Navigating the Property Tax Maze: How Location and Hotel Type Impact Your Bottom Line

Property taxes represent a substantial expense for hotels, significantly impacting profitability. A recent analysis of over 6,000 hotels, using CBRE’s Trends® in the Hotel Industry database, reveals dramatic disparities in property tax burdens based on both location and hotel type. This article explores these critical variations, providing insights into how these differences can impact hotel valuations.

Geographic Disparities: Where You Operate Matters

The data paints a clear picture of geographic disparities. For example, the average tax burden per available room for full-service hotels in New England & the Mid-Atlantic is significantly higher ($4,666) than in the South Atlantic ($2,486) or Mountain & Pacific regions ($2,765). This pattern persists across all hotel types, with New England & the Mid-Atlantic consistently bearing the highest burden. The tax burden as a percentage of revenue echoes this trend, with New England & the Mid-Atlantic hotels contributing a larger portion of their earnings to property taxes. This illustrates the importance of factoring geographic location into long-term financial planning.

Property Type Variations: Tailoring Your Strategy

Beyond geography, the type of hotel significantly impacts its tax burden. Convention and full-service hotels generally face the highest tax liabilities, followed by resort hotels, limited-service hotels, and then suites (with and without food and beverage). The more amenities and services offered, the higher the assessed value, and thus, the tax liability. For instance, the tax burden per available room for a full-service hotel in the South Central region ($2,294) is more than double that of a limited-service hotel ($1,071) in the same region. Understanding these variations is crucial for accurately forecasting operational expenses and assessing investment viability.

Figure 1: 2024 Property Tax Burden per Available Room

Source: CBRE Hotels Research, 2025 Trends® in the Hotel Industry.

Figure 2: 2024 Property Tax Burden as a Percent of Total Operating Revenue

Source: CBRE Hotels Research, 2025 Trends® in the Hotel Industry.Proactive Property Tax Management: A Strategic Imperative

Our analysis underscores the critical importance of a proactive property tax strategy. The New England & Mid-Atlantic region consistently presents the highest tax burdens, especially for full-service and suite hotels without food and beverage services, often exceeding 4% of revenue. Conversely, the South Atlantic and Mountain & Pacific regions generally show the lowest burdens, particularly for resort hotels (property taxes representing less than 2% of revenue in some cases). These findings indicate that a thorough understanding of valuation methodologies and assessment practices in each jurisdiction is paramount.

These significant regional disparities demonstrate the need for a tailored approach to property tax management. Owners and investors of properties in New England & the Mid-Atlantic, especially full-service and convention hotels, should make a detailed analysis of their property tax assessment a top priority. Even seemingly small discrepancies in valuation can translate into significant financial implications, impacting the overall value of an asset.

Real-World Results: Uncovering Opportunities for Optimization

This proactive approach can yield tangible results. Consider the case of a national hotel ownership group with a full-service hotel in the South Atlantic region. Through a detailed review of the property’s assessment, we were able to identify specific areas where the valuation differed from industry standards. By highlighting the exclusion of certain expense items, such as those related to Common Area Maintenance (CAM), and other key operational expenses, we demonstrated the potential for adjustment.

The outcome? A successful appeal that resulted in a 4.5% reduction in their 2025 property taxes. This illustrates the value of meticulous analysis and a deep understanding of valuation principles, highlighting the need for a robust and rigorous review process.

Expert Insight for Informed Decisions

Navigating the complexities of property tax assessment requires specialized knowledge and experience. A firm grasp of valuation methodologies, appeal processes, and local regulations across various jurisdictions is essential for successful outcomes. Our team brings extensive experience in these areas, providing the critical insights needed to navigate the intricacies of property tax management.

Conclusion: Enhancing Asset Value Through Strategic Tax Management

The property tax landscape for hotels is complex and highly variable, and its influence on profitability is undeniable. By recognizing the interplay between location, property type, and assessment practices, investors and operators can make informed decisions that optimize their property tax burden. A thorough and strategic approach to property tax management is not just about reducing costs; it is about enhancing asset value and improving long-term financial performance.

Desiree Flanary, MAI is Director of Property & Transaction Tax Service for CBRE Hotels Valuation and Advisory Services. She can be reached at [email protected]. Connect with Desiree on LinkedIn.