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Cost Segregation for Hotels, Motels & Resorts
A hotel is a building full of personal property: casegoods, seating, decorative lighting, wall coverings, kitchen and laundry equipment. Much of it is capitalized into the 39-year shell unless an engineer separates it, and every renovation cycle adds more.
Where the value is in hospitality
Hotels and motels are among the asset types where our engineering team has deep experience.
- Hotels
- Motels
- Resorts
- Boutique hotels
FF&E is everywhere
Guest room casegoods, seating, televisions, lamps, artwork, corridor and lobby furnishings, window treatments and decorative lighting are generally 5-year property. A boutique hotel's design-led finishes add to that population rather than to the shell.
Back of house is equipment, not building
Commercial kitchen equipment and its dedicated connections, walk-in coolers, laundry equipment, pool and spa equipment, and the utilities serving them are short-life assets, documented as such in the study.
Resorts and motels lean on the site
Resort grounds carry pools and pool decks, paths, landscaping, site lighting and recreation amenities. Motels carry surface parking and exterior circulation. Both are land improvements, generally 15-year property.
Commonly reclassified components
Representative of what an engineered study identifies in this asset class. Actual components and recovery periods depend on the property and are documented individually in your report.
What would a study find on your property?
Send the property details. Engineering prepares the estimate, and you receive a written, fixed-fee proposal within 24 to 48 hours.
Hospitality cost segregation questions
Still have a question? Ask Engineering.
Is a select-service hotel worth a study, or only full-service?
Both are strong candidates. Select-service properties are FF&E-dense relative to their cost basis, and full-service hotels and resorts add restaurant, banquet and spa equipment. The engineering-prepared estimate shows what a study would find on your property before you commit.
Is a hotel ever residential rental property?
Generally no. Hotel and motel rooms used on a transient basis are not treated as dwelling units, so the building is nonresidential real property with a 39-year life. Extended-stay properties with longer occupancies can raise the question, and the answer depends on the facts.
We just completed a brand-mandated renovation. What can we do?
Two things. Segregate the new spend into its correct recovery periods, and elect a partial asset disposition on the finishes and equipment you removed, so their remaining basis is written off rather than depreciated alongside the replacements.
Does the hotel operating structure matter?
It can matter for how the deductions are used. Material participation, grouping elections and the passive activity rules are return-level questions for your CPA. The study establishes the deduction, and we coordinate with your CPA on how it is applied.
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