USALI Article PDF

Potential bottom line impacts of the new edition of
the Uniform System of Accounts for the Lodging Industry
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. Source: AH&LA
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 Income”.
 “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 adapted.
 Additional guidance on gross vs. net accounting of revenues is provided.
 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 neglected.
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 Sebastian Gruber

Managing Consultant Senior Consultant
PKF hotelexperts PKF hotelexperts
Hegelgasse 8 Hegelgasse 8
1010 Vienna 1010 Vienna
tel +43 1 5120707 tel +43 1 5120707
e-mail Jeffrey.Scott@pkfhotels.com e-mail Sebastian.Gruber@pkfhotels.com

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Potential bottom line impacts of the new edition of

the Uniform System of Accounts for the Lodging Industry

For further information, please contact:

Jeffrey F. Scott Sebastian Gruber

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