Marcus & Millichap

Hospitality Outlook

Midyear 2018

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New Tax Law Invigorates Value-Add Options in Hospitality Sector; Elevated Occupancies Reinforce Revenue Gains

Tax law a boon to hotel investors. Increased clarity surrounding the new tax law could spur hotel investment moving forward, particularly as uncertainty pushed some investors to the sidelines last year. Several provisions will also be beneficial to investors, including owners’ ability to expense up to $1 million of depreciable personal property to furnish lodgings. The change will allow owners to deduct the cost of furniture placed into service at their properties rather than depreciating them over several years. The rule also applies to roofs, heating, ventilation and security systems, though deductions phase out after $2.5 million. This regulation could prompt some investors to consider smaller hotel assets with value-add potential.

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