When does Best Western begin capitalizing property development costs for hotel investments?

According to Best Western's 2025 Franchise Disclosure Document, property development costs for hotel investments, including construction costs, interest, financing fees, property taxes, and architectural and engineering fees, are capitalized starting when the development activity commences. This capitalization continues until all infrastructure is substantially complete and the property is available for occupancy.

For a prospective Best Western franchisee, this means that all costs associated with developing the hotel property, from the initial construction to the final stages of infrastructure completion, are recorded as assets on the balance sheet rather than as immediate expenses. This approach can improve the reported profitability of the hotel during the development phase, as these costs are not immediately deducted from revenue. Instead, they are depreciated over the useful life of the assets once the hotel opens.

The document mentions that Best Western acquired land in December 2019 and March 2020 to develop hotels in Tempe, Arizona, and Denver, Colorado. The Vīb in Tempe opened in March 2022, and the Vīb in Denver opened in June 2022. Upon opening, the capitalized development costs for these hotels were placed into service, and depreciation of these assets began. This timeline illustrates the practical application of the capitalization policy, showing how costs accumulate during development and are then accounted for as depreciable assets once the hotel is operational.

This capitalization policy is a standard accounting practice in the hotel industry, as it aligns the costs of development with the revenue generated once the property is open and operating. Franchisees should understand this policy to accurately interpret financial statements and assess the long-term profitability of their Best Western hotel investment.