America's Property Tax Advisor

Hotels Hit by COVID-19

BY SCOTT DONALD, IRVINE, SEPTEMBER 2021

Nationwide, the hotel industry is projected to end 2021 down more than $59 billion in business travel revenue compared to 2019, according to a new report released by the American Hotel & Lodging Association and Kalibri Labs. That comes after losing nearly $49 billion in business travel revenue in 2020.

 

No Quick Fix

 

Business travel is the hotel industry’s largest source of revenue and has been slow to return since the onset of the pandemic. Business travel includes corporate, group, government, and other commercial categories. Business travel revenue is not expected to reach pre-pandemic levels until 2024. The new analysis comes on the heels of a recent survey, which found that most business travelers are canceling, reducing, and postponing trips.

 

Hotels are expected to end 2021 down nearly 500,000 jobs compared to 2019. For every 10 people directly employed on a hotel property, hotels support an additional 26 jobs in the community, from restaurants and retail to hotel supply companies—meaning an additional nearly 1.3 million hotel-supported jobs are also at risk.

 

“While some industries have started rebounding from the pandemic, this report is a sobering reminder that hotels and hotel employees are still struggling,” said Chip Rogers, president, and CEO of AHLA.

 

States Suffering the Most

 

According to the report, the 10 states projected to end 2021 with the largest declines in hotel travel revenue are:

 

1.

 

Massachusetts (-84.80%)

2.

 

New York (-82.60%)

3.

 

California (-74.00%)

4.

 

Colorado (-68.80%)

5.

 

Virginia (-63.50%)

6.

 

Nevada (-63.40%)

7.

 

Florida (-60.70%)

8.

 

Georgia (-60.60%)

9.

 

Texas (-60.30%)

 

Minimizing Taxes

 

COVID-19 is the worst economic event in the history of the U.S. hotel industry. Many urban markets, which rely heavily on business from events and group meetings, continue to face a severe financial crisis, as they have been disproportionately impacted by the pandemic.

 

Most property tax jurisdictions rely on the income approach to value to ascertain taxable value of hospitality properties and thus their levies due. During the pandemic, economic obsolescence must be carved out of the aggregate valuation for such complex assets in order to reflect current the taxpayer’s accurate and appropriate share of tariffs.