ROOMS DEPARTMENT
� Group Rooms Revenue is defined as revenue derived from renting blocks
of 10 rooms or more.
� Contract Rooms Revenue is defined as revenue derived from a contract
with another entity for a consistent block of rooms for an extended period
over 30 days.
� Available Rooms is defined as all rooms in the hotel that are used
for guest overnight occupancy. The count of available rooms will
not be reduced unless a room is out of order for a minimum of six consecutive
months due to a non-discretionary event (i.e. fire, hurricane, etc�), or
an entire rooms department is completely closed for a minimum of 30 days.
� Complimentary Rooms is defined as a free room provided to a guest
often for marketing purposes and not linked to existing contractual relationships
(i.e. fourth room night free).
� Group Attrition is recorded in Rentals and Other Income.
� Revenue generated through an intermediary (i.e. wholesaler, dot.com
wholesaler) is recorded at the net rate billed to the wholesaler.
� Resort Fees are allocated to other departments based on the value
of the components included in the fee.
FOOD AND BEVERAGE DEPARTMENT
� Food and Beverage Department revenues will be combined and shown as
one revenue line item on the summary operating statement and the statement
of income.
� Food and Beverage Department expenses will be combined and shown
as one expense line item on the summary operating statement and the statement
of income. Total Food and Beverage Department expenses is the sum
of Cost of Sales, Total Payroll and Related Expenses, and Total Other Expenses.
� Separate Food and Beverage departmental sub-schedules are allowed,
but the data must be combined on the summary operating statement and the
statement of income.
� Departmental Income (Loss) is presented on the Food and Beverage
Department schedule, as well as the Food Department sub-schedule and Beverage
Department sub-schedule. Department Income (Loss) is not shown on
the summary operating statement or statement of income.
� Five classifications of Food and Beverage Revenue are approved: Outlet,
In-Room Dining, Banquet/Catering, Mini-Bar, and Other.
� Five classifications of Other Food and Beverage Revenue are approved:
Audio Visual, Public Room Rentals, Cover Charges, Service Charges, and
Miscellaneous Other Revenue.
� Total Food and Beverage Revenue is defined as the sum of Food and
Beverage Revenue net of Allowances and Other Food and Beverage Revenue
net of Allowances.
� On the Food and Beverage Department schedule, and each of the Food
and Beverage sub-schedules, one Gross Profit number is provided for, and
that amount is determined by subtracting from Total Revenue the Total Cost
of Sales.
� Cost of sales does not include breakouts for transfers between the
Food and Beverage Departments. Such transfers are charged directly
to the appropriate cost accounts in the departments receiving the items.
� China, Glassware, Silver, and Linen are separate expense items within
the department schedules and sub-schedules, and more extensive definitions
of each category are provided.
� An expense line item entitled Complimentary Services and Gifts has
been created to capture the cost of gratis presentations for promotional
purposes to guests and vendors of the Food and Beverage Department.
� An expense line item entitled Management Fees has been created to
capture any amounts paid to a third-party individual or company to operate
or manage a food outlet within the property.
� An expense line item entitled Royalty Fees has been created to capture
all costs associated with the right to use a brand name in connection with
a Food or Beverage Department activity.
OTHER OPERATED DEPARTMENTS AND RENTALS AND OTHER INCOME
� Guidance is provided to determine when to report revenue on a gross
basis (Other Operated Department), or a net basis (Rental and Other Income).
� In order to be classified as an Other Operated Department, the department
must have revenue and operating expenses, and is operated with a motivation
towards profitability. If not, the activity is reported in Rentals
and Other Income.
� If the operation is principally to provide a guest service and as
a result revenues are minor or non-existent, it cannot be classified as
an Other Operated Department. It should be charged to the department
that benefits most from the service. An example would be complimentary
shuttle service that would get charged to the rooms department.
� The Telecommunications Department is reported as an Other Operated
Department. It is no longer presented as a separate operated department
on the Summary Operating Statement.
� Sources of revenue that meet the requirements to be reported on a
gross basis, but have limited corresponding expenses (i.e. no labor), are
reported as a Minor Operated Department within the Other Operated Department
schedule. Examples are movie rental and vending.
� Attrition and cancellation penalties, proceeds from business interruption
insurance, and the net proceeds from a third-party laundry and dry cleaning
concession have been added as discrete accounts in Rentals and Other Income.
� The sum of revenues from all Other Operated Departments is presented
on the Summary Operating Statement as one revenue line item. Similarly,
the sum of expenses from all Other Operated Departments is presented as
one expense item. These two line items are supported by an Other
Operated Department schedule that summarizes the total revenues and total
expenses for each individual other operated department.
� A standardized sub-schedule format is provided to report the detailed
revenues and expenses for each individual Other Operated Department.
UNDISTRIBUTED OPERATING EXPENSES, MANAGEMENT FEES, AND FIXED CHARGES
� Security, Human Resources, and Information Systems can be created
as departments, but must be summarized and reported on the Administrative
and General line on the Summary Operating Statement.
� New categories have been added to the Administrative and General
Department for Centralized Accounting Charges and Corporate Office Reimbursables.
� Transportation Expenses directly related to transporting guests are
now reported as an expense of the Rooms Department, unless guest transportation
is operated as a revenue-generating department and meets the criteria set
forth under Other Operated Departments, in which case the cost of guest
transportation is shown in Other Operated Departments.
� Franchise fees are included in the Marketing Department. However,
the fees paid for licenses other than the hotel brand (such as fees paid
for a restaurant or coffee brand) are expensed to the appropriate operating
department using the brand in an account named �Royalty Fees.�
� Revenue will not be credited to the Property Operations and Maintenance
Department. Instead the revenue must be credited to an operating
department. Costs will also be transferred to the operating department.
For example, the revenue and expenses associated with the installation
of electrical outlets for a trade show exhibition will be reported in the
Food and Beverage Department.
� Sewer costs and fees are reported on a separate line item in the
Utilities Department.
� Management Fees are a separate line item on the Summary Operating
Statement, and reported as a deduction from Gross Operating Profit in arriving
at Income Before Fixed Charges. It represents the aggregate amount
of both Base and Incentive Management Fees.
� Taxes on Utilities have been moved to the Utilities Department.
� Insurance, which includes property, liability insurance, professional
liability, theft and other incidental lines of coverages and the associated
deductible costs for each line of insurance is reported under Fixed Charges
and includes the costs of uninsured and under-insured losses. Employee
related insurance costs for workers compensation coverage is included in
Employee Benefits costs in the appropriate departmental schedule.
This section also includes the costs of legal settlements and audits which
result in changes to the underwriting assumptions used to assess premiums.
BALANCE SHEET
Changes to the Balance Sheet were made to reflect changes in GAAP since
the release of the ninth edition of the USALI. Two significant changes
are:
Operating Equipment
� Operating equipment includes china, glassware, silver, linen, and
uniforms.
� Operating equipment determined to have a period of consumption of
one year or less is recorded as a Current Asset.
� Operating equipment with a period of consumption more than one year
is recorded as an Other Asset.
� Operating equipment is expensed ratably to the appropriate department
expense account over its estimated useful life. Please note that
Operating Equipment is no longer amortized.
� Upon implementation of the tenth edition of the USALI, a property
should expense the balance of any remaining china, glassware, silver, linen,
and uniforms on its books.
Due To / Due From
� Separate accounts have been established to report amounts due to
or from owners, management companies, and related entities.
� Examples of amounts due to or from these entities include advances
for capital improvements, accruals for management fees, and other expenses,
and advances provided to a property.
� The accounts are classified as current or long term based on their
payment terms.
� The amounts are not offset against each other unless there is a contractual
right to offset between the parties.
PAYROLL AND RELATED EXPENSES
Within each department that has personnel, payroll and related expenses
are divided into two sections: Salaries, Wages, and Bonuses, and
Payroll-Related Expenses. The following statements highlight the
costs associated with each category.
Salaries, Wages, and Bonuses
� Salaries and Wages includes regular pay, overtime pay, and shift
differential pay.
� Salaries and Wages also includes the costs for contract or leased
labor. Contract or leased labor refers to situations in which the
property enters in to an agreement with an outside service to provide employees
to fill positions that would normally be filled by hotel staff paid on
the regular payroll. The property would typically supervise these
employees, track their hours, and pay for the service on an hourly basis.
This differs from Contract Services, like pest control or carpet cleaning,
where the individuals are supervised by the outside contractor.
� Salaries and Wages are charged to the department for which the duties
of the employee are performed. The salaries and wages for an employee
that works for multiple departments should be charged to each department
based on the actual ours worked in that department.
� Bonuses and Incentives are also included in Salaries, Wages and Bonuses.
Bonuses, incentive pay, and other types of performance pay are designed
to reward employees for their efforts in connection with plans designed
to drive revenue through sales, profit, or guest satisfaction measures.
Payroll-Related Expenses
� Payroll Taxes includes all federal, state, and local government mandated
payroll-related taxes or social insurance items such as FICA, FUTA, SUTA,
and SDI.
� Supplemental Pay includes personal days, vacation pay, sick pay,
holiday pay, jury duty pay, relocation pay, paid time off, and severance
pay.
� Supplemental Pay also includes bonuses and incentive payments that
are discretionary and not determined by results from operations.
� Employee Benefits includes all other payroll-related expenses such
as employer-paid health insurance expenses, cost of meals furnished to
employees, pension contributions, and union fees.
The tenth edition contains a Schedule of Department Payroll Titles that
lists the titles of positions typically found in the various operated and
undistributed departments of a hotel.
RATIOS AND STATISTICS
New Definitions
� Rooms Available is defined as the difference between the total number
of rooms in the hotel and rooms that not available for transient rental,
including seasonally closed rooms (where the entire hotel is closed for
30 or more consecutive days), rooms designated for permanent house use,
and Extended Closed Rooms. Extended Closed rooms are rooms, which
are expected to be closed for 6 months or longer as a result of an event
beyond the control of the hotel such as a fire or hurricane.
� Complimentary Rooms is defined as a free room provided to a guest
often for marketing or promotional purposes. Complimentary rooms
do not include rooms linked to an existing contractual relationship (i.e.
a marketing program where the hotel provides a free room night after the
purchase of a defined number of rooms, such as a fourth room night free
program). Gratis rooms given in connection with the purchase of a
block of rooms is likewise not considered a Complimentary Room.
� Complimentary Rooms are excluded from the computation of average
rate and occupancy statistics.
� Under certain circumstances, rooms in a hotel that are owned in connection
with a condominium regime are included in rate and occupancy statistics
(see below). If the criteria for inclusion of condominium rooms in
the Rooms department statistics is not met, then the income derived from
the rental of the condominium rooms should be included in Rental and Other
Income or Other Operated Departments. Supplemental reporting data
should be developed for the purposes of determining rate and occupancy
statistics for the entire property (see below).
Ratio Analysis
� Expanded commentary is provided on financial benchmarking, fixed
and variable costs, and methods of calculations and comparisons.
Revenue Ratios
� Ratios have been provided to measure both Total Rooms Revenue (RevPAR)
and Total Revenue (Total RevPAR) on a per-available-room basis.
� The overall Average Room Rate (ADR) for a hotel is calculated by
dividing Total Rooms Revenue by the Rooms Occupied. Total Rooms Revenue
includes transient rooms revenue, group rooms revenue, contract rooms revenue,
and other rooms revenue (no-shows, day use, early departure, late check-out,
rollaways, cribs, portion of resort fees and surcharges allocated to Room
Department). Complimentary rooms are not included in the Rooms Occupied.
� Because most hotels do not distribute their allowances by revenue
segment (transient, group, contract), the Gross Rooms Revenue, by segment,
is used to calculate the ADR for each individual revenue segment.
Profitability Ratios
� Ratios have been added to measure Gross Operating Profit, Income
Before Fixed Charges, and Net Operating Income. These profit measures
can be analyzed as a percent of total revenue or on a dollar per-available-room
basis.
Occupancy
� The overall Occupancy ratio for a hotel is calculated by dividing
Rooms Occupied by Rooms Available. Complimentary rooms are not included
in the Rooms Occupied.
Financial Ratio
� Cash-on-Cash Return is calculated by dividing the Adjusted Net Operating
Income, less debt-service, by the Average Owner�s Equity for the period
being measured.
Condo Hotels
� Guidance is provided in the Rooms Department section of the tenth
edition regarding the reporting of revenues and expenses for mixed-use
properties.
� When condo hotel revenue is reported within the Rooms Department,
then the Rooms Occupied and Room Available within the condo portion of
the operation should be included in the hotel�s overall performance statistics.
� When condo hotel revenue is reported within the Other Operated Departments,
or Rentals and Other Income, then the Rooms Occupied and Room Available
within the condo portion of the operation should not be included in the
hotel�s overall performance statistics. In this circumstance, it
is recommended that a separate schedule be prepared to show the occupancy
and ADR for just the condo hotel operation.
MIXED-OWNERSHIP LODGING FACILITIES
The Tenth Edition provides guidance for reporting operations derived
from projects that include elements where ownership is held by a party
other than the hotel owner. These projects include condo hotel operations,
timeshare, fractional, and whole ownership elements where the hotel operator
may be providing hotel services for the element owners. Due to the
diversity of contractual arrangements that exist between owners and operators,
the reporting of revenues and expenses will vary depending on the facts
and circumstances of each contract. The Tenth Edition provides guidance
with respect to determining whether revenues and expenses derived from
condo hotel and other mixed ownership situations should be reported in
the Rooms Department, Other Operated Departments, or Rental and Other Income.
The Tenth Edition does not cover the reporting of results from Time Share
operations and Fractional operations, both of which are covered by another
publication. The following paragraphs summarize the factors to be
considered.
Reported in Rooms Department
� The hotel assumes the economic risk associated with operating the
third-party-owned units pursuant to a contractual relationship that extends
beyond one year. For example, when a hotel operator enters into an
agreement with a unit owner to take the economic risk of marketing and
filling the �condo� unit for the owner, the revenues and expenses resulting
from that activity are integrated in to the operations of the hotel.
In other words, the revenues derived from these activities are included
in the hotel�s Rooms Revenue, while the expenses incurred are reported
in their appropriate departments (i.e. rooms, maintenance, utilities, etc�)
� In this circumstance, the available and occupied room counts should
be included in the hotel�s rooms statistics calculations.
Reported in Other Operated Departments
� If the third-party owner of the unit shares in the risk associated
with the operation of the unit, a management relationship exists.
For example, the contract dictates that revenues are split between unit
owners and management, as well as expenses. In this circumstance,
hotel management is operating a condominium operation, and this operation
is reported as a Condominium Department within Other Operated Departments.
� In this circumstance, the available and occupied room counts should
not be included the hotel�s rooms statistics calculations. However,
it is recommended that supplemental rooms statistics tables be created
to capture the performance of the third-party owned units, as well as to
report the statistics of the entire business unit.
Reported in Rental and Other Income
� If hotel management receives a fixed dollar amount, a percent of
revenue, or reimbursement that is net of specified expenses in exchange
for marketing the condominium unit, then the fee received by the hotel
is reported in Rentals and Other Income. For example, management
is responsible for renting and maintaining the units. However, the
unit owners retain all revenues and pay all expenses associated with ownership
and maintenance. One of those expenses is the fee they pay to hotel
management.
� In this circumstance, the available and occupied room counts should
not be included the hotel�s rooms statistics calculations. However,
it is recommended that a supplemental rooms statistics table be created
to capture the performance of the third-party owned units.
SUMMARY OPERATING STATEMENT
� The former �Summary Statement of Income� is now entitled �Summary
Operating Statement� in order to provide a more operational review of hotel
revenues and expenses.
� The Summary Operating Statement is prepared for analytical purposes
and is not in accordance with generally accepted accounting principals.
� Account titles have been altered to reflect typical lodging terminology.
For example, �Gross Operating Profit� has replaced �Income after Undistributed
Operating Expenses.�
� The Summary Operating Statement does not link to Net Income because
a deduction is made for replacement reserves. This approach is more
informative for the owner or manager who is focused on operating cash flows.
� Due to the difficulties encountered allocating revenues and expenses
between the Food and Beverage Departments, all food and beverage revenues
and food and beverage expenses are presented in a combined manner on the
Summary Operating Statement.
� Telecommunications is now an Other Operated Department.
� Revenue is reported in just four line items: Rooms, Food and Beverage,
Other Operated, and Rental and Other Income.
� There are just three matching operating department expense categories:
Rooms, Food and Beverage, Other Operated Departments.
� Undistributed expenses are to be assigned to one of four departments:
Administrative and General, Sales and Marketing, Property Operations and
Maintenance, and Utility Costs.
� Management may create sub-schedules for each operated and undistributed
department. However, the revenues and expenses in the sub-schedules
must role up into the designated revenue and expense categories listed
in the Summary Operating Statement.
� Management fees, inclusive of base and incentive fees, are presented
as a discreet expense item.
� Fixed charges consist of Rent, Property and Other Taxes, and Insurance.
� The term �Net Operating Income� replaces �Income Before Interest,
Depreciation, Amortization, and Income Taxes.�
� �Adjusted Net Income� is calculated by subtracting a replacement
reserve (funded or non-funded) from �Net Operating Income.�
The following table presents the format of the new Summary Operating
Statement. |