Uniform System of Accounts for the Lodging Industry - Eleventh Edition
Ever since the first edition was published in 1926,
the Uniform System of Accounts for the Lodging Industry (USALI) has
remained the established international standard reference and
guideline for accounting and reporting practices for the
hospitality industry. William J. Forster (the F in PKF) was the
initiator and one of the founding fathers of this globally accepted
guide that helps businesses determine how to treat revenues and
expenses and - most importantly - how to report on them in a
uniform and comparable way. To this date, PKF remains part of the
AH&LA (American Hotel & Leisure Association) Financial
Management Committee - the publisher of USALI.
Last year, the Eleventh Revised Edition was published and the
official implementation date of the changes was set for the
financial year beginning on or after January 1, 2015. While there
are still elements that have not been considered from an owner's
point of view, the new edition finally addresses a number of issues
that have been frustrating owners' for some time. However, it is
now up to the contract parties to align their accounting and
reporting standards according to the new set of rules.
A few notable changes to USALI, some of which could well impact
a hotel's bottom line results, include the following:
- "Revenue" has been changed to "Operating Revenue" and "Total
Revenue" has been changed to "Total Operating Revenue".
- "Fixed Charges" has been changed to "Non-Operating Income and
Expenses" and now also features an account for "Non-Operating
Revenue" to account for revenue below GOP i.e. outside the scope of
most fee calculation clauses!
- "Rentals and Other Income" has been changed to "Miscellaneous
- "Information and Telecommunication Systems" has been added as a
fifth Undistributed Operating Department.
- Certain definitions have been changed or adapted.
- The presentation of the financial statements has been
- Additional guidance on gross vs. net accounting of revenues is
- Many minor changes that need to be incorporated to be "in
accordance with the Uniform System".
This new version of USALI provides a good opportunity for hotel
owners to review whether both existing and new USALI standards are
being followed (which is commonly a stipulation anchored in,
amongst others, international management agreements). We regularly
discover that the accounting guidelines are not being followed,
which in some cases impacts the calculation of fees, etc.
Therefore, this is not something which should remain
If you are a hotel owner or operator, there are a number of
questions you should ask yourself. For instance, how do you treat
non-operational revenue and what does this mean for the calculation
of fees (e.g. base, incentive, marketing, franchise, etc)? Are you
using the correct approach for all revenue types (gross vs. net
accounting) or are fees being paid, for example, on third party
revenue? Are the definitions in your operating agreement in line
with new or amended definitions in USALI?
As a case in point, on a number of occasions for various hotels,
we have encountered that revenues (generally in other operated
departments) were reported on a gross basis while they should have
been recorded on a net basis (i.e. net of associated expenses and
therefore part of rentals and other income or, as it is called now,
miscellaneous income). For instance, if your hotel features a
garage that is operated by an outside contractor and where the
operator merely collects the parking fees, then these revenues
should generally be booked on a net basis i.e. only turnover
actually being kept by the hotel (e.g. commissions) ought to be
recorded. Other examples include audio-visual equipment for MICE
events provided through a third party but billed through the hotel;
entrance tickets to a nearby attraction that are sold by the hotel
or included in packages; an outside contractor operating part of
your resort's facilities (e.g. golf or tennis) or a retail shop on
the premises of your hotel. If a property is operating in any of
the above or similar scenarios (where a third party provides
services), it may well be worthwhile looking at the situation more
closely and analysing how this is treated financially. Often the
solution is not black and white but lies somewhere in a grey zone.
Therefore, it is important to have well founded analyses and
arguments at hand.
If you have any questions regarding USALI and/or need advice in
assessing the nuances of how this could impact bottom line
operating results of your hotel, then please feel free to contact
our asset and performance management team. Better yet, we gladly
invite you to visit us in Vienna (or alternatively in our offices
in Istanbul, Kiev or London) to discuss how we might possibly
assist you in getting your fair slice of the cake - a piece of
Sacher cake will be on us!
For further information, please contact:
Jeffrey F. Scott
tel +43 1 5120707
e-mail [email protected]
tel +43 1 5120707
e-mail [email protected]