It’s time European hotels adopt USALI standards
It’s time European hotels adopt USALI standards
04 OCTOBER 2018 7:30 AM

Significant clarifications and enhancements are incorporated into the 11th edition of USALI, which benefit owners, brands and operators and these should be accurately implemented as part of the 2019 budget process.

High quality, consistent and timely financial reporting is key to successfully owning and operating hotels, and it is becoming ever more important as the European hotel industry is increasingly attracting institutional capital from across the globe.

In this article, we want to highlight the need for the European hotel industry to adopt the 11th revised edition of the Uniform System of Accounts for the Lodging Industry (“USALI”), which became effective as of 1 January 2015. This call to action is particularly relevant given many hotel operating agreements and loan documents across Europe already specify this as an obligation.

The European hotel industry is experiencing a period of remarkable transformation as the major brands pursue both asset-light and consolidation strategies, franchising becomes much more prevalent and an increasingly diverse pool of institutional capital enters the sector through new ownership structures such as profit sharing leases.

The European hotel market is notoriously “fragmented” relative to other regions in the world. While this unique landscape continues to be a tremendous source of opportunity for all key stakeholders, it is also the source of historically inconsistent reporting standards that have challenged European operators, owners and lenders for years.

As an owner or operator, whether you are currently using USALI’s previous 10th edition or another reporting structure, we believe there are compelling reasons why you should update your reporting standards to be in conformity with the USALI 11th edition in time for the 2019 budget season.

Extensive revisions were made to update the latest edition USALI to be in line with continually developing industry standards and provide much-needed clarification in key areas. Notable changes incorporated into the new 11th edition include:

  • Operating statements significantly enhanced to tailor management reporting to the latest owner and operator needs. Examples include the introduction of IT systems in undistributed expenses, the elimination of the telecommunications department as well as new non-operating income and expense line items.
  • A full suite of operating statements are now included to accommodate wider stakeholder interests such as lenders, valuers and fund management through increased detail on the balance sheet, cash flow statement and statement of comprehensive income.
  • The scope of the operating metrics schedules are increased to include utility ratios, labor ratios to account for clustered and outsourced services as well as greater clarity on food-and-beverage cover versus customer ratios and average daily rate measurement based on sold versus occupied rooms.
  • Room revenue segmentation now reflects the latest industry distribution standards and allows for much greater consistency across operators, brands and regions.
  • Detailed guidance is provided on gross versus net revenue recognition, which impacts numerous revenue and cost recognition items including service charges, resort fees and package allocations. Standardization of such treatment greatly enhances the consistency of data collection.

“Reliability and consistency of data is a fundamental tenet in conducting any meaningful performance analysis. USALI provides for clear and consistent treatment across all revenues and costs. Updating to the 11th edition will ensure benchmarking between different operators and/or countries provides reliable conclusions to enable the key stakeholders to make prudent investment and operational decisions,” said Robin Rossmann, managing director of STR, parent company of Hotel News Now.

USALI is issued by the American Hotel and Lodging Association (AHLA), which appoints a financial management committee made up of a diverse group of industry leaders who are responsible for updating the guidelines. USALI is designed to be consistent with accounting principles generally accepted in the United States (U.S. GAAP) and the 11th edition was adjusted for greater international use. Importantly, the 11th edition was the first edition in recent years to include numerous owners on the financial management committee and as a result, there are a number changes that should provide better balance across the key stakeholders.

“HAMA USA was a proud participant in updating the USALI through its numerous members who actively served on AHLA’s Financial Management Committee. HAMA Europe is committed to supporting this effort by working with the various key stakeholders in Europe to successfully implement this important, value-add initiative,” said Cody Bradshaw, head of European hotels at Starwood Capital Group and president of HAMA Europe.

To order a copy of the 11th Edition USALI, please visit: 

For more information on the key revisions in the new 11th edition of USALI, please visit: 

Nick Chadwick, VP of hotel asset management at HAMA Europe, has more than ten years of real estate and hospitality experience. Currently, Nick is based in Starwood Capital’s London office where he is asset managing a number of Starwood’s European hotel investments. Previously he was on in Starwood’s European acquisition team, where he worked on over $1 billion of hotel acquisitions. Prior to joining Starwood, Nick worked at Ernst & Young in the real estate audit department, where he qualified as a Chartered Accountant.

The opinions expressed in this column do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Bloggers published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to comment or contact an editor with any questions or concerns.

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