0

2015 - 06 June

Header for Newsletter

New Products

ISHC CapEx 2014 Study Offers Insight, Analysis of Hotel Capital Expenditures

ISHCCAPEX2014 The same economic recession that caused hotels to delay all but essential capital expenditures and repairs and maintenance spending also provided an opportunity for properties to get more for the money they did spend on repairs, positioning savvy hotel owners to emerge with freshly-renovated hotels when the economy began to recover. These trends and more are explored in the pages of the newly-published ISHC CapEx2014: A Study of Capital Expenditures in the Hotel Industry.   The book was written by members of the International Society of Hospitality Consultants (ISHC), in conjunction with the Hotel Asset Managers Association (HAMA), and is distributed by the American Hotel & Lodging Educational Institute (AHLEI). 

"The result of over two years of work by the CapEx committee, composed of ISHC and HAMA members, this landmark industry study, being published by the ISHC for the fourth time since 1995, will provide all hospitality industry stakeholders the critical data needed for correct planning of the CapEx and Repair and Maintenance expenses on all types of hotel assets. The study examines the historical spending of over 500 hotels, and also provides current, up to the date cost estimates for forecasting a hotel's future needs," said CapEx Committee Co-Chair, Alan Benjamin, President, Benjamin West, ISHC. 

The information presented in the book was derived from data collected from 502 U.S. hotels representing 42 hotel brands and independent hotels in the full service, select service, and extended stay sectors. The properties are located in 111 markets across the United States. This is an increase from the 377 hotels surveyed in 2007. The CapEx 2014 committee collaborated with STR to compile the data, calling them "the ideal partner" for delivering the most comprehensive CapEx study to date. 

The book is divided into three sections. 

  • Historical Capital Spending , including information on repair and maintenance expenses, and spending based on ownership structure
  • Perspectives on Capital Spending , featuring 18 articles by ISHC and HAMA experts
  • JN+A/HVS Design Hotel Cost Estimating Guide , which provides useful data on every aspect of CapEx, from FF&E product costs to labor costs, broken down by hotel tier (from economy to luxury)

CapEx Committee Co-Chair Michael Doyle, Executive Vice President, CHMWarnick, HAMA, recently talked about the project stating, "The 2014 ISHC CapEx Report provides the reader with current and relevant trends that will assist in the critical planning and execution of both capital and repair strategies. This information is important as it impacts all the key stakeholders involved with hotel investments. The report offers insight from noted industry professionals that will provide practical experience in approaching decisions as both competitive market challenges and available funds are impacting investment decisions. It sheds new light on critical topics facing the owner and the operators."

With the data provided by the CapEx 2014 study, hospitality industry decision makers can better evaluate and make informed decisions with regard to capital expenditures for their properties. It also demonstrates how hotel assets are subject to cyclical trends and activities, as well as the political and social events that shape society. According to the authors, the industry is once again experiencing a tremendous upswing in CapEx spending, and-barring any major world events-the 2015-2017 period could be a record time for CapEx spending.

ISHC CapEx 2014: A Study of Capital Expenditures in the Hotel Industry is available from AHLEI in both digital and print versions. The print version includes a code that provides access to the digital version of the book. The digital version of the book is designed for online viewing , with the ability to search keywords, add notes and bookmarks, increase or decrease font size, and enlarge images. The digital book's content is not printable.  For more information, visit www.ahlei.org/capex2014.

Professional Certification

AHLEI, STR Offer Certification Opportunities at I-CHRIE Conference in Orlando

STR Logo Workshops Post-secondary educators coming to Orlando, Florida for the I-CHRIE conference at the end of July will have opportunities to take workshops and exam sessions for the Certified Hospitality Educator (CHE®), Certification in Hotel Industry Analytics (CHIA) and Hotel Industry Foundations and Introduction to Analytics (HIFIA). 

A CHE® workshop will be held July 27-29 at AHLEI's Orlando office, prior to the I-CHRIE conference.  The certification is aimed at hospitality management instructors at colleges and universities and focuses on teaching methods, learning styles, and engaging students in the classroom. Registration deadline for this workshop is June 27. Cost of the certification is $600. Visit www.ahlei.org/che for complete details, including qualifications and enrollment application. 

A CHIA Train-the-Trainer workshop for college instructors will be offered July 27-28 in Orlando, prior to the I-CHRIE conference. The session will be held at the Rosen College of Hospitality Management, University of Central Florida (next to the conference hotel). Instructors must complete the free train-the-trainer session in order to offer the CHIA to their students.  The session provides a detailed outline of the training content, a list of learning objectives, and a sample exam, as well as application exercises, tips from other educators already teaching the CHIA content, and additional resources that professors can use to present the certification material. 

CHIA is a hotel-related certification for university students graduating from hospitality and tourism programs. This recognition provides evidence of a thorough knowledge of the foundational metrics and definitions that are used by the hotel industry. Recipients have proven that they can "do the math" and interpret the results. They have demonstrated an ability to analyze various types of hotel industry data and to make strategic inferences based upon that analysis. Since 2012, more than 2,000 students have earned the CHIA, and nearly 600 professors from 300 universities have attended a CHIA Train-the-Trainer session. 

Community college instructors may choose to attend a HIFIA Train-the-Trainer session on July 29.  The session, which will be held at the Rosen College of Hospitality Management, University of Central Florida (next to the conference hotel), is free with an I-CHRIE conference registration or current I-CHRIE membership. The complete training program will be demonstrated, including application exercises, sample reports, quizzes and optional projects. Participants will learn how other instructors are presenting the certification training to their students. 

HIFIA is a more streamlined version of the CHIA, and provides evidence of a knowledge of the foundational metrics, definitions, categorizations and formulas that are used by the hotel industry. Recipients have proven that they can "do the math" performed by hotel industry professionals. They have demonstrated an ability to identify and utilize various types of hotel industry data and reports. Certification also confirms an understanding of the role of benchmarking used by hotels, companies and tourism organizations. 

For more information or to register for the CHIA or HIFIA sessions, please contact sharecenter@str.com.

AHLEI Streamlines Time in Position Requirements for Professional Certifications

Professional Certification The American Hotel & Lodging Educational Institute (AHLEI) has revised qualifications for several of its professional certifications, making it possible for hospitality professionals to earn the designation for their position with less time in position.  

Certification candidates may now take time off a certification's stated time in position requirement if they hold another current AHLEI professional certification, have a post-secondary degree from an accredited academic institution, or have completed certain AHLEI training programs.  For example, the time in position requirement for the Certified Hotel Administrator (CHA®) designation is two years.  However, possession of a current AHLEI department head certification takes one year off that requirement, while possible of a degree from an accredited academic institution also takes one year off the requirement.  Therefore, a new general manager who has a bachelor's degree and is also a Certified Food and Beverage Executive (CFBE®) would be able to apply for the CHA® upon starting his or her new job. 

Depending on the certification, the time reduction may be one year, six months, or three months.  The revised prerequisites are available here.  In many cases, the original time in position requirements were reduced, even for those who might not have other factors to help them speed up the process. 

"We updated these prerequisites in effort to streamline the overall certification process for new candidates.  The challenge was finding the perfect balance between maintaining the high standards we've practiced with these programs for many years while opening them up to even more people.  I strongly feel the industry will see what we did here and gladly welcome the changes," stated Brandon O'Hara, CHIA, CGSP, senior director, professional certification. 

In other changes, the CHA® is now available to assistant general managers and directors of operations/rooms division, who have successfully completed the Certified Rooms Division Executive (CRDE®) designation.  Also, the requirement for Certified Hospitality Educator (CHE®) candidates to submit a video of their classroom teaching has been eliminated.

For details about a specific professional certification, visit www.ahlei.org/certifications , select the certification in which you are interested, and click on "Prerequisites."  For additional information, contact certification@ahla.com, or call 1.888.575.8726 or +1.407.999.8100.

International Spotlight

AHLEI Adds New Global Academic Partners

AHLEI Academic Partner Logo AHLEI's Global Academic Partner (GAP) program provides a licensing agreement with post-secondary schools around the world enabling them to offer AHLEI courses, academic certificates, and professional certification to their students.   AHLEI recently signed GAP agreements with the following schools: 

Colegio EPI, Aruba is a government-accredited institution of higher education that has been offering hospitality and tourism courses for the past 30 years.  The college offers an associate of science degree in hotel and restaurant management.  Students are then prepared to transfer into the third year of a bachelor's degree program in hospitality at a number of schools, including Florida International University in Miami, University of Nevada in Las Vegas, University of Central Florida in Orlando, Cornell University, and the University of Aruba. 

Compass College, Hong Kong is a leading, post-secondary school that specializes in vocationally-oriented study programs in business management and hospitality and tourism. Founded in 2003, its educational model is building on three pillars: theoretical knowledge, practical skills, and professional certification. 

Treston International College, Philippines, is one of the first schools in the Philippines to specialize in the combination of culinary arts, hospitality, IT, and business, educating students in these fields in response to growing demand for professionals with competencies that meet international standards.  Academic and professional certification is an important component of what the school offers to its graduates. 

To learn more about becoming an AHLEI Global Academic Partner (GAP) school, contact internationalsales@ahla.com or call +1.407.999.8100.

Orlando Spotlight

Two Chefs Seafood Oyster Bar Brings “Soul” to Orlando

Two Chefs sm By Casie Shimansky, Social Media Manager 

Orlando, Florida is an international destination mecca for hospitality and tourism - that part is no secret.  But what may be a secret to many is the rise in Central Florida's culinary arts and restaurants that are reinvigorating a delicious scene of signature drinks, savory bites, and delectable desserts.  

Recently, Two Chefs Seafood Oyster Bar held its grand opening just across the street from AHLEI's office in Downtown Orlando in the up and coming neighborhood of the North Quarter.  This energetic location is a natural evolution for the Two Chefs, Bernard Carmouche, former culinary director for Emeril Lagasse's Florida restaurants, and Larry Sinibaldi, former chef of Hard Rock Hotel's The Palm restaurant. They have come together to infuse the community with an "Orlando Soul" that no doubt has influences from the chefs' thriving pasts. 

Chef Carmouche and Chef Sinibaldi have been friends in the industry for over 15 years, visiting each other's restaurants frequently. The camaraderie of working nearly side by side for so many years, being able to connect as much as they did, and exchanging ideas and dreams, led to a true kinship in the restaurant industry and, finally, to them making those dreams every young chef has of owning their own restaurant a reality. When lightning struck, and timing and location came together after many years of training and business preparation - Two Chefs arrived on the Orlando culinary scene to rave reviews from the likes of The Orlando Sentinel and Scott Joseph.  

The Two Chefs love Orlando for its fantastic weather, tight-knit community, and great resources from local farmers and fishermen as they aim to use as many fresh, locally sourced foods as possible within their kitchen; everything is made from scratch as well.    

Beyond the food, the people are truly what this great tourism destination is all about, and the Two Chefs are no stranger to that sentiment. Both chefs are incredibly hands on, and when asked about what they look for in hiring and staffing their team they were unanimous in saying that attitude is king in the kitchen.  Talent, a passion for food, leadership and a willingness to sacrifice personal needs for the good of the team also all came in as top qualities they look for in candidates.  Historically, hospitality is an industry where academic degrees are not necessarily required, however, the Two Chefs both agreed that education absolutely helps on the path to success, along with dedication in applying those skills and the determination to make it happen.

Uniform System of Accounts for the Lodging Industry

Implementation of the11th Revised Edition of the Uniform System of Accounts for the Lodging Industry

Schmidgall Sm Gross vs. Net Revenue Reporting

By Agnes DeFranco and Raymond Schmidgall

The 11 th 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 (AH&LA).

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 available on the USALI resource portal, accessible exclusively to purchasers of the book.

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, service charges, the change from cover to customer counts, and mixed-ownership facilities.

For this month we present guidance regarding the reporting of revenue on a gross versus net basis prepared by committee members Agnes DeFranco and Raymond Schmidgall.

The FAQ for USALI 11 th Revised Edition which can be accessed through the AHLEI website has a number of practical and useful guidelines. One of the questions linking to the topic of gross versus net in the FAQ is as follow:

Q: In what department would a hotel record revenue for Sea World Tickets (for example) included in a package?

A: The gross versus net principles should be applied first. If it is determined that reporting would be gross, then it would go into one of the "Minor Operated" departments, however if it is reported net, then any profit on the ticket would go to Miscellaneous Income (Schedule 4).

The 11 th Edition of the USALI offers many new practices.  Reporting revenues as a gross amount versus netting certain items makes a huge difference.  This is especially true when management fees, owners' profit, or even managerial compensation are linked to either measures.  On the surface, it seems the treatment of revenue as gross or net is a very simple decision - if the hotel is the principal in the transaction, then the revenue should booked as gross, under a separate Other Operated Department; on the other hand, if the hotel is acting as an agent, then the revenue should be booked as net, as Miscellaneous Income.  Thus the principal-agent dichotomy dictates the decision.  However, to ensure fairness can be achieved, and life is not always so black and while, there is actually a list of indicators to which a hotel can answer yes or no.  Then, according to the preponderance of strength of all indicators present, the proper treatment is then determined. 

To assist users in making the proper decision, the USALI explains each of these indicators one by one (three indicators of net revenue reporting and eight indicators of gross revenue reporting).  It also provides examples in recreational activities (such as the Sea World tickers in the FAQ), retail outlets, parking, laundry and dry cleaning, in-room entertainment, and audio visual as to how these revenues should be booked.  So, let's start by taking a closer look at the three net revenue reporting indicators.

Three Indicators of Net

According to the USALI, revenues should be booked as net under Miscellaneous Income if the hotel is an agent, not the principal. 

  1. The supplier is the primary obligor .  The supplier is responsible for the fulfillment of the service or product, and such responsibility is clearly indicated normally in the marketing materials and/or sales contract indicating the hotel is an agent.
  2. The hotel earns a fixed amount (dollar or percentage) on the transaction regardless of the actual amount billed to the customer, again, indicating that the hotel is the agent.
  3. The supplier carries the credit and collection risks , even if a hotel acts as an intermediary to assist in the collection process.  Since the hotel does not carry any of the risks, it is again an agent.

 All these indicators show revenues earned in products and services under these circumstances should be recorded as net.

Eight Indicators of Gross

According to the USALI, revenues should be booked as gross in a separate Other Operated Department, if the hotel is the principal.  So, what constitutes the role of the hotel being a principal?

  1. The hotel is the primary obligor.  Simply put, the buck stops here.
  2. The hotel carries the credit and collection risks, not the supplier.
  3. The hotel is primarily responsible for the fulfillment of the product or service.
  4. The hotel makes the decision of supplier selection at the time of transaction.
  5. The hotel can decide the price charged for the product or service.
  6. The hotel assumes the general inventory risk.
  7. The hotel assumes the physical loss inventory risk.
  8. The hotel adds meaningful value to and provides a significant portion of the product or service

With a total of eleven indicators, surely, there are gray areas.  When this situation presents itself, the hotel's role as an agent or principal will be weakened or strengthened, thus altering whether the revenue should be booked as gross or net. Risks might be shared, thus the obligor status is compromised. Prices can be jointly decided by both the hotel and the supplier.  Again, this will change the principal-agent relationship.  Therefore, ALL indicators need to be evaluated in totality to reach the proper decision.

Therefore, let us examine three sample cases of audiovisual revenue and see if such revenues should be booked as gross or let.

Case One: Hotel Azul

Facts:

Hotel Azul has an audiovisual (AV) department in house with a full staff and a supervisor for that area who Azul's own human resources department hires.  Azul sets all the prices from easels to screens to overheard projectors.  All revenues are billed with all other hotel billings.  While Azul reaps all the benefits and are not sharing the AV revenue with any outside party, it also bears all the risk if clients do not pay.

Analysis:  

  1. Hotel Azul is the primarily obligor (indicator #1 for gross reporting)
  2. Hotel Azul has credit/collection risk (indicator #2 for gross reporting)
  3. Hotel Azul is primarily responsible for the fulfillment of the service and product (indicator #3 of gross reporting)
  4. Hotel Azul has control over the establishment of the price (indicator #5 of gross reporting)
  5. Hotel Azul provides a significant portion of the service, they hire and train all AV employees, and clients have the right to return the product or service if they are not up to standard (indicator #6 of gross reporting)

Decision:

Categorically Gross Revenue Reporting.  Hotel Azul has total control and absorbs any risks and loss.

Case Two: Hotel Blue

Facts:

Hotel Blue is a resort property with its clientele mostly couples and families on vacation.  As such, there is not a major demand on AV thus Hotel Blue contracts with Amazing AV to provide AV services for its guests.  Amazing AV sets the rates.  The revenue is collected by Hotel Blue and then remitted to Amazing AV.  Hotel Blue earns a fixed percentage of the AV revenue and that percentage is predetermined in the contract.  Amazing AV owns all the AV equipment and sets the price.  Amazing's employees work on-site alongside Hotel Blue's employees, but wear nametags that shows Amazing's logo rather than that of Hotel Blue's. 

Analysis:  

  1. Amazing AV, the supplier is the primary obligor (indicator #1 for net reporting)
  2. The amount Hotel Blue earns is fixed (indicator #2 for net reporting)
  3. Amazing AV assumes all collection and credit risk (indicator #3 for net reporting). Hotel Blue has no risk, nor rewards, of operating the AV service.

Decision:

Net Revenue Reporting for Hotel Blue is evident.  The revenue should be recognized as Miscellaneous Income.

Case Three: Hotel Capri

Facts:

Hotel Capri is a high-end luxury property and has a good amount of AV demand from its clients.  Superb service is their motto and thus everything they do is always of very high standards.  With regard to their AV, they contract with Awesome AV.  To stay true to its high standards, Hotel Capri sets all the rules for Awesome.  Hotel Capri even screens and hires the employees in the AV area and trains them on all customer service aspects while Awesome takes care of the technical training.  The contract states that Awesome AV charges Hotel Capri a fixed percentage of revenue as its monthly fee.  Hotel Capri also takes care of all the credit checks and collections. 

Analysis:  

  1. Hotel Capri is the primarily obligor (indicator #1 for gross reporting)
  2. Hotel Capri has credit/collection risk (indicator #2 for gross reporting)
  3. Hotel Capri has control over the nature and type of services (indicator #4 of gross reporting)
  4. Hotel Capri has control over the establishment of the price (indicator #5 of gross reporting)
  5. Hotel Capri provides a significant portion of the service, they actually hire and train all parking employees (indicator #6 of gross reporting)
  6. Awesome AV receives a fixed percentage (indicator #2 of net reporting - with Awesome AV as the agent)

Decision:

Preponderance of Gross Revenue Reporting.  Hotel Capri has the majority control and Awesome is simply the contractor. 

Principal-Agent, Gross-Net.  All these may be just a tiny bit unclear.  However, as you encounter a few more scenarios and apply the indicators a few more times, the decision will come easier and quicker.  In the end, this is simply the fair and proper way. 

Agnes L. DeFranco is a Professor and the Conrad N. Hilton Distinguished Chair at the Conrad N. Hilton College of Hotel and Restaurant Management, University of Houston.  She served as President of the Hospitality Financial Technology Professionals (HFTP) in 2006-2007 and currently chairs the committee for HFTP to develop the Global Hospitality Accounting Common Practices, an online, searchable database of detailed operating financial practices.

Raymond S. Schmidgall is the Hilton Hotels Professor at The School of Hospitality Business, Michigan State University.  He has been a member of the Financial Management Committee of the AH&LA since 1979.

To purchase a copy of the 11 th edition of the USALI, view the nearly 100 questions and answers on the FAQ, or submit your own question for the FMC, please visit www.ahlei.org/usali.

What Our Customers are Saying

 
1 references found on this page:
	<asp:ScriptReference name="MicrosoftAjax.js"/>

Download composite script: debug version release version