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Lodging Industry's Uniform System of Accounts

Editor’s note: This article has been added to the franchise encyclopedia as a resource for lodging owners and staff. The encyclopedia is open to contributions on franchise terms and history from Blue MauMau members.

PURPOSE: Hotel owners, operators, accountants, consultants, analysts, educators, attorneys, lenders and investors rely on the Uniform System of Accounts for the Lodging Industry as the guideline for hotel financial statements and statistics. That standard is painstakingly gone over by the Financial Management Committee of the American Hotel & Lodging Association.

PROCESS: The Financial Management Committee, consisting of a wide variety of industry participants — owners, operators, educators, accountants, consultants — is charged with updating the USALI in order to reflect current operating conditions in the industry, as well as new accounting rules and regulations. The committee of twenty-plus experts discuss, argue, revise and then finally issue new USALI standards on how accounting and statistical information is to be accumulated and reported.

The process of thrashing out problems and updating the accounting guidelines takes time. The books are published every eight to ten years. For example, the 10th edition took four years to prepare, and was published ten years after the 9th edition in 1996.

Mel Wilinsky, chairman of the American Hotel and Lodging Association Financial Management Committee, explains how ubiquitous the USALI financial standard is. “There is hardly a hotel or hotel franchise agreement that doesn’t reference this. It really is the standard — even internationally.”

The USALI serves as the reference tool for anyone who is involved in the financial aspects of the hospitality industry, since the basis upon which the statements are prepared is clearly defined.

“The USALI is important to the hospitality industry because it provides a framework within which owners, operators, investors and lending institutions can evaluate the performance of hotel operations," says Mr. Wilinsky. "They can do so with a high degree of confidence that the reporting of results is consistent from property to property, assuming both entities are using the 10th edition, of course.”

The Latest Edition

There have been a number of changes to the 10th edition, which was released in 2006.

Robert Mandelbaum, a member of the Financial Management Committee, elaborates on the recent adjustments to the hotel industry’s financial standards. “I think the biggest changes were philosophical in nature. In the 10th edition we eliminated most of the ambiguity that existed in previous editions of the USALI. The book is very clear as to where hotel revenue and expenses should be recorded. If you want to be in conformity with the USALI, you must adhere to the guidance in the book.”

Mr. Mandelbaum continues, “The new hotel operating statement format is very much an 'operating' statement. It is meant to be a useful barometer of a hotel’s performance from an operational standpoint, as opposed to strictly an accounting standpoint. The book contains several 'real-life' examples as guidance for readers.”

Although the 10th edition was published in late 2006, the new changes were not fully implemented throughout the hotel industry in 2007. The new edition is expected to fully kick in during the coming year, since accountants and experts are now using it to plan for 2008.

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Don Sniegowski is editor of Blue MauMau, the daily news journal for franchise & small business owners. Contact him at +1 (270) 321-1268, @bluemaumau or