Industry Update
Opinion Article 1 July 2015

Treatment of Service Charge for Revenue and Expense Reporting In the Hospitality Industry

By Christopher Garland, Sr Vice President Operations Finance at Four Seasons Hotels

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The 11th revised edition of the Uniform System of Accounts for the Lodging Industry (USALI) was published in the spring of 2014, with an implementation date of January 1, 2015. The responsibility for revising the USALI lies with the Financial Management Committee (FMC) of the American Hotel & Lodging Association (AHLA).

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Throughout the implementation process, the FMC has received several questions from the worldwide lodging industry. To answer these questions, the FMC has created a Frequently Asked Questions (FAQ) document on the USALI resource portal page of the AH&LA Education Institute's website (www.ahlei.org/usali).

In an effort to assist hotel owners and operators with their implementation, the FMC presents a series of monthly articles that address some of the most frequently asked questions. Some of the topics to be discussed include gross versus net revenue reporting, the change from cover to customer counts, mixed-ownership facilities, and operating metrics.

For this month, FMC committee member Christopher Garland discusses the treatment of service charge revenues and expenses.

Treatment of Service Charge for Revenue and Expense Reporting In the Hospitality Industry | By: Christopher Garland

It is usual and customary in the hospitality industry to apply a fixed percentage mandatory service charge to certain revenues. In many cases, some or all of the service charge is paid to hotel employees to supplement their base wages.

In drafting of the 11th edition of the Uniform System of Accounts for the Lodging Industry, the American Hotel & Lodging Association Financial Management Committee (the "Committee") had to determine whether (i) the full amount of the service charge billed to customers should be treated as revenue and the portion (if any) paid to employees deducted as a wage expense, or (ii) the amount of the service charge to be treated as revenue should be net of amounts paid (if any) to employees (with such employee payments treated as a pass through on the balance sheet).

To read the entire article, click here.

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Christopher Garland

Christopher Garland is the Senior Vice President of Operations Finance with Four Seasons Hotels Limited. He serves on the AH&LA Financial Management Committee, where he is Chair of the Sub-committee for Financial Reporting, Analytics & Metrics and was one of the authors of the Uniform System of Accounts for the Lodging Industry 11th revised edition.

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