Starting January 1, 2026, the 12th Edition of the USALI (Uniform System of Accounts for the Lodging Industry) will mandate several key updates to the chart of accounts for hotels, which aim to enhance transparency, data accuracy, and operational efficiency and align with the evolving needs of the hospitality industry. These changes include improved energy reporting, sustainability reporting improvements, and streamlined multi-property consolidation. Additionally, there will be new reporting requirements for all-inclusive hotels and specific schedules for loyalty programs, executive lounges, brand and operator costs, and energy, water, and waste.
Changes to Increase Transparency
Guest Loyalty Program Costs
Over the past several years, the number of hotel guests redeeming loyalty program points for a “free” or discounted price has drastically increased. Due to rising costs to support these programs, which hotel owners pay, the 12th edition of USALI presents multiple new, separate loyalty program-related expense categories to enable owners, operators, and the brands to measure the value of their loyalty programs effectively. In addition, key changes to accounting treatment include: (1) cost recognition – rather than recognizing when points are redeemed, they will be recognized when earned; (2) deferred revenue – points earned by guests will create a liability on the balance sheet until they are redeemed; and (3) marketing expenses – promotional expenses incurred will be classified as marketing expenses and not included in the cost of goods sold.
Executive Lounge Costs
Many hotels have diversified their service offerings, post-COVID, to increase top-line revenues. Recently gaining popularity are executive lounges; however, the costs to maintain have also unsurprisingly increased. Like the loyalty program costs, to enable owners, operators, and the brands to measure the value their executive lounges bring effectively, the 12th edition of USALI will mandate a new schedule to capture Executive Lounge-related costs, which will then be allocated to direct and indirect expense categories. Additional guidance is also included appropriately recognizing revenue generated from the lounge, whether through room rates, membership fees, or pay-per-use models.
Full-Time Equivalent Schedule
Labor is the most significant expense for hotels. Historically, only the salaries, wages, and employee benefits paid to employees were reported under USALI guidance, but no data was related to the number of employees or hours worked. There will be a new requirement to present the number of Full Time Equivalent (FTE) employees working in each department, enabling owners and operators to calculate labor efficiency ratios under more advanced metrics, such as FTEs per occupied room. Hotel operators must ensure that their payroll systems or service providers present the hours employees work and the department each employee is associated with. This change will help hotels allocate resources more efficiently by ensuring staffing levels meet operational demands without incurring unnecessary costs and help create more precise budgets and forecasts, which are crucial for long-term financial stability.
Brand and Operator Cost Schedule
As noted above, hotels have drastically expanded their service offerings over the last couple of years, specifically regarding services provided by hotel brands and management companies. These costs are charged to owners and reported in various expense categories throughout the summary operating statement. One of the updates with the 12th edition of USALI is to provide a single place for these costs to be reviewed and classified in the following key areas:
- Marketing and advertising;
- Brand development;
- Public relations;
- Customer loyalty programs; and
- Information and technology.
Changes to Account for Contemporary Practice
All-Inclusive Hotels
All-inclusive (AI) hotels have flourished over the past decade. Given the growth, hotel owners, operators, and brands have sought guidance from USALI to better account for their revenues and expenses to enable better benchmarking. The 12th edition of USALI presents a new section dedicated to revenue and expense reporting for AI hotels, with specific attention paid to the unique sources of revenues earned by AI properties such as package revenue, non-package revenue, and miscellaneous income (i.e., food and beverage upsells, weddings, golf, and spa services).
Energy, Water, and Waste
As environmental and sustainability standards have expanded over the recent years, there is now a need for enhanced reporting of what were previously titled “Utility Expenses”. In addition, some consumers are now demanding a better understanding of a hotel’s environmental impact when booking a stay. The 12th edition of USALI has made changes to expand reporting for historical utilities such as electricity, water, and gas, along with new items like composted waste and renewable energy.
Takeaways
The transition to USALI’s 12th Edition marks an essential step for hotels to align their financial reporting with current-day industry practices. By embracing these new requirements, hotels will be able to better navigate the intricacies of their operations, which will improve their financial performance and guest satisfaction.
With all these changes on the horizon, it is extremely important for hotel owners and operators to ensure they have plans in place to ensure a smooth transition next year and meet the updated relevant reporting requirements.
Author: Kyle McClure | [email protected]
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