New Tax Credits for Hotel Projects

By Andrew Glincher Office Managing Partner, Nixon Peabody LLP | October 28, 2008

Unfortunately, these are the locations in which hotel projects are the most speculative and sometimes difficult to finance. They may be just outside the central business district, or in a former industrial area that has seen hard times, but is beginning to reinvent itself and turn things around.

A new federal tax credit program is designed to help developers of projects exactly like that. It is available for a wide range of commercial projects, but hotel developers need to become more aware of it. The New Markets Tax Credit (NMTC) program could easily be the difference between a property being developed or staying on the drawing board - it can provide a financial edge that tips projects toward reality and success.

Simply put, the New Markets Tax Credit program was created by Congress in December 2000 to encourage investments in communities which historically have had poor access to capital. It provides a federal tax credit equal to 39% of the investment - obviously a significant value - spread over a seven-year period. Aimed at spurring community and local business development, this tax credit can help lower interest rates and offer developers far greater financial flexibility.

There is an allocation of tax credits each year, made by the U.S. Department of the Treasury. In this year's round, announced just last month, 41 organizations were selected to receive $2 billion in tax credit allocations, ranging from $5 million to $100 million.

Any taxable investor--including individuals, corporations, partnerships and investment funds - is eligible for The New Markets Tax Credit. Transactions can be structured so that the project developer can use the credit or sell it through the well-established, although highly specialized, market for these credits.

The mechanism for obtaining the credits is, however, somewhat complex. Having seen many entities successfully through this process, it has become clear to us that having the advice of counsel who are knowledgeable and experienced in this area is essential.

Choose a Social Network!

The social network you are looking for is not available.

Close

Hotel Newswire Headlines Feed  

Holly Zoba
Cid Jenkins
Naseem Javed
Vanessa Horwell
Mark Johnson
Rocco Bova
Simon Hudson
Casey Olsen
Larry Gillanders
Scott Acton
Coming up in June 2019...

Sales & Marketing: Selling Experiences

There are innumerable strategies that Hotel Sales and Marketing Directors employ to find, engage and entice guests to their property, and those strategies are constantly evolving. A breakthrough technology, pioneering platform, or even a simple algorithm update can cause new trends to emerge and upend the best laid plans. Sales and marketing departments must remain agile so they can adapt to the ever changing digital landscape. As an example, the popularity of virtual reality is on the rise, as 360 interactive technologies become more mainstream. Chatbots and artificial intelligence are also poised to become the next big things, as they take guest personalization to a whole new level. But one sales and marketing trend that is currently resulting in major benefits for hotels is experiential marketing - the effort to deliver an experience to potential guests. Mainly this is accomplished through the creative use of video and images, and by utilizing what has become known as User Generated Content. By sharing actual personal content (videos and pictures) from satisfied guests who have experienced the delights of a property, prospective guests can more easily imagine themselves having the same experience. Similarly, Hotel Generated Content is equally important. Hotels are more than beds and effective video presentations can tell a compelling story - a story about what makes the hotel appealing and unique. A video walk-through of rooms is essential, as are video tours in different areas of a hotel. The goal is to highlight what makes the property exceptional, but also to show real people having real fun - an experience that prospective guests can have too. The June Hotel Business Review will report on some of these issues and strategies, and examine how some sales and marketing professionals are integrating them into their operations.