Cost segregation for limited-service hotels
Limited-service hotels are built from a brand playbook: the same room layout, the same breakfast bar, the same porte-cochère, repeated across hundreds of sites. That standardization is exactly what makes them efficient to segregate — the FF&E package is predictable and the back-of-house is thin, so a larger share of interior spend is furnishings and fixtures rather than central plant. Because there is no full kitchen, banquet space, or extensive food-and-beverage operation to anchor 39-year systems, the reclassified share typically runs higher than full-service, commonly 20–35%.
| Modeled reclass range | 20–35% |
|---|---|
| Typical study fee (Cost Seg Smart) | See pricing guide |
| Recovery periods captured | 5-, 7- and 15-year vs the 39-year shell |
| Delivery | Engineering-based; virtual or on-site depending on the provider |
1What reclassifies in a limited-service hotels
In a limited-service hotel, cost segregation typically reclassifies 20–35% of depreciable basis out of the 39-year building shell into 5-, 7- and 15-year property. The components that recur:
| Component | Recovery period | Authority carried (with caveat) |
|---|---|---|
| Guest-room FF&E — beds, case goods, seating, and soft goods where owned | 5-year | Personal property (Asset Class 57.0) tied to key count under the branded prototype. Confirm ownership vs. a furniture lease before counting; the repeatable spec makes per-room modeling reliable but does not override the actual ledger. |
| Breakfast-area equipment & serving millwork | 5-year | Small-kitchen equipment and decorative serving-station millwork generally qualify as personal property; built-in casework tied to the structure may follow the building. Depends on whether the piece is equipment or construction. |
| Pool & spa mechanical equipment | 5-year | Filtration, heaters, and pumps serving the amenity, separate from the pool shell and deck. Present only where the property has a pool. |
| Exterior signage & pylon | 15-year | Land improvement (Asset Class 00.3) for free-standing monument and pylon structures; illuminated sign faces can be shorter-life equipment. Separate the structure from the electronics. |
| Parking, curbing & site paving | 15-year | Land improvements (Asset Class 00.3) covering the lot, drive lanes, and porte-cochère paving; scales with site area, not room count. The building pad and structural slab stay 39-year. |
| Decorative & accent lighting | 5-year | Decorative fixtures beyond base illumination may qualify; the general lighting load stays 39-year. A fixture-level judgment, not a blanket reclassification. |
2Typical results and what drives the spread
Across standardized limited-service hotel configurations, the engine models an accelerated share of roughly 20–35%. The predictable per-key spec makes portfolios of the same flag efficient to model, but the study still reconciles each property to its own owned-vs-leased FF&E ledger before settling on a figure. These are modeled ranges, not a promise for any specific building — see by the numbers.
3By the numbers (original data)
4What a study costs for this type
Study fees track building size, documentation quality and whether an on-site inspection is performed. See the pricing guide for current market bands; competitor fees are sourced there, not quoted in prose here.
5Provider comparison — the Top 5 for this asset class
Every provider below is scored on the same fixed rubric, weighting relevant limited-service hotel evidence most heavily. Facts are drawn from each provider's public materials and dated.
| Provider | Score* | Relevant limited-service hotel evidence | Profile | ||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| RE Cost Seg Engineering-first · National (Houston, TX) Best published pricing Best for virtual delivery Most transparent turnaround | 7.9How this score is built (sub-score ÷ 5 × weight):
| Generic coverage only source · as of Jul 2026 | Profile → | ||||||||||||||||||||||||||||||||
| Cost Seg Smart site owner Engineering-first Best published pricing Best for virtual delivery | 7.8How this score is built (sub-score ÷ 5 × weight):
| Generic coverage only source · as of Jul 2026 | Profile → | ||||||||||||||||||||||||||||||||
| Baker Tilly National accounting/advisory · National (Chicago, IL) Best for national on-site coverage Most transparent turnaround | 7.6How this score is built (sub-score ÷ 5 × weight):
| Generic coverage only source · as of Jul 2026 | Profile → | ||||||||||||||||||||||||||||||||
| Source Advisors Engineering-first · National (Fort Worth, TX) Best for national on-site coverage | 7.3How this score is built (sub-score ÷ 5 × weight):
| Generic coverage only source · as of Jul 2026 | Profile → | ||||||||||||||||||||||||||||||||
| Cherry Bekaert Engineering-first · National (Richmond, VA; #1 Southeast) Best for national on-site coverage | 7.2How this score is built (sub-score ÷ 5 × weight):
| Generic coverage only source · as of Jul 2026 | Profile → |
Top 5 of 22 firms scored for limited-service hotel. See every firm's full profile and per-type standing in the provider directory.
*Score is this site's published rubric output (0–10) for limited-service hotel, weighting relevant property-type evidence most heavily (see how we compare) — click any score for its build-up. It is not a customer rating and no reviews are used. Cost Seg Smart is the site owner and is scored on the same rubric.
6Is it worth it — break-even
The present-value benefit generally clears a study fee once depreciable basis reaches the low seven figures, and the thin back-of-house means a favorable share of that basis is shorter-life. It is weakest on a short intended hold, where §1245 recapture on furnishings at sale offsets much of the accelerated timing.
7Frequently asked questions
Why do limited-service hotels often reclassify a higher share than full-service ones?
They carry far less 39-year back-of-house — no full commercial kitchen, banquet space, or large central plant — so the interior spend that remains is weighted toward FF&E and fixtures. That is why the modeled band, 20–35%, generally sits above the full-service central tendency, though your property's facts govern.
We own several properties under the same brand — can one study cover them?
Each property is placed in service separately and depreciated on its own schedule, so each needs its own study and its own ownership reconciliation. The shared prototype does make the engineering efficient across the portfolio, but the figures are not interchangeable between sites.
Does the breakfast bar count as kitchen equipment?
The serving equipment and decorative station millwork generally qualify as personal property, but built-in casework fixed to the building may follow the structure. The determination depends on whether each item functions as equipment or as construction, which is why it takes an item-level review.
Is the parking lot really depreciable faster than the building?
Site paving, curbing, and the porte-cochère surface are generally 15-year land improvements, separate from the 39-year building. They scale with site area rather than room count, so a property on a large pad can carry a meaningful 15-year line.
How does bonus depreciation affect the result?
Qualifying 5- and 15-year property can be deducted much faster in the placed-in-service year under bonus depreciation, pulling the benefit forward. The rate depends on the placed-in-service date under the current phase-down, so model it to your specific year rather than assuming a flat percentage.
Sources and authority consulted
- Rev. Proc. 87-56 (MACRS asset classes)
- IRS Cost Segregation Audit Techniques Guide (Pub 5653)
- Cost Seg Smart per-vertical component engine (modeled ranges + component authorities).
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