?
A recent analysis by CBRE, utilizing data from over 6,000 hotels, highlights significant disparities in property tax burdens based on geographic location and hotel type. The study found that full-service hotels in the New England and Mid-Atlantic regions face the highest average tax burden per available room, at $4,666, compared to $2,486 in the South Atlantic and $2,765 in the Mountain and Pacific regions. This trend is consistent across all hotel types, with New England and Mid-Atlantic hotels contributing a larger portion of their earnings to property taxes. The analysis also shows that convention and full-service hotels generally face higher tax liabilities than resort and limited-service hotels. The findings underscore the importance of a proactive property tax strategy, particularly in regions with higher tax burdens.
Why It's Important?
The disparities in property tax burdens have significant implications for hotel profitability and valuation. Hotels in regions with higher tax burdens, such as New England and the Mid-Atlantic, may face reduced profitability, impacting their overall financial performance and attractiveness to investors. Conversely, hotels in regions with lower tax burdens, like the South Atlantic and Mountain and Pacific areas, may enjoy a competitive advantage. Understanding these variations is crucial for hotel owners and investors to accurately forecast operational expenses and assess investment viability. A strategic approach to property tax management can enhance asset value and improve long-term financial performance, making it a critical consideration for stakeholders in the hospitality industry.
What's Next?
Hotel owners and investors, particularly those in high-burden regions, are encouraged to conduct detailed analyses of their property tax assessments. Identifying discrepancies in valuation and understanding local assessment practices can lead to successful appeals and potential tax reductions. For example, a national hotel ownership group in the South Atlantic region successfully reduced their 2025 property taxes by 4.5% through a meticulous review of their property's assessment. This proactive approach can yield significant financial benefits and should be a priority for stakeholders aiming to optimize their property tax burden.
Beyond the Headlines
The findings from CBRE's analysis highlight the broader implications of property tax management in the hospitality industry. A thorough understanding of valuation methodologies and local regulations is essential for successful outcomes. The ability to navigate the complexities of property tax assessment can significantly impact a hotel's financial health and asset value. As the hospitality industry continues to evolve, strategic tax management will play an increasingly important role in enhancing asset value and ensuring long-term financial success.
