Intangible Assets in Hotel Property Tax Assessments

Hotels are complex assets that blend real estate with business value. For property tax purposes, only the real estate is taxable, yet all too often, assessors inadvertently include the hotel’s intangible business assets in the assessed value.

Brand value, management contracts, franchise affiliations, and customer relationships can inflate the taxable value if not properly removed. On many occasions, upscale, select-service, and extended-stay hotels, particularly those transacted in portfolios, are assessed at values that fail to extract these intangibles.

Intangible Assets and Hotel Taxable Value Standards

By appraisal standards and law, intangible assets should be excluded from a hotel’s taxable property value. A hotel’s income derives from a going concern that includes real property, tangible personal property (FF&E), and intangible personal property. Tax assessors, however, are charged with valuing only the real estate component. Accepted practice therefore requires deducting or otherwise isolating the non-taxable intangibles so that only the real estate’s value is assessed.

Under professional appraisal guidelines, only the tangible property—land and improvements (and in some cases, personal property)—should remain in the taxable value after intangible assets are removed. For instance, California law expressly exempts intangible assets from property tax. If an assessor values a hotel by capitalizing the business income or using sales of whole hotel enterprises without adjustments, the result includes non-taxable intangibles and inflates the assessment. Failing to remove intangible value can render an assessment unlawful or subject to reversal on appeal.

Judicial Momentum Toward Comprehensive Intangible Asset Analysis

There is growing momentum within the courts affirming that a complete and deliberate analysis of intangible assets is not only appropriate but required. Historically, many hotel valuations used in tax assessments or appeals have leaned on simplified deductions—typically a franchise fee and a management fee—under the assumption that these adjustments sufficiently remove the business enterprise component of value. However, as the hospitality industry has grown more complex and intangible drivers of hotel performance have become more prominent, courts have begun to push back on this oversimplification.

Recent rulings, particularly in states like California and Florida, demonstrate a clear judicial expectation: assessors and appraisers must undertake a thorough and specific allocation of intangible assets, rather than relying on industry rules of thumb. The courts have recognized that a hotel’s flag, reputation, digital infrastructure, workforce, customer relationships, and operational systems all contribute significantly to income—and that failing to isolate and remove the value of these elements results in overassessment.

Cases such as SHC Half Moon Bay v. County of San Mateo show that the legal system is becoming more sophisticated in its understanding of hotel economics. Appraisal reports used for tax purposes must demonstrate a defensible, segmented approach.

Post-COVID “Revenge Travel” and Inflated Performance Bounces

In the wake of COVID-19, hotel operating performance has swung dramatically. After travel demand collapsed in 2020, many markets saw an aggressive rebound driven by “revenge travel”—a surge of pent-up demand as soon as vaccines and lifted restrictions enabled people to take the trips they had deferred. Occupancy levels and average daily rates (ADR) often jumped well above the prior year’s figures, and sometimes even surpassed 2019 levels.

On the surface, these rebounding metrics paint a picture of robust growth. However, high occupancy and revenue figures are measured off abnormally depressed base-year comparables. When 2020 is the benchmark, even a partial recovery yields eye-popping growth rates. “Revenge travel” was a temporary boost fueled by unusual consumer savings and stimulus. By 2023, those trends began to ebb. As excess savings dwindled and broader economic softening took hold, travel demand growth moderated.

For tax valuation, this context is critical. Assessors who capitalize a single year of inflated post-COVID income or use recent growth rates in their projections risk overestimating a hotel’s long-term sustainable value. A proper appraisal should consider normalized occupancy and earnings over a multi-year period, adjusted to account for the temporary nature of pandemic recovery.

Hotel Recovery vs. U.S. Personal Savings Trends

The U.S. personal saving rate offers a macroeconomic lens to evaluate hotel demand. In April 2020, the personal saving rate hit a historic high (~32%) as consumers stayed home and curtailed spending. As travel resumed, Americans drew down their savings and spent on travel at extraordinary levels, with the saving rate dropping to a low by March 2022.

This inverse relationship—between saving and hotel spending—highlights how excess liquidity drove much of the hotel industry’s short-term performance gains. Today, however, the trend is normalizing. Personal savings have returned to mid-single digits, and discretionary travel spend is starting to reflect broader economic conditions, including inflation, credit tightening, and income pressure.

Upscale, Luxury, and Portfolio-Traded Select-Service and Extended-Stay Hotels

Hotels in the upscale, upper-upscale, and luxury classes—as well as select-service and extended-stay hotels that are commonly transacted in portfolios—are particularly susceptible to the inclusion of intangible assets in property tax assessments. These assets often derive significant value from brand affiliation, loyalty programs, centralized reservation systems, and the operational efficiencies of national management platforms.

This exposure is especially evident in portfolio transactions, where properties are sold as part of a larger, branded group. Buyers are not just acquiring physical real estate—they are investing in the enterprise value of the portfolio, including intangible elements such as brand strength, bundled services, and multi-property synergies.

The Appraisal Advantage in Tax Appeals

In tax appeals, properly prepared hotel appraisals that isolate real estate value from intangibles offer one of the most compelling tools available. They combine legal precedent with rigorous valuation analysis and can often reveal a significant overstatement in assessed value.

A segmented valuation identifies the income attributable to real estate only, subtracts intangible components like franchise and management systems, and presents a stabilized, market-supported estimate. These reports often carry significant weight before tribunals and can drive meaningful tax reductions.

Conclusion

Hotels are frequently over-assessed for property tax because assessors and mass appraisal models often overlook the intangible components of value. The post-COVID volatility in hotel financials further complicates matters, as unusually high recent incomes may overstate a property’s long-term capacity.

By removing the pent-up-demand effect through income stabilization and subtracting intangible business assets, a credible appraisal can present a more accurate value for the taxable real estate. This approach is backed by case law, appraisal theory, and macroeconomic trends—a compelling combination for effective tax appeals.

The hospitality and valuation industries increasingly agree: hotels must be assessed like real estate, not operating businesses. Only then can assessments be fair, defensible, and in line with statutory intent.