Starting January 1, 2026, the 12th edition of the Uniform Systems of Accounts for the Lodging Industry (USALI) goes into effect and becomes the standard for hotel reporting.
Although this may seem far off, now is the time to identify data sources, create new schedules, define accounting practices and start populating reports. With 2025 data used for comparative reporting in 2026, early preparation will be crucial to resolve potential reporting issues.
A key update in the 12th edition is Schedule 15, a Full Time Equivalent (FTE) report. The intent of the report is to provide greater visibility into the number of management and non-management FTEs, broken down by department over a reporting period. Understanding the nuances and details of the presented data will be crucial for accurately describing and improving labor productivity and optimizing labor expenses with guest service.
The first step is identifying the data source. The payroll system provides the most comprehensive and accurate tracking of internal employee hours and resulting FTE counts. The system will reconcile with time clocks and is the basis for payroll expenses. Clarifying which roles are categorized as management or non-management and determining which hours — regular, overtime, sick, vacation, training — are included in FTE calculations will be essential. Understanding the process for tracking and billing of task force allocations also needs to be considered.
Contract labor tracking, on the other hand, will likely require new solutions to ensure accuracy and reporting. Although there are digital resources, the current process remains highly manual and is reliant on the third-party provider, often involving incomplete or delayed sign-ins, the need for reconciling billing discrepancies and invoices that arrive outside of the reporting period, complicating accruals.
It might be tempting to calculate FTEs by dividing total expenses by average salary or wage, but this can misrepresent actual hours worked. Pay rate fluctuations, overtime, bonuses, tipped wages, task force coverage, vacancies and maintaining an accurate payroll roster all affect the accuracy of such calculations. If this process is deemed the source for FTE reporting, the components used to calculate total expenses must align with those used to derive the average salary or wage.
The Global Finance Committee and USALI Oversight Panel — the groups tasked with updating the USALI — have identified several challenges with implementing Schedule 15, including complexity in tracking, increased administrative burdens and potential for inconsistent reporting. This is in line with the discussion and reinforces the need to start the process of developing the reporting now.
While Schedule 15 provides a simple FTE count, understanding the underlying details is vital for optimizing labor models and managing labor — the largest operating expense in the hotel industry.
Darryl Law is an asset manager with a focus on operational and investment strategy for public REITs, private equity, special servicing, and management companies. His viewpoints have been developed over multiple cycles and coverage includes a wide range of property types, including select-service, resort, full-service, convention and lifestyle hotels located in suburban, destination and top 25 gateway markets.
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