USALI: The standard that optimizes profitability in hotels.

By Rebeca Sequeira.

A key methodology for profitability in hotels

The profitability of a hotel does not depend only on the number of accommodations sold, but on how the income and costs of each business area are managed. To achieve this, the hotel industry has a global financial standard: the Uniform System of Accounts for the Lodging Industry, better known as USALI .

This system has established itself as the financial benchmark in the sector, allowing individual hotels and international chains to evaluate their financial performance with comparable metrics. In a competitive environment, where operational efficiency can determine profitability, the use of USALI not only facilitates internal management, but also provides strategic information for decision-making.

USALI Origins and Purpose

USALI was born in 1926, when the Hotel Association of New York City developed a common accounting system to facilitate financial management and improve decision-making in the industry. Its success led to its adoption by hotels in other regions, evolving over time to adapt to changes in hotel operations, technology and management needs.

Today, USALI is administered by the Hospitality Financial and Technology Professionals (HFTP) and the American Hotel & Lodging Association (AHLA) , who periodically update their standards to ensure they reflect the financial realities of modern hotels.

Benefits of applying this financial model in hotels

The USALI system is not a simple accounting structure, but a strategic management tool. Unlike traditional financial statements, which present income and expenses in a more general structure, USALI allows the results to be segmented by department, obtaining management indicators or KPIs, facilitating profitability control and cost optimization.

Clear identification of profitability by business area

A hotel is not just about rooms. The operation includes restaurants, bars, room service, hall rentals, spa, shops and more. A well-organized accounting structure allows you to analyze which of these areas generate higher profit margins and which ones might be operating with unnecessary costs.

For the rooms business unit, the key indicator is RevPAR (Revenue per Available Room), which measures the combination of occupancy and average daily rate (ADR).

RevPAR benchmarks by hotel category:

• Luxury hotels: $120 - $350

• Mid-range hotels: $50 - $120

• Budget hotels: $20 - $50

According to STR (Smith Travel Research) , hotels that apply advanced revenue management strategies can increase their RevPAR by 8%-12% annually by optimizing their customer segmentation and adjusting rates based on demand.

Performance comparison with other hotels in the industry

USALI allows hotels to compare their performance with other properties with similar characteristics, both within their chain and with the competition in the market.

Benchmarking example:

• According to CBRE Hotels Research , payroll costs account for 42%-46% of total revenue at a full-service hotel.

• If a hotel has a higher percentage, it may be overstaffed or have inefficient salary structures.

These types of comparisons allow managers to make informed decisions about cost cutting or operational adjustments.

Control of operating costs and efficiency in spending

Well-structured accounting allows you to monitor expenses in greater detail, making it easier to detect cost overruns and savings opportunities.

Operating cost and tax benchmarks performed by EAS LATAM GROUP :

• Marketing: 7% - 10% of total revenue.

• Maintenance: 6% - 10%.

• Public services: 6% - 8%.

• Effective income tax rate: 7% - 10% on gross income.

Monitoring these indicators allows us to identify areas where costs can be optimized without compromising the quality of service.

Technology and operational efficiency: the impact on fixed costs

Digitalization is transforming the hospitality industry, reducing operating costs and improving the customer experience. According to McKinsey, implementing technology in hotel management can reduce operating costs by 15%-25%, optimizing tasks such as:

• Digital check-in and check-out: reduction of staff costs at reception.

• Automated rate management: improved room revenue.

• Data analysis in predictive maintenance: reduction of costs due to unforeseen repairs.

Applied example:

A hotel that automates its reservation management and room assignments could reduce its front desk payroll costs by up to 20%, without impacting the customer experience.

USALI as a tool for the valuation and sale of hotels

If you manage a hotel and plan to sell it or attract investors in the future, having financial statements under the USALI model will not only facilitate the process, but will increase the confidence of potential buyers.

Today, major hotel investment funds require USALI reporting to assess the real profitability of hotels. Having financial statements structured under this model can speed up a purchase negotiation and allow for better justification of the business's sale price.

It is important to clarify that: Although USALI is a widely used standard in the hotel industry, it does not replace International Financial Reporting Standards (IFRS), but rather complements them.

While IFRS establishes general accounting principles applicable to any industry, USALI is a specialized methodology for the hotel industry, focused on the detailed breakdown of revenues and operating costs by department. This allows for a more precise analysis of the profitability of each business unit within the hotel.

A hotel's numbers can tell many stories, but if they are not organized in the right way, they can hide key information for the profitability of the business. The USALI model allows you to see the hotel from the inside, number by number, identifying which areas generate the greatest value and where there are opportunities for improvement.