Where USALI Ends: Why Vacation Rentals Need an Extension of Hotel Accounting Standards

A few weeks ago I argued in this article that vacation rental management has a financial blind spot: no reporting standard produces a true, unit-level view of what a property earns, because the model splits costs across two parties that the Uniform System of Accounts for the Lodging Industry — USALI — was never designed to reconcile. The response I heard most often came down to a single word.

Abandon it.

If USALI does not fit vacation rentals, the reasoning goes, then vacation rental operators should stop pretending it does and build something entirely their own. It is an understandable reaction. It is also the wrong lesson, and drawing it would set the sector back rather than forward.

What a uniform system actually gives you

It is worth being precise about what USALI is, because the value people attribute to it is often not the value it actually delivers. USALI has served the hotel industry for roughly a century. Its worth is not in any particular schedule or line item. Its worth is in the discipline of a uniform system itself — the fact that a property in one city can be measured against a property in another and the comparison means something, because both are keeping score the same way.

That comparability is not a small thing. It is the foundation on which benchmarking, lending, valuation, and management accountability all rest. Strip it away and every operator is speaking a private dialect, and no one — not owners, not lenders, not the operators themselves — can tell strong performance from weak with any confidence. The uniform system is infrastructure. You notice it the way you notice a road only when it ends.

Every standard encodes an assumption

Here is the idea I want to put forward, because I think it matters well beyond vacation rentals: every financial reporting framework encodes an assumption about the business it measures. USALI encodes a specific and, for hotels, entirely reasonable one — that a single operating entity controls both the revenue and the cost of the asset. In a hotel, it does. The operator books the room and also pays for the housekeeping, the utilities, the insurance, and the roof. One entity, one set of books, one complete picture. USALI works beautifully because its central assumption matches the business exactly.

The moment that assumption stops matching the business, the framework starts to strain — not because the framework is flawed, but because it is being asked a question it was never built to answer. This is not a defect unique to USALI. It is true of every accounting standard ever written. A standard is a lens ground for a particular subject. Point it at a different subject and the image blurs.

The boundary, drawn honestly

So the useful question is not whether USALI is good or bad. It is where its assumption holds, where it strains, and where it breaks. Drawn honestly, the boundary has three zones.

Where it holds cleanly: full-service and limited-service hotels, resorts, and any lodging asset where one entity owns the operating economics end to end. Here USALI is not just adequate; it is excellent, and nothing about the vacation rental conversation changes that.

Where it strains: mixed structures — management contracts, owner-operator splits, properties where some costs sit with one party and some with another. USALI can be adapted to these with effort and judgment, and practitioners do it every day, but the fit requires work because the underlying assumption is only partially true.

Where it breaks: the vacation rental management model, where the split between the management company and the individual property owner is not an exception to the structure but the structure itself. The management company holds booking revenue and its own operating costs; the owner carries insurance, HOA dues, utilities, taxes, and debt service. Two ledgers by design. Here USALI cannot produce a unit-level net return, not because it is deficient, but because it is being asked to reconcile something outside its frame.

Extend the discipline; do not discard it

Once the boundary is drawn this way, the right response becomes obvious — and it is not abandonment. Abandoning the uniform-system discipline would mean surrendering the very comparability that makes reporting worth doing. It would trade a framework that does not quite fit for no framework at all, which is a worse position, not a better one. The sector would gain the freedom to measure however it liked and lose the ability to measure anything against anything.

The right response is extension. Keep the discipline of a uniform system — the commitment to a shared, comparable, auditable structure — and extend it to the parts of the business the existing standard was never built to reach. In the vacation rental case, that means adding the owner-cost layer that USALI leaves out, and doing it in a standardized, transparent way rather than a bespoke one. That is the logic behind the framework I have been developing and implementing across our portfolio: not a rejection of USALI, but an attempt to carry its discipline across the boundary into territory it does not currently cover.

I want to be careful not to overstate one operator's work. A framework built inside a single company is a starting point, not a standard. Standards are made by industries, not by individuals — through associations, through shared practice, through the slow accumulation of agreement about what to measure and how. My point is not that I have solved this. My point is that the sector should be trying to, and trying in the right direction.

The boundary is the frontier

There is a tendency to treat the limits of a standard as an embarrassment — evidence that it has failed and should be replaced. I would argue the opposite. The boundary of a good standard is not where it fails. It is where the discipline has not yet been extended. Mature industries do not abandon their standards when their businesses evolve past them. They extend them. USALI itself is the proof: a century of revisions, each one carrying the same core discipline into circumstances its authors could not have foreseen.

Vacation rental management is the newest such circumstance. It does not need us to throw out a hundred years of accumulated discipline. It needs us to carry that discipline across one more boundary — deliberately, transparently, and together. That is not a failure of the standard. It is the next chapter of it.