Real Estate Law

The 2020 COVID-19 pandemic has had severe negative consequences for many sectors of the American economy.  This is certainly true for the hotel and hospitality industries, which have been particularly hard hit.

According to the American Hotel and Lodging Association (AHLA), the hotel industry is experiencing record low occupancy rates.  Occupancy rates averaged about 66% in 2017, 2018 and 2019.  The AHLA projects an average occupancy rate for 2020 at approximately 38%.  This is substantially lower that the 2007-2009 recession, when occupancy rates dropped to 54%. 

Without more help from Congress, hotel industry-supported job losses are projected to be in the range of 3.3 million to 3.9 million.  Seventy percent of hotel employees have been laid off or furloughed, representing lost weekly wages of about 2.4 billion dollars.

Pennsylvania had pre-COVID direct hotel jobs of 65,229 and hotel-supported jobs of 234,088.  By September 2020, Pennsylvania hotels lost 24,852 direct jobs, with the threat to lose a total of 45,660 jobs without more help from Congress.  Hotel-supported jobs have decreased by 54,074, with the threat to lose a total of 105,340 jobs.  Of 1,564 hotels across Pennsylvania, 1,048 are threatened with closure without more aid.

Owners of hotels obviously have to reduce operating costs in order to survive the COVID pandemic.  One area of costs that hotels owners should examine closely are real estate taxes.  In Pennsylvania, most tax assessments of hotel properties are based on the income method.  If occupancy is significantly down, then income is also significantly down.  Hotel owners and operators should consider filing a tax assessment appeal in an attempt to get the real estate tax burden reduced.

The deadline to file a tax assessment appeal in Allegheny County, Pennsylvania is March 31.  In all other western Pennsylvania counties, the filing deadline is either August 1 or September 1, depending on the county.  Because experts think it will take a number of years for the hotel industry to recover fully, a successful tax assessment appeal could result in substantial savings.

Hotel owners considering a tax assessment appeal should first have their financial records reviewed carefully by a competent, experienced real estate appraiser, who will analyze the records and determine if a tax assessment appeal may have merit. The appraiser must then prepare an appraisal report of the hotel property, and must testify at any hearing as an expert witness. The owner should engage legal counsel who is experienced in litigating tax assessment appeals. 

The attorneys and staff at Bowles Rice have experience with commercial tax assessment appeals throughout Western Pennsylvania, and the team in our Southpointe office is prepared to assist.  A carefully prepared and presented appeal could result in substantially reduced real estate taxes. For more information, visit our Commercial and Industrial Tax Assessment Appeals page on the firm’s website.