UNIFORM SYSTEM OF ACCOUNTS FOR THE LODGING INDUSTRY

UNIFORM SYSTEM OF ACCOUNTS FOR THE LODGING INDUSTRY
Eleventh Revised Edition AHLEI - Education Institute Webinar Date:

Today’s Presenters Ralph Miller – Inntegrated Hospitality Management, Ltd. Cindy Braak – Marriott International Inc. Robert Mandelbaum – PKF Hospitality Research LLC W. Peter Temling – The Temling Group, LLC USALI 11th Edition  2

Presentation Outline The Process for Updating the USALI
Summary Operating Statement Multi-Department Changes Operating Department Undistributed Departments Non-Operating Income and Expenses Financial Statements Financial Ratios and Operating Metrics Revenue and Expense Guide Implementation for January 1, 2015 Questions and Answers

Who is Responsible For Changes
Hotel Association of New York City Owns Copyright American Hotel & Lodging Association Financial Management Committee – Author Education Institute – Publisher Hospitality Financial Technology Professionals Sponsor

Committee Membership Hotel Industry Constituents
Individual Hotel Owners Hotel Chains Educators Public Accounting Smith Travel Research / PKF Consulting Owner Representatives / Asset Managers Management Companies Consultants Chains Represented Asset Managers Carlson Hotels Capital Hotel Mgt Fairmont FelCor Lodging Trust Four Seasons HOST Hotels Hyattt Hotel Ave Marriott HVS Starwood Pebblebrook Hotel Trust JHM Hotels Thayer Lodging

The Process Financial Management Committee of the AH&LA
First Meeting - November 2011 Process started with a review of 2011 survey of HFTP members. Each committee member added their own issues. Sub-Committees Tasked With Different Sections of the Book Quarterly meetings Discussions Research Votes (simple majority) Forwarded to Publisher for Editing February 2014

Reasons for Changes Keep up with changes in industry practice
Technology Cluster Services Sustainability Distribution Channels Globalization Ratio Analysis New Terminology Keep up with changes in accounting practice IFRS GAAP Recognition that USALI has global application, referenced in management agreements, and ‘brand’ management reporting internatinally. Increasing importance of technology as a guest amenity, in distribution, and as a cost centre. Cluster services becoming common in major urban areas Increasing reliance on electronic distribution channels Need to incorporate operating metrics into the management reporting standard

Summary Operating Statement

Summary Operating Statement
Revenue Rooms Food and Beverage Other Operated Departments Miscellaneous Income Total Operating Revenue Departmental Expenses Total Departmental Expenses Total Departmental Income On the revenue section, “Rentals & Other Income” has become “Miscellaneous Income”, and the section has several new and important accounts added to it.

Summary Operating Statement (continued)
Undistributed Operating Expenses Administrative and General Information and Telecommunications Systems Sales and Marketing Property Operations and Maintenance Utilities Total Undistributed Expenses Gross Operating Profit Management Fees Income Before Non-Operating Income and Expenses The growth of technology resulting in greater IT expenses and resources has justified a new Undistributed department dedicated solely to Information and Telecommunications systems. Income before Non-Operating Income and Expense replaces Income before fixed charges.

Summary Operating Statement (continued)
Non-Operating Income and Expenses Income Rent Property and Other Taxes Insurance Other Total Non-Operating Income and Expenses EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) Fixed Charges is now Non-Operating Income and expense. As indicated by the name, there is now an Income category below GOP Net Operating Income is now called EBITDA, which makes it consistent with the financial reporting of other industries.

Summary Operating Statement (For Operator)
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) Less: Replacement Reserve EBITDA Less Replacement Reserve There are now two versions of the Summary Operating Statement recognizing the needs of both Operators and Owners The Operators Summary Operating Statement deducts the replacement reserve from the EBITDA to give EBITDA Less Replacement Reserve. This is effectively net operating cash flow.

Summary Operating Statement (For Owner)
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) Interest, Depreciation, and Amortization Interest Depreciation Amortization Total Interest, Depreciation, and Amortization Income Before Income Taxes Income Taxes Net Income The Owners Summary Operating Statement presents EBITDA less Interest/Decprec/Amort and Income Taxes to arrive at Net Income

Multiple Departments A number of new expense lines were added and some deleted, that run across multiple departments. Starting with labor

Multiple Departments - Labor Reporting
Migration from Payroll Costs to Labor Costs Considers the growing impact of ‘Outsourced Labor’ in hotel operations Includes payroll costs plus outsourced labor in metric analysis and benchmarking The focus on reporting is shifting from the cost of payroll to the total cost of labor, recognizing the move toward clustering and outsourcing. The cost of labor is now Total Salaries, Wages, Service Charges, Contracted Labor and Bonuses Contracted, Leased or Outsourced Labor – represents the cost of contracted labor incurred in situations where a third party provides employees to fill positions that would otherwise be filled by hotel employees. The key factor in this case being that the hotel tracks the hours and directly supervises the employees. .

Multiple Departments – Labor Reporting
The aggregated Salaries and Wages of Management and Non-Management personnel are presented on the department schedule. Service Charge Distribution is presented as a distinct cost category within Salaries, Wages, Contracted Labor and Bonuses. Department schedules break out the cost of Management and Non-Management S&W. As an example, the Rooms department would list, total management on one line and then on individual lines, Non-management Front Office, Reservations, Housekeeping and Guest Services. The intent is the identify that labor, which is primarily variable, and that which is primarily fixed. Service Charges now form part of the S&W cost as well. There was considerable discussion of service charges by the committee and it is now recognized as revenue (when collected) and labor expense (when paid), consistent with both GAAP and the IRS rules.

Modified Labor language and descriptions for relevancy All bonuses now go into the Bonus & Incentive line Goal to broaden categories for payroll taxes and benefits to reflect global needs Added category to consolidate benefits for ex-pats Language in the description of the labor accounts was modified to be more relevant in todays business environment. All bonuses now fall in the bonus and incentive line, regardless of whether they are discretionary or performance related. Payroll tax descriptions are more global in nature (Nat’l & State Retirement vs FICA) Supplemental pay picks up al other types of pay not identified in the other categories For hotels with employees on expat pay packages, there is now a category for expat benefits

Labor Costs and related Expenses Salaries, Wages, Contracted Labor and Bonuses Salaries and Wages Management Non-management Sub-Categories as needed Sub-Total: Salaries and Wages Service Charge distribution Contracted, Leased or Outsources Labor Bonuses and Incentives Total Salaries, Wages, Service Charges, Contracted Labor and Bonuses Payroll-Related Expenses Payroll Taxes Supplemental Pay Total Payroll Related Expenses Total Labor Cost and Related Expenses Where a hotel has only one individual in the management category in a department and the report would disclose their salary, the hotel can merge management and non-management for reporting.

Multiple Departments – Gross vs Net
Enhanced accounting guidance is provided for the reporting of revenues and expenses on a Gross vs Net basis. A separate section was created for this topic. Guidance on Gross vs Net reporting is applicable to all departments. Readers are advised to refer to the Gross vs Net section. Readers should go through all of the criteria for Gross vs Net and pay particular attention to (a) who bears the economic risk (who pays if the client fails to) and (b) who does the client believe is obligated to perform the service. This section ties back to FASB codification #

Service Charges Definition
A service charge is a mandatory amount billed to the customer’s account for which the customer has no discretion as to payment, the amount of the charge, or it’s distribution to employees. Treatment Service charges must be treated as revenue and any corresponding payment of service charge to employees is treated as a wage expense. As mentioned, service charges received a considerable amount of attention by the committee. Close attention must be paid to the definition of a service charge, which must meet the following criteria The payment is mandatory , and The customer has not discretion as to: The payment The amount of the charge Or it’s distribution to employees

Multiple Departments – New Expenses
A new expense category has been added to account for Cluster Services. Department specific Reservation Expenses are charged to the appropriate operating department. Each department will have an In-house Entertainment account. Cluster services is added for costs of services shared between hotels in a region. If labor can specifically be identified, it should go to the salaries, wages and benefits, however if not would remain in this line Reservations expense is permitted in other departments such as F&B and spa. In-house Entertainment was added to recognize that meals and entertainment can occur on the property. In the 10th edition, the description was only for meals and entertainment while travelling.

Multiple Departments – Admin. Telecom.
All administrative telecommunications expenses are recorded in the Information and Telecommunications Systems department.

Operating Departments

Summary of Rooms Department Changes
Rooms Revenue segments revised and listed on the face of Rooms department operating statement, and definitions added for each segment Package Revenue language “tightened up” and package breakage treatment addressed Resort Fees moved to Miscellaneous Income (Schedule 4) Rooms Service Charges added as this is common in certain geographic areas. Rebates or subsidies granted directly to a group moved to Contra Revenue vs. being treated as part of Commissions and Rebates – Group expense Expanded Complimentary Services and Gifts expense item to three separate expense categories, to include Complimentary Food & Beverage and Complimentary In-Room/Media Entertainment Enhanced guidance is provided regarding the handling of Revenues & Expenses associated with mixed ownership lodging facilities. Thanks, Chris. Moving on to slide #24 The Rooms dept revisions are summarized on this slide. They primarily reflect the desire to drive for greater consistency, and to prevent manipulation of RevPAR, a key benchmark in the industry. Let me touch briefly on these 7 revisions: #1 - The rooms revenue segments revision reflects a partnership with our experts in Revenue Management and members of HSMAI to make these more relevant, and matches closely what is reported to Travel Click #2 - Package revenues revisions are more about “tightening up” the language to promote better compliance. This is a source of frustration due to allegations of competitor hotels either not allocating revenue out of Rooms to other depts or using unreasonably low amounts, thereby inflating RevPAR # 3 - Resort Fees were a real hot topic but the solution to move them out of rooms altogether was well received, especially since these represent fees for all of the non-rooms amenities provided to the guest. #4 – The addition of Rooms Service charges reflects the globalization of the book #5 - The recording of rebates or subsidies paid directly to a group were erroneously shown to be an expense category in the 10th Edition, so this has been fixed in the 11th Edition #6 – Complimentary Services & Gifts expanded into three different categories of complimentary costs to help distinguish these items #7 – Mixed Ownership lodging facilities was quite the hot topic with the 10th edition but needed great clarity. We leveraged a lot of the work done around Gross vs. Net revenue reporting to enhance this section.

Rooms Revenue Segments
More detailed room revenue reporting, with segmentation more aligned with revenue management definitions 10th Edition 11th Edition Transient - Commercial/ Corporate - Leisure - Government/ Military - Frequent Guest/ Preferred - Travel Packages, FIT - Hotel Packages - Internet - Retail - Discount - Negotiated - Qualified - Wholesale Group - Corporate - Association/ Convention - Government - Tour group - SMERF - Tour group / Wholesale Contract Material Change in Transient Segments; Added Definitions Minor Change in Group Segments; Added Definitions Moving to slide #25 This slide compares the Rooms Revenue Segments - 10th edition vs. the 11th edition. There was a strong desire to “beef up” the guidance around rooms revenues and be more aligned with current practices/thinking. This resulted in 3 primary revisions: Revised the sub-segments under Transient and Group, although the major changes were all in Transient Revised the face of the Rooms Dept operating statement (Schedule 1) to show all of these sub-segments 10th edition showed Transient, Group and Contract 11th edition shows 5 sub-segments under Transient and Group Provided definitions for each of the sub-segments Again, these revisions reflect a great partnership with the experts in Revenue Management.

Package Revenues Established minimum frequency of once a year for setting ratios by which Package Revenues are allocated Encouraged more frequent ratios adjustment where needed (e.g., highly seasonal hotels like resorts) Changed allocation treatment for revenue components provided by third-party vendors to conform with GAAP, that is, to be part of the revenue allocation Added language to define “package breakage” and provided guidance to record this in Miscellaneous Income (Schedule 4), as a means of simplifying the process and causing less distortion in the other non-Rooms departments Moving to slide #26 The inconsistent handling of Package allocations is a constant source of frustration. This inconsistency impacts the credibility of RevPAR comparisons, a key metric in the industry. Four primary changes were made in this section: Language was added to mandate ratios to be updated at least once a year More frequent updates were encouraged if conditions would require it (e.g., highly seasonal hotels like resorts where prices peak at certain times of the year) The 10th edition provided erroneous guidance, that is, to deduct the price of 3rd party supplied goods/services before allocation. This has been corrected in the 11th edition. The 10th edition did not address package breakage, Guidance has been added to the 11th edition to record this in Miscellaneous Income. A paragraph was added to emphasize that “Market” values should be driven by the revenue component of the item, not by the profit margin or cost of the item.

Resort Fees and Surcharges
In the 10th Edition, under Other Rooms Revenue, there was a caption entitled, “Resort Fees and Surcharges”, which has been changed to “Surcharges and Service Charges” Two other changes were made: Service Charges in Rooms is specifically called out, as this is common in certain geographic areas Resort fees are specifically called out as NOT being part of Other Rooms Revenue and should now recorded in Miscellaneous Income (Schedule 4) NOTE: The key determining factors for the recording of Surcharges and Service Charges are set out in the Appendix 1: Gross vs Net Reporting. The property must assess whether it is acting as an Agent or as Principal in the transaction in order to make a determination on reporting the revenue from that transaction on a gross or a net basis. Moving to slide #27 Three changes were made in this area of Rooms: First was a caption name change – “Resort Fees” were pulled out altogether and renamed “Surcharges and Service Charges” The 10th edition made no reference to service charges in the rooms depts, or what is referred to as rooms service charges. This has been added since this is very relevant in those markets where it is standard practice. Resort fees have been moved out of the Rooms dept altogether and should NOT be a component of ADR or RevPAR. These fees are now to be credited to Miscellaneous income. STR guidelines will enforce this revised treatment.

Rebates or Subsidies Granted Directly to a Group
The Tenth Revised Edition had an expense category entitled, “Commissions and Rebates – Group”, which has been changed to “Commissions and Fees – Group” The expense category caption was changed to remove “rebates” and add “fees” Removed a portion of the last sentence stating, “This line item also includes rebates or subsidies granted directly to the group” to conform with GAAP, since these should be a reduction of revenue Added a sentence to reinforce the proper GAAP treatment of rebates or subsidies, “Rebates or subsidies granted directly to a group should be recorded as contra revenue.” Moving to slide #28 The 10th Edition provided for the overstatement of revenue by stating that rebates or subsidies paid directly to a group should be recorded as an expense as opposed to its correct accounting treatment as a reduction of revenue, or contra revenue To address this error, three changes were made: Changed expense category title from “rebates” to “fees” Removed last sentence since this contradicted GAAP Added a sentence to reinforce the proper treatment of rebates

Complimentary Services and Gifts
Expanded “Complimentary Services and Gifts” into 3 expense categories: Complimentary Food and Beverage Complimentary In-Room/Media Entertainment (previously Cable/Satellite TV) Complimentary Services and Gifts Moving to slide #29 These three Complimentary expense line items now appear one after the other in the Rooms dept. F&B: this is easy to relate to, especially when these are provided as part of a concierge or executive lounge In-Room/Media Entertainment: This used to be “Cable/Satellite Television”; this includes costs for in-room media (e.g., cable music, games, satellite video) Complimentary Services and Gifts: This category captures everything else, such as a complimentary fruit basket sent to the room of a frequent guest.

Mixed Ownership Lodging Facilities
Mixed Ownership is reported in one of three ways depending upon the agreement between the property and the unit owner. Identifying the treatment includes a review of the Gross versus Net reporting. Property assumes the predominant economic risk–long term. The units must be in the hotel inventory for sale throughout the entire year and the hotel has contractually assumed the predominant economic risk. The revenues, expenses and statistics are all included in the Rooms Department Operating statement. Property assumes the predominant economic risk–short term. The units are only in the hotel inventory for sale for part of the year and the hotel has contractually assumed the predominant economic risk. The revenues and expenses are included in the Other Operated Departments section. The units are not included in room inventory or reported as rooms statistics. Third Party Unit Owner assumes the predominant economic risk–The owner has assumed the economic risk and the commission paid to the hotel as Agent is recorded net in Miscellaneous Income. Any recovery of costs is also recorded as revenue in the same department. The units are not included in room inventory or reported as rooms statistics. Moving to slide #30 Mixed Ownership was a hot topic at the time of writing the 10th edition. For the 11th edition, we leveraged the work around Gross Vs. Net revenue reporting, and tried to clarify the guidance by laying out three scenarios – emphasizing the predominant economic risk in each. Predominant risk drives what activity is reported and where it is reported: Property assumes long term economic risk – Gross reporting in Rooms dept & inclusion of room stats Property assumes short term economic risk – Gross reporting in Other Operated dept (NOT in Rooms) & no room stats Third Party owner assumes economic risk – Net reporting in Miscellaneous Income & no room stats I’d now like to turn it over to my colleague and chairman of the committee who gave us the 9th and 10th editions for USALI, the infamous Peter Temling

Summary of Food and Beverage Department Changes
Focus on combined Food and Beverage Operations. COVER terminology dropped in favor of CUSTOMER. Public room set-up charges added. Expanded discussion regarding AUDIO VISUAL revenue recognition. Gift certificate revenue recognition expanded. Thanks, Cindy (infamous??) The two most significant changes in the F&B Department are items 1) and 2) on this slide and they are: the elimination of the separate Food and Beverage sub-schedules (all Food and Beverage revenues, costs and expenses are now reported on Schedule-2) and the change in the terminology from COVER to CUSTOMER…This is more than just a name change, since a CUSTOMER is now defined as one person who is served in a F&B Venue or Function Space. In other words, both F&B revenue is measured BY CUSTOMER. The reason for this change was to allow consistent benchmarking of hotel F&B operations in accordance with the terminology developed by the AH&LA Food and Beverage Council in 2012. Additionally, we have also included further reporting guidelines regarding AUDIO VISUAL and GIFT CERTIFICATE revenue recognition. The key determining factors for the recording of AUDIO VISUAL Charges are set forth in the Gross vs. Net reporting in PART V of the book. The property must assess whether it is acting as an Agent or Principal in the transaction in order to determine how to report the revenue from that transaction. GIFT CERTIFICATE revenue recognition will be covered shortly.

Food and Beverage Format
Separate food and beverage summary statements are not an alternative in the 11th edition; rather, all properties must report a summary schedule that includes both food and beverage revenues. Line items for total food and total beverage revenues are presented in the new summary statement. 10th Edition 11th Edition Revenue Outlet Food Revenue Outlet Beverage Revenue In–Room Dining Food Revenue In–Room Dining Beverage Revenue Banquet/Catering Food Revenue Banquet/Catering Beverage Revenue Mini Bar Food Revenue Mini Bar Beverage Revenue Other Food Revenue Other Beverage Revenue Less: Allowances Total Food and Beverage Revenue Banquet/Conference/Catering Food Revenue Total Food Revenue Banquet/Conference/Catering Beverage Revenue Total Beverage Revenue All food (beverage) revenue presented together This is the new revenue reporting format. For comparison, the 10th Edition format is shown on the left. Separate Food & Beverage statements are no longer an alternative in the 11th Edition. Clarity was provided to the treatment of Soft Drinks. All Soft Drinks are considered FOOD revenue. Following this revenue section is OTHER REVENUES Food and beverage sub schedules optional

Surcharges and Service Charges
Food and Beverage surcharges and service charges are consolidated in Other Revenue. Surcharges and Service Charges generally include any mandatory, non-discretionary, or other charge automatically added to a customer account in respect of the use of a service or amenity, and may include, but are not restricted to, such items as: Item Revenue Recorded as Banquet service charge Restaurant service charge Rooms service delivery charge Corkage charge F&B Other Revenue OTHER REVENUES includes Surcharges and Service Charges which are generally defined to include MANDATORY, NON-DISCRETIONARY charges or other charges that are AUTOMATICALLY added to a customer account. These may typically include Banquet or Restaurant Service Charges, Room Service delivery charges, or corkage charges. As is the case with AUDI VISUAL revenue, the key determining factor for the recording of Surcharges and Service Charges are set forth in the Gross vs. Net reporting in PART V of the book. The property must assess whether it is acting as an Agent or Principal in the transaction. The key determining factors for the recording of Surcharges and Service Charges are set out in the Gross vs Net reporting section. The property must assess whether it is acting as an Agent or as Principal in the transaction in order to make a determination on reporting the revenue from that transaction on a gross or a net basis.

Gift Certificate Revenue
Included in Miscellaneous Other Revenue are unused or forfeited deposits related to gift certificates that are not otherwise required to be escheated to the state or local jurisdiction, or un-presented and expired prepaid food and beverage coupons. Only the discounted value of the prepaid food and beverage coupons not redeemed, or the amount not required to be escheated to the state or local jurisdiction should be recorded as revenue. Unused or forfeited F&B deposits that are not otherwise required to be escheated or turned over to the state or local jurisdiction are reported as Miscellaneous Other Revenue. Please note that only the DISCOUNTED value of these coupons not redeemed or turned over to the state or local jurisdiction is recorded as revenue Moving on to OTHER OPERATED DEPARTMENTS……

Summary of Other Operated Departments Changes
Telecommunications No longer an Other Operated Department. Revenues and cost of sales moved to “Guest Communication” in Minor Operated Departments. Cost of administrative phone calls and internet connectivity moved to new “Information and Telecommunications Systems” department. Cost of complimentary phone calls and internet connectivity moved to new “Information and Telecommunications Systems” department. All other telecommunications related expenses (labor, maintenance, operating supplies) moved to new “Information and Telecommunications Systems” department. Telecommunication is no longer an OTHER OPERATED DEPARTMENT. It is broken up as follows: Revenue and direct cost of sales from telephone and internet guest usage is coded to Minor Operated Departments. All other costs of the Telecommunication department including labour are charged to a NEW Undistributed Department “Information & Telecommunications Systems” Rationale: The telephone operators are merely servicing the department, they do not generate any revenue and therefore there is no need to match that labour cost against the revenues.

Summary of Miscellaneous Income Changes
Name Change Department name changed from Rentals and Other Income to Miscellaneous Income. Other Breakage Unused or forfeited Gift Cards or Gift Certificates, and un-presented or expired Prepaid Coupons are recorded in Miscellaneous Income. Package Breakage Unused revenue from a package recorded in Miscellaneous Income. Resort Fees The entire amount of a mandatory resort fee is recorded in miscellaneous income, even if the fee is described as covering services provided by multiple departments. Additional Guidance Additional guidance provided regarding the definitions for Commissions, Business Interruption Insurance, Foreign Currency Exchange and Interest Income. The name of the RENTS AND OTHER INCOME DEPARTMENT was changed to MISCELLANEOUS INCOME. Included are such items as BREAKAGE from forfeited gift cards or gift certificates, or from packages (of course, subject to local escheat laws). Also included is the entire amount of any mandatory RESORT FEES. If RESORT FEES involve services provided by third parties, the revenue recognition standards are found in the Gross vs. Net Reporting PART V of the book. As previously stated, Mixed Ownership properties which report results on a NET BASIS pursuant to the standards set fourth in Gross vs. Net Reporting in PART V of the book, would show this revenue/commission in this MISCELLANEOUS INCOME department. NOT INCLUDED in this department: FX gains/losses from non-guest transactions (shown in A&G) Unrealized FX gains/losses (shown in Non-Operating Income and Expenses) No-Show Revenue (shown in Other Rooms Revenue) Early Departure Fees (shown in Other Rooms Revenue)

Undistributed Departments
The following slides explain the changes to the Undistributed Departments

Information & Telecommunication Systems
Consolidate all hotel expenses associated for information and telecommunication systems to provide better line of sight cost management Includes cost of cell phones, administrative call and internet services, and complimentary call and internet services. System expenses categorized by type of technology or by area benefiting from technology solution As previously stated, we have created a new department to better track all hotel expenses for information and telecommunication systems. It includes the cost of cell phones as well as the cost of administrative and complimentary calls and internet services. System expenses are now categorized by type of technology as the following two slides will show

Expenses Labor Costs and Related Expenses Salaries, Wages, Contracted Labor and Bonuses Salaries and Wages Management Non-management Information Technology Telecommunications Sub-Total: Salaries and Wages Service Charge Distribution Contracted, Leased or Outsources Labor Bonuses and Incentives Total Salaries, Wages, Service Charges, Contracted Labor and Bonuses Payroll-Related Expenses Payroll Taxes Supplemental Pay Employee Benefits Total Payroll related Expenses Total Labor Costs and Related Expenses Cost of Services Other Cost of Services Cost of Cell Phones Cost of Internet Services Cost of Local Calls Cost of Long Distance Calls Other Cost of services Total Cost of Services As you can see, the department follows a similar format as the other Undistributed departments, starting with LABOR COSTS, followed by COST OF SERVICE, SYSTEM EXPENSE and OTHER EXPENSE. It should be noted that this department EXCLUDES any cost of sales associated with guest communication revenue recognized in the MINOR OPERATED DEPARTMENT

Summary of Additional Undistributed Department Changes
Additional guidance regarding the handling of Foreign Currency Exchange income and expenses. Eliminated segregation of Sales and Marketing expenses. Clarified Revenue Management and Catering Sales Functions as Sales and Marketing expenses. Utility Taxes was eliminated as a separate expense category in the Utilities Department. Contract Services was added as an expense category in the Utilities Department. We have clarified that only FX gains/losses relating to non-guest transactions, such as A/P or A/R, are included in A&G. FX transactions with guests are recorded in MISCELLANEOUS INCOME and unrealized (balance sheet) FX transactions are shown in Non-Operating Income/Expenses Other changes in the Undistributed Departments are: We have combined the Sales and Marketing departments We have classified the revenue management and catering sales functions as S&M Utility Taxes have been eliminated And Contract Services was added in the Utilities Department Now, let me turn it back to Cindy

Non-Operating Income and Expenses
Previously known as the “Fixed Charges Section”. Changed title from “Rent, Property & Other Taxes and Insurance” to reflect that there are other items affecting the property income statement that are not from hotel operations. Added Income line items to Schedule 11: Interest Income from Replacement Reserve or other restricted accounts Other Income such as income from parts of the facility not controlled or directed by hotel operations (e.g., antenna or billboard lease) Cost recovery (should net to zero against cost recovery expense) Thanks, Peter. Moving to slide #42. It was felt that the current title, “Rent, Property & other Taxes and Insurance”, a/k/a/ “Fixed Charges”, was perhaps too limiting and that the use of “non-operating” would be more descriptive of the types of activity to be captured here. The separate owner/operator (or management company) model is pervasive throughout the industry and this helps to further clarify the reporting of activity that is “not related to hotel operations” This allowed for the addition of several revenue or income line items to Schedule 10: Interest Income from FF&E/RR or other restricted accounts Other Income such as income generated from parts of the complex not controlled directly by the hotel operator (e.g., antenna lease) Cost recovery – this relates to income collected from 3rd parties for the recovery of CAM (common area maintenance) and out-of-pocket expenses, where the hotel doesn’t earn a profit

Rent Eliminated 2 discrete line items on Schedule 11 Information Systems & Telecommunications Equipment rent, now both captured under Other Property and equipment rent Added guidance under Land & Buildings rent to include a facility/complex to provide housing for employees, which is common in certain geographic areas Property and Other Taxes Provided additional guidance on Other Taxes and Assessments (e.g., Building Improvement District or assessments for public improvements) Moving to slide #43 Rent expense was changed to show two vs. three line items and language was added under “Land and Buildings rent” to provide guidance for the handling of employee housing, which is common in certain geographic areas Similarly, additional guidance was provided on other taxes and assessments

Added a line item for Deductible under Insurance Added additional expense categories: Cost Recovery Expense Gain/Loss on Fixed Assets Owner Expenses (e.g., asset management fees, owner directed audits) Unrealized Foreign Exchange Gains/Losses (e.g., revaluation of foreign currency bank accounts and Replacement Reserve) Moving to slide #44 A line was added under Insurance to make it clear that the amount paid as deductible should be included here Several other expense categories were added since their absence in the 10th edition resulted in a lack of clarity regarding where these should be reported. The last item here, Unrealized FX G/L, is quite common outside the US and its absence in the 10th edition created lots of questions.

Moving on to slide #45 This slide shows the revised Schedule 11 in its entirety which incorporates all of the revisions mentioned on the previous 3 slides This wraps up the slides on “Non-Operating Income & Expenses”, so I’d like to turn it over to my colleague and friend, Chris Garland

Financial Statements

Summary Financial Statements
Included statement of comprehensive income which replaces income statement Included reference to International Financial Reporting Standards (IFRS) Included gift certificates and cards in current liability section Expanded explanation of inventories Expanded explanation of operating equipment Included explanation of pre-opening expenses Statement of Comprehensive Income adjusts net income for activities that affect equity including unrealized gains on available for sale marketable securities, foreign currency translations and pension liability adjustments to name a few. IFRS is acknowledged for the first time as an alternative to GAAP outside of the US, although this book is written in compliance with US GAAP. The text does provide reference websites that highlight the differences between IFRS and GAAP Inventories which are expensed based on the estimated useful life must be physically counted on a periodic basis to ensure that the estimate of life was reasonable. Adjustments to the amortization must be made where it is deemed not to be reasonable. An finally, Preopening expenses are identified and must be expensed as incurred under GAAP.

Financial Ratios and Operating Metrics
Thank you, Chris,

Summary of Changes Financial Ratios and Operating Metrics
Name changes to Financial Ratios and Operating Metrics The section is divided into two major categories: Financial Ratios and Operating Metrics In the Operating Metrics section, enhanced statistics are provided for operated and undistributed departments, as well as labor. A recommended schedule for the presentation of important statistics will be provided for operated and undistributed departments. A recommended schedule will be provided to present labor statistics for all departments. The name of this PART III section of the book has been changed to FINANCIAL RATIOS AND OPERATING METRICS and both sections have been enhanced with statistics that are recommended for the operating departments and for the undistributed departments. This section also provides guidance for the calculation of financial ratios and profitability ratios.

Summary of Changes Financial Ratios and Operating Metrics
Average Room Rate calculation is based on “rooms sold” instead of “rooms occupied”. “Cover” changed to “Customer” for F&B metrics. Utilities Ratios have been expanded to include: Electric cost ratios, Gas cost ratios, Steam cost ratios, Chilled Water cost ratios, Total Energy cost, Total Utilities cost ratios. In addition, energy usage ratios have been added. While detailed calculations about a hotel’s carbon footprints have not been approved, this edition has laid a foundation for tracking and monitoring a hotel’s environmental impact. This slide highlights some of the changes in the operating metrics: A change in the calculation of the Average Daily Rate, which is now based on ‘rooms sold” instead of “rooms occupied” The change in the F&B department from COVER to CUSTOMER and the inclusion of beverage revenue in addition to food revenue in the calculation. An expansion of the Utilities Ratios to include electric cost ratios, gas cost ratios, steam cost ratios and others. This Edition also laid the foundation for the future tracking of a hotel’s carbon footprint.

Revenue and Expense Guide
Finally, this Edition now includes a REVENUE dictionary in addition to an EXPENSE GUIDE.

Revenue and Expense Guide
Guide for reporting revenues added. User-friendly format – sortable and searchable Both the REVENUE and EXPENSE GUIDE are presented in a user-friendly and searchable format for the electronic version of the book. Thanks for listening, and now let me turn it back to Ralph to wrap up the presentation.

Publication and Implementation

Publication eText publication available for the 1st time
Hard CoverBook is published and is available NOW Implementation for fiscal years beginning January 1, 2015 Hotels should consider the impact of the changes when preparing their 2015 budgets.

Implementation eText version with search capabilities
Resource Portal Frequently asked questions (FAQ) Questions to the FMC Webinar Archive FMC Clarifications and emerging issues Searchable Revenue and Expense Guild Downloadable Excel files for all schedules and statements Hotels should consider the impact of the changes when preparing their 2015 budgets.

Questions & Answers Ralph Miller – Inntegrated Hospitality Management, Ltd. Cindy Braak – Marriott International Inc. Robert Mandelbaum – PKF Hospitality Research LLC W. Peter Temling – The Temling Group, LLC USALI 11th Edition  56

Uniform System of Accounting for the Lodging Industry Eleventh Revised Edition
THANK YOU

UNIFORM SYSTEM OF ACCOUNTS FOR THE LODGING INDUSTRY

Similar presentations

Presentation on theme: "UNIFORM SYSTEM OF ACCOUNTS FOR THE LODGING INDUSTRY"— Presentation transcript:

Similar presentations

About project

Feedback

Log in

Auth with social network:

UNIFORM SYSTEM OF ACCOUNTS FOR THE LODGING INDUSTRY

Similar presentations

Presentation on theme: "UNIFORM SYSTEM OF ACCOUNTS FOR THE LODGING INDUSTRY"— Presentation transcript:

Similar presentations

About project

Feedback