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Interpreting and Auditing Hotel Accounts in 2016 - part 3

What you should know about the Uniform System of Accounts for the Lodging Industry. - Part 3 Hotel Management Information and Reporting


Hotel management and financial reporting


Every business needs to implement a system to record its transactions with customers, employees, suppliers, and to report to taxation and other authorities.   Where the business has been incorporated and is subject to the rules governing such entities, the minimum standards of what information has to be reported and in what format are laid down in legislation. Non-compliance can lead to fines and criminal penalties.  


Generally, financial reports are required to be submitted semi-annually within a reasonable time from the period end.  If the business is within an entity with multiple shareholders or is a company with its shares quoted on a stock exchange,  financial reports may be required as often as quarterly.  These reports are essentially historic summaries, and reflect the financial results of the business for past periods, together with a snapshot of what the business owns and owes at the period end.


For day to day management, and especially in a business such as hotels where a multiplicity of transactions are taking place minute to minute, something more than historic reporting is needed for effective management and performance measurement.


There is complete freedom for hotel businesses to create or choose the systems and formats for management information reports used to monitor and control the business.  Effort, expertise and creativity are required to establish and implement what best fits a particular business. 


Basic hotel revenue measurement

For most hotels, the minimum data collected on a daily basis arises from the revenues produced from the various facilities operated.  Rooms, food and beverage and other revenues are recorded and used to monitor income.  


Common practice is to relate these revenues to the hotel’s number of rooms, both sold and available.  The industry standards are to show rooms revenue per room sold each day, (ARR being the average room rate achieved per room sold, or ADR being the average daily rate) and rooms revenue per room available (RevPar).  Levels of hotel room occupancy are reported based on the percentage of available rooms occupied each day.  The term sold is not always the same as occupied, as will be explored in a later section.


Focusing on rooms revenue alone means that the significance of revenues from catering and other services is not reflected.  Total revenue per room available (TRevPar), takes these ancillary revenues into account.   

These industry standards are only very slowly being supplemented by reference being made to revenues per unit of area (per square foot or metre).  

As well as comparing the revenue results to forecasts and the same period for previous years, generating these statistics enables a hotel to compare its performance to trend data published for hotels in a region or for particular hotel categories.  Such information is available via government related bodies such as tourist departments, and through independent benchmarking company reports.  In some locations, revenue related benchmarking information is produced on a daily basis.


Total hotel operating performance reporting

One of the most valuable operational reporting tools developed by and for management in the hotel industry is The Uniform System of Accounts for the Lodging Industry (USALI).


The Summary Operating Statement format laid down by the USALI in its current edition is as shown below.  This standard should have been implemented for accounting periods commencing on or after  1 January 2015.

The latest edition of the Uniform System is the result of cooperation between the Hotel Association of New York City, a subcommittee of the Committee on Financial Management of the American Hotel & Lodging Association, and the Hospitality Financial and Technology Professionals (HFTP) association.  The latter association has a close relationship with the UK Hospitality Professionals Association (HOSPA)


The Uniform System of Accounts for Hotels was first produced in 1926 for the Hotel Association of New York City, the copyright owner.  It has become the most important business information tool for the hospitality industry, and was renamed the Uniform System of Accounts for the Lodging Industry in 1996 on publication of the Ninth Revised Edition. The Tenth Revised Edition was published in 2006, and the 11th in June 2014. 


The Tenth Revised Edition moved the focus of the USALI more towards its original purpose of management accounting and reporting, with less emphasis on technical financial reporting than in earlier editions.  Note though that where references are made to financial reporting these are based on US generally accepted accounting principles (GAAP). 


The Tenth edition introduced the disallowance of alternative formats to the Summary Operating Statement and the departmental schedules.  Presentation of reports other than in the formats contained in the Tenth Revised Edition could give rise to issues of non-conformity. The USALI became prescriptive rather than descriptive. This could be important where agreements between hotels and third parties refer to accounts prepared ‘in accordance with the Uniform System’ and where practices and uses of terminology differ from the standards.


The USALI continues to be a recognised and widely adopted management and analytical tool for hotels throughout the world. It also forms the basis of many commercial and legal agreements that use terminology and reporting formats derived from its standards. Growth in its use has been rapid in recent years as the major hotel chains have expanded internationally. It has become a universal language for hotel managers, accountants, professional consultants and advisors, and it forms the basis for many financial and commercial arrangements that are geared to hotel performance.  Uniformity in operational reporting is also a requirement for hotel performance to be benchmarked against others in the same chain or competitors. 

USALI Summary Operating Statement Structure


The structure will be explained and explored in detail in the next parts of the blog.

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