USALI 12th Revised Edition, Deep Dive: Annual Mandatory Brand and Operator Costs – Schedule 16
Just released, the Uniform System of Accounts for the Lodging Industry (USALI) 12th Revised Edition has been meticulously updated by the Global Finance Committee (GFC) with guiding principles to enhance transparency in reporting, broaden data sets to better inform decision-making, and align with contemporary practices.
To support its release, GFC members are also presenting a series of webinars. Be sure to register for the monthly “USALI 12th Revised Edition, Deep Dive” webinars running through September 2024. Accompanying the webinars are correlating blog posts, including this one which precedes the webinar “USALI 12th Revised Edition: Payroll FTE – Schedule 15 and Annual Mandatory Brand and Operator Costs – Schedule 16” taking place on August 8 at 11:00 a.m. CDT. This blog post covers the Annual Mandatory Brand and Operator Cost Schedule (16).
Hotel owners frequently engage a management company (operator) to operate their hotel. Further, hotel owners or operators will engage a brand to provide marketing and reservation services. Sometimes the brand provides operator services, as well.
The definition of an operator and brand are as follows:
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An operator is defined as the organization responsible for overseeing and directing the day-to-day operations, including sales and marketing, guest satisfaction, human-resource management, maintenance of the books and records, and financial reporting.
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A brand is defined as the organization that contracts for the use of its name, business systems, and commercial services to attract customers to the hotel.
Purpose
Historically, the majority of fees could be recorded in a few major categories within the operating statement:
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Management Fees (base and incentive)
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Marketing Assessments
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Guest Loyalty Program Expenses
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Franchise Royalties
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Reservation Fees
Over the years, the services provided by brands and operators have expanded into the areas of technology, training, purchasing, employee recruiting, and payroll processing, usually to promote or maintain standards and often at a lower cost than a single property could achieve due to economies of scale. The brands and operators charge for these reimbursable expenses, and the costs are recorded across multiple applicable departments.
The Annual Mandatory Brand and Operator Cost — Schedule16 has been developed for the USALI 12th Revised Edition to capture all these expenses in one easily viewable table. Only costs that are mandatory are included in Schedule 16. Optional services ordered by the owner, and pass-through expenses (e.g., travel agent commissions, business intelligence reports) should not be included in Schedule 16.
Structure of Schedule 16
Schedule 16 is divided into four sub-categories. The expense titles within each sub-category are also provided.
Rooms:
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Reservations (includes mandated costs for brand or operator central reservation system)
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Other (includes complimentary food and beverage and on-property costs for loyalty program member benefits)
Sales and Marketing:
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Revenue management services
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Franchise and affiliation marketing
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Franchise and affiliation fees: Royalties
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Loyalty programs
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Loyalty programs promotions
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E-commerce and digital marketing
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Other sales and marketing
Information and Technology:
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On-property revenue systems
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Property IT support
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Centralized information systems
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Information security program
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Other information technology costs
Programs, Systems and Services:
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Human resource and payroll systems
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Risk management program
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Procurement
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Other HR services
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Base and incentive management fees
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Centralized accounting
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Ancillary accounting services
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Other programs, systems, and services
Expenses are presented both on a total annual dollars and percent of total operating revenue basis. Discrete columns are presented for current and prior year data for both the operator and the brand, and in total.
It should be noted that the expense categories presented in Schedule 16 may not be compatible to similarly titled classifications in the operating statement, and therefore should not be relied upon for benchmarking purposes.
Bundled Expenses
Brands and operators often combine reservation, marketing, central information system, and administrative support assessments into bundled program charges. In this circumstance, the preparer should seek guidance from the brand or operator regarding the estimated allocation of the bundled program charges across the designated sub-categories. If such guidance is not available, the unallocated bundled program charges should be recorded in the Franchise and Marketing Expense category within the Sales and Marketing department.
Use of Schedule 16
Schedule 16 should be prepared once a year when all the associated costs have been tabulated. Because the definition and extent of services provided by brands and operators differ significantly, Schedule 16 should not be used to compare and benchmark costs amongst brands and operators.
The USALI is a leading publication with operational information pertinent to the lodging industry. The most current edition is available for purchase as a hard copy book or as a digital subscription. First published in 1926, the primary purpose of this publication is to offer operating statements formatted to provide hotel owners, managers and other interested parties with operational information pertinent to the lodging industry. Learn more at usali.hftp.org.
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