Selling more and earning less: the management accounting independent hotels lack

There is a question every hotelier has asked at least once, usually at the end of the season, staring at numbers that do not add up as they should: how is it possible to have sold more rooms than last year, at higher rates, and to be left with less margin?

It looks like an accounting question. It is really a question of method. And the answer, almost always, is not in the annual accounts — because the annual accounts were not built to answer it. They were built to answer the tax authorities.

Turnover tells half the story

The hotel sector has an almost affectionate relationship with RevPAR, revenue per available room. It is a useful indicator, immediate and universally understood: it tells you how well a property manages to fill up and to get paid. But it tells you exactly that, and nothing more. It does not tell you what it cost to generate that revenue.

And that is precisely where the end-of-season paradox plays out. If guest acquisition cost, labour and energy rise faster than rooms revenue, RevPAR can climb while profitability falls. The property looks like it is doing better. It is doing worse.

To see this you need a different vantage point: GOP, gross operating profit — what is left after paying the cost of goods sold, staff, utilities and overheads, but before rent, depreciation, interest and tax. It is the margin that measures the quality of the operation, not the financial structure of the building. Set against available rooms it becomes GOPPAR, and at that point two properties of different sizes become comparable on the plane that actually matters: not how much they sell, but how much they keep.

The conceptual leap is simple to state and hard to practise. RevPAR measures the commercial activity. GOPPAR measures the business.

The cost nobody sees until it is too late

There is a structural reason why the independent hotelier knows their revenue day by day and their costs once a year.

Revenue comes through the PMS: every night the system records rooms sold, rates applied, source channel, extras charged. It is live data, available in real time, which the hotelier consults as a matter of habit. Costs, by contrast, go through the accountant’s office and come back reclassified by tax category: purchases of goods, services received, staff costs, depreciation. That is the classification you need in order to file a return. It is not the classification you need in order to take a decision.

The difference is not a subtle one. Knowing you spent a certain amount on “electricity” over the year tells you almost nothing useful: it does not tell you how much the rooms department consumed and how much the kitchen did, it does not tell you how that cost moved month by month against occupancy, it does not tell you whether it grew because tariffs went up or because the property was busier. A number with no destination and no denominator is a number you cannot act on.

It is out of this asymmetry that the opening paradox arises. The hotelier governs revenue in real time and endures costs after the fact. And by the time the year-end figures arrive, the financial year is closed and there is nothing left to correct.

The logic of USALI: cost goes where it is consumed

The USALI system — Uniform System of Accounts for the Lodging Industry — was born in 1926 out of an initiative by the New York hotel association, to solve a banal and intractable problem: different hotels were booking the same items in different ways, and no comparison was possible. Today it is published by HFTP together with the American Hotel & Lodging Association, has reached its twelfth revised edition — adoption of which is set for 1 January 2026 — and has in the meantime become the sector’s lingua franca: the accounting structure that banks, funds, investors and buyers expect to find when they open a hotel’s books.

Its logic is simpler than the acronym might lead you to fear, and it has nothing to do with statutory accounting, which stays where it is and continues to serve the tax authorities. USALI is a management reporting system that sits alongside them, reorganising the same numbers around a different question: not “how much did I spend”, but “where did I spend it, and what did that cost produce?”

The cardinal principle is that a cost is charged to the department that consumed it, not to the tax category it belongs to. First the revenue-generating departments — rooms, food and beverage where it exists, the spa — each with their own direct costs, so that you can see the margin each department genuinely produces. Then the costs that belong to no single department because they support the whole property: administration, sales, maintenance, utilities. Subtract those and you have GOP. Only after that, and separately, come the items the operator does not control: rent, depreciation, finance charges.

This separation is not a technicality. It exists to distinguish what the hotelier can act on from what they simply endure. A profit and loss account that mixes the two makes it impossible to tell whether a disappointing result stems from inefficient operations or from an over-expensive mortgage — two diagnoses that call for opposite treatments.

An Italian advantage almost nobody is using

Up to this point the objection would be obvious: all very well, but who is going to do this work? Reclassifying hundreds of invoices a year by department is exactly the kind of activity an independent property cannot afford, and for which the chains have a controller on the payroll.

Except that in Italy this objection has stopped being true. And for a reason nobody designed for the benefit of hoteliers.

Since 1 January 2019, electronic invoicing has been mandatory for all business-to-business transactions, and since January 2024 the obligation covers every VAT-registered business, including those on the flat-rate scheme. This means that every invoice a hotel receives — from the food supplier, the laundry, the cleaning firm, the utility, the heating engineer — is not a piece of paper, nor a PDF to be retyped by hand. It is a structured XML file, passed through the Revenue Agency’s Exchange System, in which the supplier, their VAT number, the date, the line items, the taxable amounts and the rates all occupy defined fields readable by any software. Even the commissions of foreign intermediaries, which under the reverse charge rules must be documented and transmitted to the same system, end up in that flow.

Italy has built, for revenue-collection reasons, the infrastructure that makes management accounting economically accessible to a thirty-room property. The cost data is already digital, already structured, already in the building. What is missing, in almost every case, is not the data: it is the decision to use it.

From invoice to department: where the real work is

Software connected to the incoming invoice flow can do three things that, done by hand, no independent hotel would ever do.

Collect, to begin with: automatically pick up every document as it arrives, without anyone having to download it, print it, file it or type it into a spreadsheet. It is the most tedious work, and the first to be eliminated.

Categorise, next. And this is where the game is won or lost. Most of a hotel’s suppliers are single-destination: the laundry serves the rooms, the coffee supplier serves the bar, the boiler engineer is maintenance. For these — the large majority of documents — the rule is written once and holds forever: from that supplier, that cost goes to that department. It does not take intelligence, it takes memory.

Ambiguous cases exist, and it is only honest to name them. The food supplier delivering both breakfast items and restaurant stock. The energy bill, which feeds rooms, kitchen and public areas indiscriminately. The cleaning firm covering both bedrooms and shared spaces. For these items there is no exact answer: there is an allocation basis — by square metres, by occupied rooms, by service coverage — which has to be chosen once, declared, and then applied consistently. And here a principle holds that the experience of sector controllers has confirmed for decades: in management accounting, consistency is worth more than precision. An imperfect allocation basis applied identically for twenty-four months produces a readable, comparable time series. A perfect one changed every year produces nothing.

Report back, finally. Because the point of all this is not to file things better, it is to see them sooner. When invoices categorise themselves, the departmental P&L is no longer an annual exercise to be commissioned from a consultant: it is a monthly output that already exists, automatically, the day after the month closes.

One limitation has to be stated without dodging it: staff cost does not come through invoices. It comes from payslips, and attributing it to departments requires information that a time-and-attendance system can supply but that somebody still has to set up. It is often the heaviest line in a hotel’s P&L, and it remains the piece that requires an organisational choice, not merely a technical integration.

A cost you can see is a cost you can negotiate

What changes, concretely, when cost stops being an annual line item and becomes a monthly figure per department?

What changes is that a denominator appears. Rooms department cost divided by rooms actually occupied gives you cost per occupied room: what it genuinely costs, every night, to serve a guest. It is the number from which the minimum rate follows — the rate below which selling a room destroys value rather than creating it. And there are countless hotels that, in low season, sell below that threshold without knowing where it lies.

What changes is that cost becomes comparable over time. A fifteen per cent increase in laundry, read annually and in absolute terms, is invisible: it disappears into the total. Read per occupied room and month by month, it leaps out immediately — and at that point it is still possible to work out whether it stems from a supplier price rise, a change in internal procedure, or waste.

What changes above all is your negotiating position. A hotelier who knows how much each supplier weighs on the cost of a room sold enters a negotiation in a different condition from one who vaguely recalls having “spent quite a bit”. A cost you do not measure is not negotiated: it is endured.

Which brings back the question of lost margin on the commercial side. The OTAs remain the main channel for most unaffiliated hotels today, with commissions averaging between fifteen and twenty per cent of booking value, and higher in the enhanced-visibility programmes. It is a cost nobody considers unreasonable in itself: it is the price of demand the individual hotel could not generate on its own. The problem is not the commission — it is that in ordinary accounting it appears as an aggregate line disconnected from the revenue that produced it. Charged to the rooms department, alongside the revenue it corresponds to, that same commission lets you read net revenue per available room: RevPAR stripped of direct acquisition costs. And to discover, very often, that the channel bringing the most volume is not the one bringing the most margin.

The objection about size

The classic objection remains: USALI was built for chains. That is true. The academic literature confirms it without reticence — the standard is adopted overwhelmingly by chain hotels and luxury properties — and more recent research finds that small independents struggle to apply it in full, because of resource limits and the complexity of some schedules introduced by the latest revisions.

But a different conclusion follows from that observation than the one usually drawn. Not that USALI is unsuited to independents: that it should be adopted by subtraction.

That is the route mapped out by a strand of research developed at the Polytechnic Institute of Leiria by Luís Lima Santos, Conceição Gomes and Cátia Malheiros, which set itself exactly this problem — making USALI useful to micro and small hotels outside the chains — and proceeded in the most obvious and least practised way: identifying the schedules that never get used in practice, and the dozens of line items with no relevance to a thirty-room property, and proposing a simplified framework with a handful of essential statements and a scorecard cut down to only those indicators that bear on a decision.

In any case, departmental logic applied to a property with no restaurant simplifies itself: what remains is rooms and overheads. Fewer departments means fewer statements, not a different system. USALI’s complexity is proportional to the hotel’s complexity, not to the length of the manual.

A choice that has stopped being optional

There is, finally, an element that in Italy shifts the question from the plane of opportunity to that of duty.

Article 2086 of the Civil Code, as formulated by the Business Crisis and Insolvency Code, requires the entrepreneur to establish an organisational, administrative and accounting structure appropriate to the nature and size of the business, including for the purpose of detecting distress and loss of going-concern status in good time. This was once an obligation concerning mainly larger companies; today it extends to the whole population of incorporated businesses — hotels included, regardless of how many rooms they have.

It is not a rule that prescribes USALI, and it would be wrong to claim otherwise. It is a rule that prescribes a control system proportionate to the business. But it changes the terms of the question facing the independent hotelier. It is no longer whether to put management accounting in place. It is on what framework to build it. And if a framework already exists, tested by a century of practice and immediately readable by a bank, a shareholder or a prospective buyer, then building a home-made one is an effort that produces a worse result.

Conclusions

The idea that management accounting is the preserve of the chains rests on a historical misunderstanding that the facts have overtaken. The chains did not adopt USALI because they were big: they adopted it because they had owners and lenders who insisted on knowing where every euro went. Size merely made the cost of that discipline sustainable — and for decades that cost was a labour cost, because somebody had to take the invoices, read them, classify them and add them up.

That cost has now collapsed, and in Italy more than anywhere. Revenue is already in the PMS, categorised by channel and by rate. Costs are already in a structured format, mandatory by law, that a machine can read and attribute. What separates the independent hotel from the chain is no longer access to the data, but the decision to read it.

It is a decision that does not require a controller, does not require adopting a four-hundred-page manual in full, and does not require overturning the accounting you already have. It requires establishing, once, which department each cost belongs to — and letting the rest happen by itself.

Those who do it generally discover two things. The first is that the lost margin was not hidden: it was simply not measured. The second is that, once measured, it can almost always be recovered.