The USALI is the accounting standard adopted across the hotel sector, allowing hotel operations to offer accurate like-for-like comparisons to owners and potential owners, creating a benchmark which is understandable and useable by everyone in the market, a common language for financial reporting.
It is at the core of the industry, to the extent that hotel management agreements commonly insist that operators adopt the new editions of USALI as they become effective.
It is the envy of other real estate sectors, creating data which offers true clarity on performance and can drive accurate decisions, which is why at Global Asset Solutions we have applied it across our portfolio.
The USALI has evolved with the sector, taking into account the growth of the brands, the addition of other revenue streams (including, in 1952, cigar stands) and encouraging input from ownership, academia, accountants, consultants and operators to create as accurate a view as possible.
The previous revision was in 2014. A great deal has happened to the sector in the past decade, as hotels have moved into the mainstream as an asset class and as sustainability and distribution is further acknowledged.
This latest revision meets growing demands for transparency and sustainability, in line with wider investment requirements.
“Adopting USALI is not merely about compliance, it’s about embracing a tool that transforms everyday data into a roadmap for operational excellence. In the context of operational benchmarking, it ensures that each data point serves a strategic purpose, enabling hotels to excel in a competitive market,” said Dr. Agnes DeFranco, professor, Conrad N. Hilton Distinguished Chair at the University of Houston and a member of the Global Finance Committee working on the revisions for the USALI 12th edition.
There are five key changes, with enhancements incorporating financial and operating changes, a new sustainability section, and a section specific to all-inclusive hotels.
ESG
The Utilities Schedule has been replaced by the Energy, Water and Waste Schedule, with an eye to meeting the need for reliable ESG reporting standards. These are rapidly being enshrined into law in different jurisdictions around the world and the latest version of the USALI includes new expense categories to capture energy, water, sewer expenditures, waste, and contract services, along with a recommended schedule for obtaining environmental and greenhouse gas emissions statistics.
Loyalty and brand costs
Loyalty programmes are at the heart of the branded hotel sector, with companies including Marriott and Hilton employing them in their competition for the consumer with the OTAs. Membership is in the hundreds of millions and is a core element of the brand sales process to owners, but there have been growing concerns raised by owners around measuring the value of these programmes.
The revised USALI includes new metrics clarifying annual mandatory costs, which includes non-negotiable costs for mandatory programs, systems, and services. This standardisation across the industry allows for more benchmarking and comparison; this means the hotelier can better gauge their performance against peers and industry standards.
All-inclusive hotels
All-inclusive hotels have expanded around the world over the past decade, moving into Europe and moving up the chain scales. They are increasingly offered by the big chain hotels, as part of their attempts to offer a full suite of options to owners and guests.
The 12th edition of the USALI includes a new section focused on revenue and expense reporting for these hotels, helping to highlight their unique sources of revenue: package revenue, non-package revenue, and miscellaneous income.
The new all-inclusive guidance applies to hotels with package revenue exceeding 50% of total revenue over a three-year period or for newly-established hotels projecting similar revenue proportions. For hotels falling below this threshold, existing EP (European Plan or room-only) guidelines are followed. Distinctions are made in the treatment of service charges between all inclusive and EP establishments.
Executive lounge
As part of the expanded definitions for rate categories and new guidance on revenues and expenses, the treatment of management of Executive Lounges is more refined. This includes a better allocation of operating expenses to the guests who pay for access to these premium spaces. In so doing, the new edition ensures a more precise reflection of streams of income associated with the high-value services offered within hotels.
Teams
Labour is the largest cost for hotels and has continued to rise as some team members have moved to other sectors in recent years, creating the so-called ‘war for talent’.
The USALI has been updated a number of times to account for changes to working practice and in the 11th edition additional salary and wage sub-categories were added to provide an enhanced understanding of labour costs. These allowed for salaries, wages and benefits to be recorded, but not the number of employees or the hours worked.
The new edition adds new mandatory Schedule 15 to record FTE (full time equivalent) employee hours in each operated and undistributed department, supported by a formula, with the intent of giving greater visibility into the number of management and non-management FTEs.
Importantly, the nuance of knowing who is paid what, where and when – rather than taking an average of salaries – allows the hotel to calculate critical labour efficiency ratios.
