Tenth Edition of USALI – Impact on Year-to-Year Comparability
We used the new Tenth (10th) edition of the Uniform System of Accounts for the Lodging Industry (USALI) to serve as the basis for account classification when processing the data for our 2008 Trends in the Hotel Industry report. Accordingly, the changes from 2006 to 2007 in certain revenue and expense items presented in this report were influenced by modifications in account classification definitions in the Tenth edition. When possible, PKF Hospitality Research adjusted the 2006 data to conform to the new 10th edition standards to allow for equitable comparisons between 2006 and 2007 numbers. However, adjustments were not always possible, thus some year-to-year changes may be somewhat distorted.
The following statements highlight revenue and expense items that have been impacted by changes in the USALI, and the impact the changes have on the data shown in this report:
Occupancy – The calculation of occupancy excludes complimentary rooms. We were able to remove complimentary rooms from the 2006 occupancy calculation, thus allowing for an equitable year-to-year comparison.
Attrition and Cancellation Penalties – Proceeds from group attrition and cancellation penalties are not included in Rooms Revenue. They are categorized as Rentals and Other Income. This will serve to lower year-to-year changes in Rooms Revenue and average daily room rates.
Food and Beverage – The revenues and expenses of the food and beverage departments are combined for presentation on the Summary Operating Statement. This will not impact year-to-year comparisons.
Telecommunications Revenues and Expenses – The revenues and expenses of the Telecommunications department are included in Other Operated Departments. We have included 2006 Telecommunications revenue in the 2006 Other Operated Department revenue, thus allowing for an equitable year-to-year comparison.
Telecommunications Maintenance - Telecommunications maintenance is categorized as an Information Systems expense in the Administrative and General Department. This will serve to lower year-to-year changes in Other Operated Department expenses, while increasing the year-to-year change in Administrative and General Department expenses.
Internet – Revenue and costs associated with guest use of Internet services in guest room or public spaces are included in the Telecommunications Department. This will serve to increase year-to-year changes in Other Operated Department revenues and expenses, while lowering the year-to-year change in expenses within the Rooms Department (guest Internet use) and Food and Beverage Department (meeting related Internet hook-ups.)
Other Operated Departments / Rentals and Other Income – Any minor hotel operated service for which the hotel collects revenue and incurs an expense is categorized as an Other Operated Department. If a hotel only receives revenue on a “net basis” such as a commission, concession, or rental payment, then the revenue is classified under Rentals and Other Income. In general, this has lowered the year-to-year changes in Other Operated Revenue, but increased year-to-year changes in Rentals and Other Income.
Salaries, Wages, and Bonuses – Contract labor is included in Salaries, Wages, and Bonuses. This will serve to increase year-to-year changes in Salaries, Wages, and Bonuses, while lowering changes to other departmental operating expenses.
Payroll-Related Expenses – Supplemental pay such as vacation pay, sick pay, and holiday pay are included in Payroll-Related Expenses. This will serve to increase year-to-year changes in Payroll-Related Expenses while lowering changes in Salaries, Wages, and Bonuses.
Franchise Fees – The amount paid by hotels for franchise royalties, marketing assessments, and guest loyalty programs are included in the Marketing Department expenses. Assessments for franchise reservation systems remain in the Rooms Department. We have included 2006 Franchise Fees in 2006 Marketing Department expenses, thus allowing for an equitable year-to-year change in Marketing Department expenses.
Information Systems – The cost to maintain all computer systems within the hotel is categorized in the Administrative and General Department. This includes hardware and software costs associated with PMS, POS, and telecommunications systems. This will serve to increase year-to-year changes in Administrative and General Department expenses, while lowering year-to-year changes in the departments to which these expenses were previously allocated.
Management Fees – Base and incentive management fees are deducted before Income Before Fixed Charges. This has no impact on year-to-year changes.
Insurance – Includes deductible payments, costs incurred due to underinsurance, and legal settlement costs. This will serve to increase year-to-year changes in Insurance costs, while lowering year-to year changes in Administrative and General Department expenses.
Rent – The USALI calls for the deduction of building, property, and equipment rental payments before the calculation of Net Operating Income (NOI). The purpose of our Trends report is to provide the hotel industry with an operational benchmarking tool. Therefore, due to the non-operational nature of lease payments, PKF Hospitality Research has opted not to deduct this expense prior to the calculation of NOI. This is consistent with the historical practice of PKF Hospitality Research, thus allowing for an equitable year-to-year comparison.
To purchase a copy of the Tenth edition of the Uniform System of Accounts for the Lodging Industry and obtain a complete description of the changes in account classifications that have been made, please contact the Educational Institute of the American Hotel and Lodging Association at www.ei-ahla.org.
