Hotel News Resource - Popp, Gray & Hutcheson, LLP Hotel Industry News

In these tough economic times, hotel owners need to proactively manage their property tax liabilities. The massive movement toward 'green' construction presents a meaningful opportunity for existing hotels to reduce their property taxes because 'green' has introduced obsolescence into the property tax equation.

The ongoing financial crisis has had a tremendous impact on the commercial real estate market and the downturn is abundantly evident in the hotel market. During the past three years, purchase prices for hotels have been at an all time high. These high purchase prices led tax assessors to use extremely low capitalization rates in their valuation models. This enabled the assessors to match the capitalization rates implied from high purchase prices.

The most popular valuation method employed by assessors to determine the taxable value of hotels is the 'management fee' method of appraisal. When taxpayers review their property tax assessments, understanding how the assessor determines the property's value is critically important.

Property taxes represent a significant expense item for hotels. Thus, when a tax assessment is deemed to be unfair, owners should carefully consider which tax professional to retain for an appeal.

As everyone knows, property taxes are a major expense in the operation of a hotel. In addition to a desire to reduce and control property taxes, hotel owners frequently make two comments, 'just treat me fairly and give me predictability in the process.'