The total property tax expense for U.S. hotels exceeds a potential $8.1 billion, according to a new study by STR utilizing 2016 HOST (Hotel Operating Statistics) data. The study found that roughly 36% of all hotel property tax expense resides in 15 counties. While 611 counties comprised STR’s HOST data, the report studied only those with a sufficient reporting sample. Overall, the median property tax expense for U.S. hotels was 3.7% of total revenue with a much higher expense percentage for limited-service properties (4.2%) than full-service hotels (3.3%).
by Jessica Vachiratevanurak, Managing Consultant, Miami | Today's Hotelier
For hoteliers, property tax expense is often a substantial fixed expense. As a result, understanding how property taxes are calculated and what owners and operators can do to mitigate them is crucial. Below are four tips for keeping property taxes from unduly impacting your hotel’s bottom line.
Over the past two years, Chicago-area landlords have capitalized on a strong economy and low interest rates by selling properties at a rapid pace. But after a whirlwind couple of years of real estate sales transactions, deal volume in the Chicago area is finally slowing down. Sales of commercial properties year to date through August were down 20 percent from the same period in 2016, to $9.8 billion, according to New York-based research firm Real Capital Analytics. While nearly $10 billion is still far more action than there was coming out of the Great Recession, it's the lowest amount spent on office, industrial, retail, apartment and hotel properties in the market through the first eight months of the year since 2014.
Hotels in Silicon Valley, California are experiencing above-average performance and attracting the attention of owners and developers across the country, thanks to the widely successful international technology companies in the area bringing in an influx of business – as well as leisure – travelers. The Santa Clara/Silicon Valley area is shaping up to be one of the most desirable markets in California due to its lack of overbuilding, scarcity of land and barriers to entry.
Philadelphia commercial property owners should expect major increases when they receive their property assessments mid-April. The value of the taxable portion of Philadelphia’s 14,000 commercial buildings went up by nearly 40 percent — from $14.4 billion to $19.7 billion — with the reassessments, an increase that will contribute to the expected $118 million in new tax revenue to be split between the city and school district. This is the first full reassessment of commercial properties since the controversial Actual Value Initiative (AVI) in 2014, which uses actual market values as the assessment standard.
The hotel industry could be facing an uphill battle in 2017 as new supply may erode pricing power and hinder performance. Hoteliers are already seeing performance dip as supply meets and surpasses demand. In a Hotel News Now roundtable, hotel executives and market analysts provide perspective on supply growth and how it will affect the hotel industry going forward. Jan Freitag, SVP of lodging insights at STR (Hotel News Now’s parent company), says new supply will negatively impact occupancies, now more than ever since demand growth will slow. While it remains to be seen how hoteliers react to the new competition in their markets, Feitag expects continued pressure on pricing and limited (average daily rate) increases going forward. Some markets (such as New York City and Miami), however, are already observing pricing weakness and ADR declines.
After years of success and growing occupancy and revenue per available room (RevPAR), the hospitality industry is starting to face some challenges. Occupancy levels reached a 30-year high of 65.5 percent in 2015 and gave the industry a gain of 1.7 percent. But if current trends continue, the percent change in occupancy could slip into negative territory for the first time since the recession, according to research from PwC’s Hospitality Directions US. Occupancy levels are not the hotel industry’s only success metric, but even as observers look beyond the surface, they find other reasons for concern. PwC expects that for 2016 the average daily rate growth, which drives RevPAR, will be 3.1 percent, half the level from the previous year.
The Baird/STR Hotel Stock Index fell 6.4% in September to close the month at 3,134. Year to date, the index remains up 1.3%. "As we enter the final months of 2016, the U.S. hotel industry is bracing for a slowdown in demand growth and an acceleration in the number of open hotels," said Amanda Hite, STR's president and CEO. "STR expects nationwide occupancy to flatten or decline, as can already be seen in a number of Top 25 Markets.”
A recent report by CBRE highlights Houston’s best- and worst-performing hospitality submarkets in terms of occupancy and RevPAR, and touched on the positive and negative outside economic factors that have impacted the city most profoundly, including the ongoing oil slump, the widening of the Panama Canal and more. The downtown market is feeling some growing pains and a number of high-profile deliveries are still expected in the next year, including the 1,000-room Marriott Marquis, a new Aloft hotel and a Euro-themed, 195-room AC Hotel by Marriott.
After a record-shattering 2015, a combination of factors early in the year drove a 56% total-dollar-volume drop in California hotel transactions in the first half of 2016 compared to the same period a year earlier, according to research from Atlas Hospitality Group. Alan Reay, president of Atlas, said the severe year-over-year decline in hotel transactions was due in large part to the following factors: Tough numbers to compare to in 2015, a first quarter stock market slowdown and a shift in pricing leading to a gap between buyers’ and sellers’ expectations. “The first quarter was very, very ugly in terms of transactions, and people didn’t know what direction the market was heading,” Reay said. “The second quarter picked up again, but if anything sums up the first six months, it’s that buyers were very cautious.”