From 2019 to 2022 , the combination of EBITDA decreases and cap rate increases put downward pressure on values . A 100-basis-point increase in cap rates , coupled with the 1.7 % decrease in

Robert Mandelbaum , director of research information services , CBRE Hotels Research

EBITDA , correlates to a 12.6 % loss in value . Therefore , it appears that property tax decreases did not keep up with the sharp drop in property values .

In general , this is not good news for the owners of U . S . hotels . However , a deeper analysis of the data reveals that the ability of hotel owners to control their property taxes varies by location across the country . Since property taxes are levied at the local level , each municipality has different tax rates , assessment policies and tax calendars . Further , taxing agencies have shown different levels of leniency during the past three years as hotels have recovered from the severe declines experienced in 2020 .

To assess recent trends in U . S . hotel property taxes , we analyzed the performance of 3,255 hotels that reported property tax payments each year from 2019 through 2022 for our annual Trends ® survey . In 2022 , these properties averaged 200 rooms in size , with an occupancy of 66.9 % and an average daily rate of

$ 196.27 . Excluded from this analysis were any hotels that did not pay property taxes in any of the four years and hotels that may have received a property tax rebate resulting in a net negative property tax obligation for a year .

PROPERTY TAX RELIEF LAGGED In 2020 , the hotels in the study sample suffered a 62.8 % decline in total operating revenue , which resulted in an EBITDA decline of 107.3 %. An EBITDA decline more than 100 % implies that the owners of these hotels suffered a true loss for the year and had to pay their operating and ownership expenses “ outof-pocket .” In the same period in 2020 , property taxes grew by 2.0 % despite the severe loss in top-line revenue . This disparity in the direction of profits , values and property taxes occurred because many municipalities generally tax in arrears , meaning that they base their tax assessments on the previous year ’ s performance . Still , others work off of multi-year cycles , so unless the assessed values

were appealed mid-cycle , their respective assessments may have still been working off of a prior-year peak or near-peak performance .

Fortunately for hoteliers , we observed a decline in property tax payments in both 2021 and 2022 . This occurred even though EBITDA rebounded significantly in both years . We believe this favorable difference is the result of the previously mentioned valuation in arrears or is a product of successful property tax appeals and / or forbearance exercised by taxing authorities . We note that many states or municipalities actively looked to assist hotel owners by temporarily rolling back either assessments or taxes . These forbearances have all but burned off in 2023 and we are seeing sharp increases in assessed values across the country .

DIFFERENCES BY STATE We have analyzed historical hotel property tax trends by state from 2019 through 2022 , as tax policies vary from state-to-state or even county-

62 hotelsmag . com Nov / Dec 2023