Using USALI to measure your hotel’s financial performance

Using USALI to measure your hotel’s financial performance

Keba Vinod Keba Vinod November 22, 2022 News

Having a clear understanding of your property’s financial performance is crucial for any CEO, accounting professional or hotel owner. This information can help lay the foundation for you to make important decisions, such as where and how to allocate resources, and help you build your business. But the question remains – where do you begin?

A tool that has proven itself useful is the Uniform System of Accounts for the Lodging Industry (USALI). This system supplies users with a standardised accounting plan of action and a set of metrics that can be used to measure a hotel’s financial performance. While not mandatory, hotels globally have been using USALI as a best practice for decades. In this blog, we will provide you with a breakdown of USALI, and how it can be used to your advantage.

USALI

What is USALI?

First published in 1926 by the Hotel Association of New York City, USALI was devised by the American Hotel & Lodging Association (AHLA) as a way of guiding hotels to monetary success through the maintenance of their financial records. For years since, USALI has remained extremely popular amongst finance and accounting professionals in the industry.

The current 11th edition of USALI was issued in 2014, which brought forth a number of major changes from the previous version of the guide.

We can expect the next edition of USALI in 2023 or 2024, as the tool is updated every 10 years or so to reflect changes in the industry.

The USALI was created to provide hotels with a standardised way to track their income and expenses, therefore making performance comparison with other hotels in the market and industry averages a lot easier. As USALI is popular throughout the whole lodging industry, it is also useful when seeking financing or investors for your property.

USALI

USALI: How does it work?

There are two main parts that make up the USALI: the operating statements and a chart of accounts.

The operating statements show details of income and expenses in each category over a certain amount of time, typically one month or a year. These statements can be used to oversee your overall financial performance and can also be handy when it comes to tracking trends over time.

The chart of accounts lists all the various categories of expenses and income that are of concern to the lodging industry. This includes items such as food and beverage sales, marketing expenses, labour costs and revenue.

The current edition of USALI was the first to include an effective date. This was in an effort to encourage people to align with the new practices as soon as possible, as there were some changes in the new edition that would have a major impact on multiple schedules and on how operating metrics and financial ratios would be calculated.

USALI

The USALI is a fantastic tool as it ensures uniformity from one organisation to the next, which is vital for benchmarking and comparability. This means that its guidance is very specific when it comes to changes in departmental schedules. For example, line items might be deleted, but no additions or changes can be made without agreement from USALI.

The 11th edition guides hoteliers on how to report revenues and expenses for hotels and resorts. This includes information on everything, from where to record sneeze guards and air fresheners, to guidelines for formatting and a detailed revenue & expense dictionary. Having these standards in place allows for consistency and comparability when discussing different items, like diffusers used in the Health Club/Spa Department.

It is important to note that the USALI 11th edition also supplied an online resource page, alongside the printed copy. Accessible via the Hospitality Financial and Technology Professionals website, this page provides example schedules in Excel format, industry updates, a revenue & expense guide, and an FAQ listing

USALI

Hoteliers can notice several changes in the transition from the 10th to the 11th edition of the uniform system. The following are a few of the most notable changes.

The USALI provides formatting guidelines and a detailed revenue & expense dictionary for 14 departmental schedules.

Summary Operating Statement

  • “Rentals and Other Income” changed to “Miscellaneous Income”
  • “Revenue” changed to “Operating Revenue”
  • “Total Revenue” changed to “Total Operating Revenue”
  • “Information and Telecommunications Systems” added as an “Undistributed Operating Department”
  • “Fixed Charges” changed to “Non-operating Income and Expenses”
  • “Net Operating Income” changed to “EBITDA”
  • Two Summary Operating Statements for Operators and Owners

Rooms Department

  • Rooms Revenue segmentation was expanded
  • Resort Fees was moved to Miscellaneous Income
  • Further guidance was provided for mixed-ownership lodging facilities
  • Package Revenue allocations and package breakage were addressed in detail

Food and Beverage Department

  • Food and Beverage is presented on the same schedule
  • Gift Certificate Revenues were addressed in more detail
  • The term “Cover” was replaced with “Customer”

Miscellaneous Income

  • Resort Fees and Package Breakage were recorded in Miscellaneous Income
  • Guidance was provided on Commissions, Business Interruption Insurance, Foreign Currency Exchange, Unused or Forfeited Gift Certificates and Interest Income

Undistributed Departments

  • The Information and Telecommunications Systems Department was created
  • Non-Guest-Related Foreign Currency Exchange Income and Expenses addressed in further detail
  • Sales and Marketing expenses were presented together
  • Revenue Management and Catering Sales were reported as Sales and Marketing expenses
  • Contract Services were added as an expense category on Utilities to incorporate the cost of energy audits

Financial Ratios and Operating Metrics

  • Ratios were provided for both Operating and Undistributed Departments
  • Key ratios were presented for each department
  • A labour cost schedule was provided to detail labour cost data for each department
  • Additional utility and waste consumption ratios were provided
USALI

The USALI 11th edition expanded from accounting standards to providing an extensive listing of operating metrics and financial ratios, an enlarged revenue and expense guide, and guidance on gross vs. net reporting. The USALI 11th edition should be the go-to guide for hotel finance professionals, laying out the tools to record, analyse and benchmark accounting and finance data in depth and providing the knowledge needed to manage an organisation’s overall financial picture.

 

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