Written by: Patrick Price, Vice President of Operations, Property Tax
As we witness the recovery of the hospitality industry, it’s essential to recognize that the challenges for hotel operators are far from over. During the pandemic, many pursued assessment reductions, helping to mitigate the impact on their bottom line. However, a new reality is emerging —one that demands continued vigilance in property tax assessments.
Rising Valuations as New Challenges Emerge
Fundamentals in the hotel industry have shown signs of improvement over the last year. As a result, assessors have been implementing valuation increases. But hotels are now facing another very severe headwind as inflation plays a role in driving up costs, impacting both debt management and operating expenses.
Recent events paint a picture of the new challenges faced by the hospitality industry. Ashford Hospitality Trust’s decision to relinquish a 19-hotel portfolio to lenders this summer was a stark reminder of the hurdles hotels face. Despite an uptick in revenue, higher operating expenses and labor shortages continue to pose a significant challenge. Lenders have adopted stringent policies, making it difficult for hotels to secure new debt issuance. A staggering number of hotel-backed loans are set to mature in the coming months, backed by over 1,500 hotels. Many will struggle to find new financing, and when they do, much higher interest rates will erode much, if not all, of their existing net income.
A Proactive Measure: Assessment Appeals in 2024
For hotel operators, the time to act is now. Engaging with a tax professional to determine the potential for property tax appeals in 2024 is crucial. This proactive approach will ensure that your property tax liabilities align with the economic realities of the evolving market.
In an industry as dynamic as hospitality, staying ahead of the curve is paramount. The challenges presented by evolving property valuations and the debt market’s unpredictability require a strategic approach. By partnering with property tax professionals knowledgeable in your industry and reevaluating your property tax strategy, you can position your hotel for long-term success.