"Hotel owners and managers should resist attempts by the taxing authority to use short-cut methods to derive their valuation for property tax purposes."
Every year, most assessors across the nation face the daunting task of determining market value for every property in their jurisdiction. By virtue of necessity, they are required to use 'mass appraisal' techniques to value thousands of properties within a very short time frame.
When these mass appraisal short-cuts are used to value hotels, however, the results often yield widely inaccurate valuations for property tax purposes.
Wide-spread agreement exists within the appraisal industry that determining the tangible (taxable) value of a hotel is one of the most difficult tasks. The best minds in the appraisal community differ greatly on the proper way to segregate non-taxable intangibles in hotel valuations.
If these approaches yield a proper assessment, it is just by coincidence. Applying a standard adjustment for business value or a GRRM may yield acceptable values. But, an owner who accepts this kind of short-cut method in one year may face totally unacceptable values in future years when market conditions change.
Hotel owners and managers should resist attempts by the taxing authority to use short-cut methods to derive their valuation for property tax purposes. This calls for owners to perform an independent analysis every year by using market income, adjusting for the return on and of start-up costs and business personal property and employing appropriately determined capitalization rates. Such an analysis provides owners with the necessary data to begin discussions with the assessor for more accurate and equitable tax assessments on their hotels.