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THE RUNDOWN

What is the REAL value of a hospitality property?

November 11, 2017

The cap rate is the sales price of property divided by the income it generates, but hotel income streams are different to apartment and office buildings, or shopping malls. Office space rents by the square foot over a year or more, apartments rent by the month or year, but hotels are leased by the night, and the rate can be radically different depending on the day of the week or time of the year. As well, the income from rooms of the same square footage varies depending on views or special discounts per person. 
Also, unlike apartment or business buildings, the flag on a hotel has value.
Some assessors do, however, project returns based solely on one advertised price, impacting the hotelier’s property tax bill and the business’s future investment allure.

 

Don’t merely accept the assessor’s conclusions; also examine their work papers to see how they have arrived at their numbers.

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