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Hotel Industry Overview - Complete Version

LMSB-04-0807-054

"This document is not an official pronouncement of the law or the position of the Service and cannot be used, or cited, or relied upon as such."

Table of Contents

Introduction

A. Purpose of Industry Overview
B. Use of the Intranet and Internet
C. Acknowledgement
D. General History of Industry Specialization Program (ISP)
E.  History of Hotel ISP
F.  Industry Specialist Staffing (Technical Advisors in LB&I)
G. LB&I Industry Staffing
H. Description of the Hotel Industry

History of Hotel Industry

Trends

Industry Terms

Accounting Principles

Information Systems

Industry Operating Procedures

Government Regulatory Requirements

A.  Federal Requirements
B.  State Requirements
C.  Local Requirements

Significant Law and Important Issues

A.  Coordinated Issues
B.  Emerging or Other Significant Issues
C.  Recent or Pending Legislation
D.  Specific Industry Related Tax Law
E.   Important Revenue Rulings or Revenue Procedures
F.   Important Court Cases
G.  Technical Advice Memorandums – Field Service Advices

Alternative Issue Resolution Considerations

Industry Resources

A.  WEB Sites
B.  Trade Associations
C.  IRS and Other Training Courses/Videotapes
D.  Trade Magazines and Newsletters
E.   Industry Books
F.   Internal Revenue Manual Citations
G.  AICPA Auditing Standards and Publications
H.  Market Segment Specialization Program (MSSP) 

Appendix

 

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Introduction

A. Purpose of Industry Overview

This overview is designed to provide industry-related information to the Large Business & International (LB&I) Division. This is the first step in the effort of LB&I to develop a greater level of expertise in the industry or industries to which you will be assigned.   This overview is one of a series of industry specific overviews.  See the Appendix for a complete listing of available overviews.

B. Use of the Intranet and Internet

Each Technical Advisor has established a web site on the LB&I Intranet.  These web sites contain more detailed information on each Technical Advisor area.  Topics that have been included in this Industry Guide are sometimes expanded upon and new topics may be added.  Each web site also has a section where Technical Advisors can highlight the latest developments such as new court cases, new technical advice memorandums, new revenue rulings, etc.  There is a new section called “Forum” where individuals are able to address any questions they have about various issues.  Others reading the question may be able to help you with your issue.

C. Acknowledgment

This guide was primarily drafted by:
James Johnston, Senior Program Analyst, RFPH
Phil Hofmann, Technical Advisor for Food, Restaurants and Hospitality
Paul Knap, Counsel, Milwaukee, WI
John Lelko, Team Coordinator, Chicago, Illinois
Cindy S. Kim, Senior Program Analyst, RFPH

We appreciate all their hard work and also that of others that were contacted for their input into this document. 

D.  General History of Industry Specialization Program (ISP)

 

Date

Event

1952 The Service was restructured in 1952 into a highly decentralized organization consisting of seven regions and 58 districts.  This reorganization was implemented in part to achieve greater sensitivity and responsiveness to pubic needs.  District Directors were given wide latitude and authority in administering the Service's policies, procedures and programs.  While decentralization of the Service proved to be a progressive action, communication between the regions and districts was made more difficult because of their quasi‑autonomy.  Positions taken by the Service on industry issues could differ significantly from one region to another on the same issues.
1971 The Service implemented the Industry Wide Examination Program to concurrently examine the major taxpayers in a given industry, coordinate selected issues common to that industry and to resolve those issues uniformly and consistently among all the industry taxpayers.   Under the direction of project coordinators (usually large case branch chiefs), the industry wide examinations were largely successful in achieving uniform and consistent treatment of issues.  Industry wide examinations were conducted in several industries between 1971 and 1979 and the ability to communicate freely across district and regional lines proved to be invaluable to the success of these examinations.
1977 The Industry wide Examination Program had one major drawback.  Since they existed for only two or three tax years and were then terminated, the program failed to provide continuity.  To correct this situation, a major study group was created in 1977 to review the Service's Coordinated Examination Program.  The study recommended that permanent positions be established for several Industry Specialists and a National Industry Coordinator.  In addition, the study group identified basic industries to which it recommended specialists be assigned.  The duties and responsibilities of the Specialists and the Coordinator were to be much broader than the former Project Coordinators whom they replaced.
1979 The recommendations of the study group were implemented greatly expanding the scope and depth of the Industry wide Examination Program.  The term, Industry Specialization Program, eventually evolved as a name that could encompass the varied concepts of Industry Specialists, National Industry Coordinator, Coordinated Issues, and the many refinements suggested by the study group.
2000 As part of the Internal Revenue Service’s restructuring, the Industry Specialists were assigned to Pre-Filing and Technical Guidance which is part of LMSB.  The “Industry Specialists” are now called “Technical Advisors.”  Each of them was placed in one of the five industry areas and is managed by a Technical Advisor Manager. 

E.  History of Hotel ISP

 

Date

Event

Pre 1984 to 2006

There was no formal Hotel Industry Specialist.  However, the Food & Beverage TA and the Gaming TA have been involved in some Hotel cases.

1984 - 1986

Conducted study of food industry, 55 cases in 7 regions included in the program study. 

1986

Food industry approved for inclusion in ISP

1987 - 1992

Coordinated issue papers and appeals settlement guidelines developed.

1993

Established an Industry Specialist for Gaming.

1994

Audit Guidelines established.

1997

Gaming Audit Technique Guide published.

1999

First gaming coordinated issue approved – The applicable recovery period under IRC § 168(a) for slot machines, video lottery terminals and gaming furniture, fixtures and equipment.

2006

The Food & Beverage TA adds the Hotel Industry to that program

F.  Industry Specialist Staffing (Technical Advisors in LB&I)

 

Name of Specialist

Telephone #

FAX #

Email Address

 

Philip Hofmann, Food

316-352-7434 316-352-7255 Philip.J.Hofmann@irs.gov
Eric Lacher, Gaming 702-868-5262 702-868-5442 Eric.A.Lacher@irs.gov

G.  LB&I Industry Staffing

The Industry Specialist is assigned to the Pre-Filing and Technical Guidance Division that is part of LB&I Headquarters.  Each industry is assigned to one of the five LB&I Industry Functional Divisions.  Industry Specialists will be known as technical advisors in LB&I and will be supervised by a Manager, Technical Advisors.  Management and other appropriate personnel for this industry are as follows:

 

Name

Title

Location

Sergio Arellano Industry Director

 

Downers Grove, IL

Jim Roosey Field Operations Director Downers Grove, IL
Lori Nichols Field Operations Director Louisville, KY
Jessica Yip Senior Industry Analyst Downers Grove, IL
Greg Zielinski Manager, Technical Advisors

 

St. Louis, MO

H.  Description of the Hotel Industry

The Hotel Industry program covers taxpayers that develop, own, manage, and/or operate lodging facilities, including motels and full-service hotels.    

This industry is comprised of several sub-industries.  The following is a compilation of statistical data for these sub-industries sorted by NAICS codes:

  • 721100 – Travel Accommodations
  • 721110 – Hotels (except casinos) & Motels
  • 721120 – Casino Hotels
  • 721191 – Bed & Breakfast Inns
  • 721199 – All Other Traveler Accommodation
  • 721210 – RV (Recreational Vehicle) Parks & Recreation Camps
  • 721310 – Rooming & Boarding Houses

The hotel industry may also have related activities including restaurants and cafes, gambling, sports and recreation, theme parks, retail operations, and other entertainment.  Additionally, some members of the industry have expanded into long-term care.

 

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History Of Industry [1]

The hotel industry is a mature industry marked by intense competition. Market share increases typically comes at a competitor’s expense. Industry-wide, most growth occurs in the international, rather than the domestic, arena.

Common American hotel classifications are as follows:

Commercial Hotels cater mainly to business clients and usually offer room service, coffee-shop, dining room, cocktail lounge, laundry and valet service as well as access to computers and fax services.

Airport Hotels are located near airports and are a conveniently located to provide any level of service from just a clean room to room service and they may provide bus or limousine service to the air lines.

Conference Centers are designed to specifically provide meeting space from groups; they provide all services and equipment necessary to handle conventions.

Economy Hotels provide a limited service and are known for clean rooms at low prices meeting just the basic needs of travelers.

Suite or All-Suite Hotels are hotels which offer spacious layout and design.  Business people like the setting which provides space to work and entertain separate from the bedroom.

Residential Hotels used to be very popular.  The typical residential hotel offers long term accommodations.

Casino Hotels are often quite luxurious.  Their main purpose is in support of the gambling operation.  Casino hotels often offer top name entertainment and excellent restaurants. 

Resort Hotels are the planned destination of guests, usually vacationers.  This is because resorts are located at the ocean or in the mountains away from inner cities.  Resort hotels may offer any form of entertainment to keep their guests happy and busy.

A summary of key events in the history of the industry would include the following:

While the practice of renting space to travelers stretches back to antiquity, what could be considered the modern concept of a hotel derives from 1794, when the City Hotel opened in New York City.  While the practice of renting space was not new, the City Hotel was purported to be the first building devoted exclusively to hotel operations.  For it’s time, the building was quite large and possessed 73 rooms.  Similar operations soon appeared in such nearby cities as Baltimore, Boston and Philadelphia.                 

Interestingly, New York City’s first skyscraper was a hotel - the six story Adelphi Hotel.            

Hotels took a distinct step up in style and class when the Tremont House opened in Boston in 1829.  This hotel was considered by many to be the beginning of what was regarded as first class service.  With 170 rooms, the Tremont House was a large facility.  In addition, the hotel offered features which, for the time, were amazing.  Private single and double rooms were available, which offered not only privacy, but also security.  In addition to water pitchers and a washing bowl, free soap was provided in each room.  The Tremont House offered French cuisine and, reportedly, was the first hotel to have a Bellboy.                

In 1908, the Buffalo Statler opened, marking the beginning of the modern commercial hotel era.  Many services now considered standard were introduced by the Statler, including such amenities as a light switch next to the door, private bathe, ice water and a morning newspaper.  The Statler set the standard of the day by being clean, comfortable and affordable.  The Statler served as the pattern for hotel design and operation for many years.

In the 1920’s, hotel building entered a boom phase and many famous hotels were opened, including the Waldorf Astoria, New York’s Hotel Pennsylvania, and the Chicago Hilton and Towers, which was originally named the Stevens.               

Motels began to replace roadside cabins as use of the automobile spread throughout society. Offering clean rooms with adjacent parking, motels enjoyed great popularity with the traveling public.         
 

In the 1950’s and 1960’s, the practice of franchising appeared within the industry.  Franchising enabled entrepreneurs to expand their operations without the use of substantial capital.               

For much of their history, hotels were owned and operated by individuals.  However, as franchises and chains began to appear, individually owned hotels found themselves increasingly at a competitive disadvantage.  By the 1960’s, independent prospects began to improve as the result referral organizations such as Quality Courts, Best Western, Master Host and Best Eastern.               

From the 1980’s forward, mergers and acquisitions became common within the industry, and brands become hotly traded commodities.

Recently, use of management companies has entered the mainstream.  As a result, many chains are more involved in management than in ownership.  These chains realize a much more predictable and steady income stream than had normally been yielded by ownership.               


[1] History of Hospitality.   27 March 2007.  6 June 2007.   http://schonwalder.org/historyHotel.htm

 

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Trends

In the 1980's there was extensive merger and acquisition activity between hotel and non-hotel companies. Many companies are now selling specific brands in an effort to get back to their core business.

Another trend in the hotel and beverage industry is paperless inventory systems. Improvements in scanning equipment have made this possible. In many instances, ordering, delivery, payment and stocking are all initiated and accomplished by software prompted by information captured by scanning equipment with very little human involvement.

Some chains have sold ownership in their hotels to foreign investors while still maintaining control.  This provided the capital that was needed for further expansion.

REIT’s (Real Estate Investment Trusts) have been created to allow smaller investors to participate in mortgages and equities.

Product segmentation has become more popular.  Luxury and first class hotels have created more amenities and products for their customers while economy and budget motels have cut back services in order to maintain lower prices.  Also specialized extended stay and suite hotels have become more popular.   Hotels with indoor water parks are one of the newest trends.  Timeshares is another segment that many hotel companies are involved with recently. The development, sale, and management of timeshares have become particularly popular with the large chains. Franchising continues to flourish in the hotel industry.

Audit issues cover a variety of areas, as would be expected.  In addition to matters such as cost segregation, which impact numerous industries, hotel companies have undertaken such activities as donating used bedding as they upgrade their equipment, using trusts to defer income, delaying recognition of last day of the year receipts, franchising, condo conversion, and so forth.

Several years ago, customers generally called a toll-free number to make room reservations.  In 2006, about 50% of hotel rooms were booked through the internet. 

The number of domestic hotel rooms reserved for smokers is declining as major hotel chains are beginning to decrease their total number of smoking rooms or becoming non-smoking facilities altogether.  

Other recent trends in the industry include luxury mattresses, complimentary breakfast, high definition TV, high speed internet access, Wi-Fi (wireless internet access), and room suites.

A recent 2006 trend is hotels re-imaging their lobbies to destination places.  For example part of the lobby may be used for a breakfast area in the morning and a bar at night.  This may include sliding walls, decorative lighting, and music.   One reason for this is to generate more income per square foot. 

A July 2005 article from Knight Ridder Newspapers[2] highlights what the major chains are upgrading in the sleep department.  The article provided the following information:

  • Marriott International has been replacing mattresses at its Marriott and Renaissance hotels for several years and is adding new bedding at its 2,400 hotels, including higher thread count sheets, down comforters and duvet covers at a cost of $190 million.
  • Hilton Hotels is introducing new bedding across its brand, including Hilton, Doubletree and Embassy Suites.  There will be higher thread count sheets, plush top mattresses, extra pillows and user friendly clocks.
  • Crown Plaza replaced some 50,000 beds and bedding in 2004, hired a sleep doctor for advice on relaxation, and tossed in a sleep kit for guests. 
  • Radisson in 2004 began moving in custom-designed Sleep Number beds at 230 of its hotels and resorts, with most of its 90,000 beds to be replaced by 2006.  New bedding is also included in the makeover.
  • Hyatt recently rolled out its Grand Bed, a 13 ½ inch pillow-top mattress, and added more luxurious linens and decorative pillows.
  • Starwood Hotels announced the debut of a new bed at its moderately priced brand, Four Points by Sheraton.   The Four Comfort Bed, a $13 million investment, joins the Heavenly Bed and Sheraton Hotel’s Sweet Sleeper Bed in Starwood’s lineup.
  • Red Roof Inns will offer pillow top mattress pads, 230 thread count sheets and hypoallergenic pillows at select hotels.

Some Best Western hotels will add new mattresses, comforters, feather pillows and triple sheeting.


[2] Martinez, Michael. “Hotels Compete To Give You The Comfiest Night's Sleep.” The Wichita Eagle. 10      July 2005.  H3.

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Industry Terms

 

 

Industry Term

Definition or Explanation

ADJOINING ROOMS Guestrooms located side by side without a connecting door between them.
AFFILIATE RESERVATION SYSTEM A hotel chain's reservation system in which all participating properties are contractually related. Each property is represented in the computer system database and is required to provide room availability data to the reservation center on a timely basis.
AFFILIATED HOTEL A hotel that is a member of a chain, franchise, or referral system. Membership provides special advantages, particularly a national reservation system.
AMENITY Service or item offered to guests or placed in guestrooms for the comfort and convenience of guests, and at no extra cost. Examples are various guest services (such as in-room entertainment systems, automatic check-out, free parking, concierge services, and multilingual staff) in addition to an array of personal bathroom items offered by most hotels and motels. Amenities are designed to increase a hotel's appeal, enhance a guest's stay, and encourage guests to return.
ATRIUM A guestroom floor configuration in which rooms are laid out off a single-loaded corridor encircling a multistory lobby space; also the multistory lobby space, usually with a skylight.
AVERAGE OCCUPANCY PER ROOM A ratio that shows the average number of paid guests for each room sold. Calculated by dividing number of paid room guests by number of rooms sold. Measures management's ability to use the lodging facilities. 
AVERAGE ROOM RATE

 
A ratio that indicates average room rate, and to what extent rooms are being up-sold or discounted; calculated by dividing rooms’ revenue by number of rooms sold. Also called average daily rate or ADR. 
BANQUET A meal prepared for a particular group, for which the number of guests and the menu are predetermined. Most properties offering banquet service have special facilities for banquet food production and service.
BARTER The trading of merchandise instead of paying cash. (e.g. advertising)

BED &

BREAKFAST (B&B)

A small inn or lodge that provides a room and a breakfast. Often a B&B is in a residential home setting and/or a historic building converted to a quaint lodging facility.
BILLING CLERK The person responsible for charging to hotel guests all vouchers representing food, beverages, room service, and merchandise purchases.

CALL ACCOUNTING

SYSTEM

A system that is part of the telephone equipment that prices telephone calls made by hotel guests and sends the information to the property management system (PMS) for billing.
CASINO HOTEL A hotel that features legal gambling, with the hotel operation subordinate to the gambling operation.
CENTRAL RESERVATION OFFICE Part of an affiliate reservation network. A central reservation office typically deals directly with the public, advertises a central (usually toll-free) telephone number, provides participating properties with necessary communications equipment, and bills properties for handling their reservations.
CHAIN OPERATING COMPANY A firm that operates several properties, such as Holiday Inn Worldwide or Hilton Hotels Corporation. Such an operator provides both a trademark and a reservation system as an integral part of the management of its managed properties.
CHECK-IN The procedures for a guest's arrival and registration.
CHECK-OUT (1) The procedures for a guest's departure and the settling of his or her account.
(2) A room status term indicating that the guest has settled his or her account, returned the room keys, and left the property.
COMMERCIAL HOTEL A property, usually located in a downtown or business district, that caters primarily to business clients.
COMPLIMENT-ARY ROOM A complimentary or "comp" room is an occupied room for which the guest is not charged. A hotel may offer comp rooms to a group in ratio to the total number of rooms the group occupies. One comp room may be offered for each fifty rooms occupied, for example.
CONDOMINIUM HOTEL A hotel in which an investor takes title to a specific hotel room, which remains in the pool to be rented to transient guests whenever the investor is not using the room. The investor expects to receive a gain from the increase in value of the hotel over time, as well as receive ongoing income from the rental of his or her room.
Cooperative advertising Any arrangement by which a product or service is brought to public notice over the names of both the supplier and any intermediary who comes between that supplier and the ultimate purchaser.  The intermediary may be a retailer who buys a product for resale, a distributor who sells to retailers or other form of intermediaries.  This arrangement results in consumer advertising as well as other forms of promotion.   The cost of the promotion may be shared by the supplier and the intermediary, or the supplier may pay all costs.  The process commonly involves reimbursing retailers for advertising they create and place.
CORPORATE HOTEL CHAIN Hotel organization that has its own brand or brands, which may be managed by the corporate chain or by a conglomerate.
GENERAL MANAGER The chief operating officer of a hotel.
HOSPITALITY INDUSTRY Lodging and food service businesses that provide short-term or transitional lodging and/or food.
HOTEL A large lodging facility, generally a hotel is full service and a multi-story building with interior entrance guest rooms.
INDEPENDENT HOTEL A hotel with no chain or franchise affiliation. It may be owned by an individual proprietor or a group of investors.
LATE CHARGE Charged purchase made by a guest that is posted to the guest's folio after the guest has settled his or her account.
MID-PRICE/ EXTENDED-STAY HOTELS Hotel that caters mostly to persons who must be in an area for a week or longer. The guestrooms of mid-price/extended-stay hotels have more living space than regular hotel guestrooms, and may also have cooking facilities. Guestrooms in these hotels tend to be less expensive than guestrooms in full-service or all-suite hotels.
Occupancy The percentage of available rooms occupied for a given period.
POINT OF SALE SYSTEM (POS) Computerized systems that retail outlets such as restaurants, gift shops, etc, enter orders and maintain various accounting information. The POS generally interfaces with the property management system (PMS).

PROPERTY 

MANAGEMENT

SYSTEM (PMS)

A computerized front desk system that manages hotel room inventory, guest billing and interfaces with various other systems such as telephone, call accounting, point of sale (POS), entertainment, etc.
PROPRIETARY BOOKING ENGINE A internet reservation system that is owned and operated by an individual hotel or group of hotels to allow them to take reservation on their own website without paying a fee to the GDS, third party booking engines or franchise reservation systems.
RACK RATE The current public rate quoted for each accommodation as established by the property's management.  However, most rooms are discounted. (i.e. rented at less than the rate rack)
RESERVATIONS A guestroom that being held under an individual or business' name at a particular hotel for a specific date or range of dates.
RESORT HOTEL A hotel, usually located in a desirable vacation spot, that offers fine dining, exceptional service, activities unavailable at most other properties, and many amenities.
ROOM OCCUPANCY SENSOR A device that uses infrared light or ultrasonic sound waves to sense the physical occupancy of a room. Sensors have the ability to turn on devices and appliances such as lights, air conditioning, and heating whenever a guest enters a space, and to turn these devices and appliances off when the guest leaves.
ROOM RACK A card index system that is constantly updated to reflect occupied and vacant rooms. In the evening, the room rack contains forms for only those registered guests remaining for the night who are to be charged for rooms. A daily room report can be prepared from the room rack.
ROOMS MANAGEMENT MODULE A front office application of a computer-based property management system. The module (a) maintains up-to-date information on the status of rooms, (b) assists in the assignment of rooms during registration, and (c) helps coordinate various guest services.
SERVICE CHARGE A percentage of the bill (usually 15% to 20%) added to the guest charge for distribution to service employees in lieu of direct tipping.
THIRD PARTY 
BOOKING
ENGINE
An internet site that provides a booking engine where a traveler can search a large number of lodging facilities for availability and reserve a room. The lodging facilities are not affiliated with the site and pay a fee for the business that the third party site generates. Examples of third party sites include: hotels.com, priceline.com.
Transient Occupancy Tax City or County tax added to the price of a hotel room.
WATERPARK HOTEL A hotel that offers large recreational water elements such large pools, multiple pools, slides or other water related venues.

 


Accounting Principles

The lodging industry was reportedly one of the first industries to develop “definitive standards to provide specific guidance to accountants and operators. The standards evolved because uniformity of layout and presentation were, and are, still not stressed under U.S.

Generally Accepted Accounting Principles (GAAP).” [3]; Those standards were and are contained in the Uniform System of Accounts for the Lodging Industry (USALI), which is published by the American Hotel and Motel Association. [4]

While the accounting profession may not have seen fit to develop GAAP standards specifically applicable to the lodging industry, the USALI has been widely adopted within the industry. Although there is no requirement that a lodging operator use the USALI, the degree of compliance with this time-tested, turnkey system is substantial. The primary reason for widespread adoption of the USALI has been comparability.  Lodging operators tend to use financial statement data generated by competitors as a benchmark against which to measure their own operations.  If comparability is lacking, then there are no benchmarks.

Additionally, while the system was developed for use within the United States, many hotel operators around the world have adopted the USALI. 

Financial statements prepared for external users, are based on GAAP.  In addition to other items commonly found in most financial statements, lodging industry financials are likely to report on such items as China, Glassware, Silver, Linen, and Uniforms (CGSLU), and the House Bank.

The USALI is a highly departmentalized system of accounting, and includes Departmental Statements of Income.  There are two main department classifications in a hotel: operating and overhead.  The operating (revenue-producing) departments include rooms, food and beverage, telecommunications, and similar departments.  The overhead departments include administrative and general, data processing, human resources, transportation, marketing, guest entertainment, energy costs, and property operation and maintenance.

The USALI itself provides for up to 30 departmental statements, which include, in addition to those already mentioned: telecommunications, garage and parking, golf shop, golf pro shop, guest laundry, health center, swimming pool, tennis, tennis pro shop, other operated departments, rentals and other income, human resources, information services, security, franchise fees, management fees, rent, property taxes and insurance, interest expense, depreciation and amortization, income taxes, house laundry, salaries and wages and payroll taxes and employee benefits.

The principal differences between a hotel’s transactions and internal control and those of other businesses are found in the revenue cycle.  Room revenue is the most important source of income to a hotel.  The front desk is the center of the hotel’s operation and the place where the guest ledger, which summarizes and accumulates all charges to guests using the hotel facilities, is maintained.  Some of the functions performed by front desk personnel are registering guests, recording room revenue, recording food and beverage and other guest charges, checking out guests, and settling guests’ bills.  There are numerous articles and books that further explain the hotel business.  For more information, refer to Montgomery’s Auditing by O’Reilly,Vincent M., et al., Twelfth Edition.  new York: Wiley, 1998.

Montgomery’s Auditing recommends the following substantive tests for room revenue for financial statement purposes:

  • Review reconciliations of rooms occupied per the front desk to the housekeeper’s daily  inspection report or the exception report 
  • Compare the room rate charged on the guest folio with that on the guest registration and room rack for a selected number of folios
  • Trace room charges to guest folios and compare with established rates
  • Trace cash receipts to the cashier’s report and the cash receipts journal                

Montgomery’s Auditing recommends the following for revenue deductions (allowances):

  • Determine that adjustments (credits) made to guests’ accounts in connection with overcharges, disputed charges or rate changes were properly approved
  • Review supporting documentation for propriety
  • Trace credit postings to individual guest folios

From a tax audit standpoint, the available descriptions of hotel operations would seem to suggest considerable opportunity for manipulation of both revenue and expenses.  Room rates vary considerably depending on a variety of factors - e.g., group rates versus individual rates, etc.  The occupancy rate would appear to be another area of potential concern. 

While these concerns may not be overly great in the case of publicly traded companies who have to undergo an audit in the post Sarbanes-Oxley atmosphere, there may be of considerable concern with non-publicly traded companies.

Additionally, one of the newest areas that is gaining significance in the industry is the barter transaction.   A barter transaction occurs when a property agrees to provide accommodation and/or other services in exchange for external services, for example advertising. While USALI recognizes barter transactions as executory contracts that do not need to be recorded in the financial statements until service is provided or received, it suggests that to provide more complete information for decision-making, the internal records reflect the transaction by recording an asset and a liability at the time the barter transaction is negotiated. The value assigned to this transaction should be a conservative average of the market rate for similar accommodations or services at the property, per the USALI.[5]

When services are provided by the property, revenues are recorded and charged to the barter liability. On the other side, the expense is offset against the barter asset account when the service is received. For external reporting purposes, USAL suggests that the asset and liability accounts be netted and reflected as a current asset or liability. This will result in revenues and expenses associated with the barter transaction being reported in different periods. [6]

Ratio analysis, in general, comprises the same types of ratios used in almost any industry.  However, there are a few industry specialized ratios peculiar to hotels and/or restaurants of which one should be aware.

  • Average Room Rate = Rooms Revenue divided by Paid Rooms Occupied. 
  • Average Food Check = Total Food Revenue divided by Number of Covers.  Covers refer to guests served in the food operation during the period. 

A key recent addition is RevPar, which stands for Revenue per Available Room.  It is calculated as either: Rooms Revenue divided by Rooms Available for Sale, or as Rooms Revenue divided by Rooms Available.  The USALI expresses a preference for the second computation because “[t]he purpose of the ratio is to determine whether the inventory of rooms is being managed optimally.  Therefore, the denominator should also include rooms out of order and temporary house use rooms.”[7]

The USALI also discusses a sample chart of accounts, which uses a twelve-digit numbering system, consisting of four clusters of three digits each.  The first three digits are the property number.  The second three digits are the revenue departments or cost centers.  The third three digits are the major accounts on the balance sheet or income statement and the final three digits are sub-accounts useful for analysis and control.  Obviously, this may vary considerably from taxpayer to taxpayer.

The descriptions contained in this guide only scratch the surface of standard practices within the hotel industry which are either unique to the hotel industry, or are uncommon in most other industries.  A partial listing of available publications is provided elsewhere within this guide should additional information be required.


[3] Popowich, Taylor, and Daria Sydor. "Uniform System of Accounts for the Lodging Industry: Are you up to Date?" The Journal of Hospitality Financial & Technology Professionals. Volume 12, Number 7 (October/November 1997).  28 June 2007 http://www.hftp.org/members/bottomline/backissues/1997/Oct-Nov/index.html.

[4] Hotel Association of New York City, Inc. Uniform System of Accounts for the Lodging Industry. Ninth Revised Edition. Lansing, MI.  Educational Institue of the American Hotel & Lodging Association.  1996.

[5] Popowich, Taylor, and Daria Sydor. "Uniform System of Accounts for the Lodging Industry: Are you up   to Date?" The Journal of Hospitality Financial & Technology Professionals. Volume 12, Number 7 (October/November 1997).  28 June 2007http://www.hftp.org/members/bottomline/backissues/1997/Oct-Nov/index.html.

[6] Ibid.

[7] Ibid.

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Information Systems

The following are examples of some of the information system products that are available to hotel operators:

LodgingTouch Property Management System (by Hotel Information Systems)[8]

The system is divided into various modules which can interact with the front office, group sales, guest history, accounts receivable, travel agencies, and yield management. Hoteliers can search and retrieve guest information by various fields, including name, address, confirmation numbers, and other fields. In addition, the system allows users to search for accounts using any criteria.

Paragon AS/400 Front Office System (by Hotel Information Systems)[9]

Planning for a guest’s stay includes managing accommodations, aggressive pricing, marketing, forecasting, and implementing reporting controls.  The Paragon system claims a flexible system that provides information in order to achieve optimal standards.   The system provides information and feedback to measure financial impact and quality.

Paragon can manage the complete hotel system.  Paragon can be integrated with Paragon Back Office, Central Reservations, and complementary products.  Some benefits claimed by the Paragon include improved customer service, efficient internal operations, and control over financial data integrity.

Other key features include:

  • Easy reservation input
  • Optimal return on rooms by providing flexible rate configuration and maximum room occupancy
  • Access availability by room type, total hotel and group.
  • Provide confirmation letters and pre-printed registration cards.
  • Capture additional guest information through hotel configurable fields.
  • Maintain wait lists
  • Provide flexible package configurations.

CLS Software Property Management System (by Hotel Information Systems)[10]

This system can support properties of all sizes, from 50 to 1,000 rooms.  They also claim a comprehensive integrated modular system that links together all aspects of the hotel function.   The system comes in domestic and international versions.  Other key features include:

  • Ease of data entry
  • Over 200 interface solutions
  • Technical Support - 24-hours a day, 7-days a week, 365-days a year
  • Over 25 years of experience.

Hotel Information Systems’ epitome® Project Management System for UNIX

Hotel Information Systems offers a wide variety of other hotel management systems, namely, epitome® Project Management System for UNIX.  This system can be utilized with the hotel’s current IT system.

_________________

[8] E-hospitality.com.  28 June 2007. 
< http://www.e-hospitality.com/storefronts/hotelinfo.html>

[9] Ibid.

[10] Ibid.


Industry Operating Procedures

Some hotels are heavily involved in franchising activities. Franchisees will pay a fixed per-cent of receipts to a franchiser for advertising and royalties. Some hotel franchisers will lease the structure to the franchisee for a monthly rate and/or a percentage of sales.

The internal controls of these chain hotels are extensive; conversely, individual independent hotels do not always enjoy the same degree of controls over operations.

Ownership takes diverse forms, ranging from publicly-held companies to individuals. Included within this span are churches and other not-for-profit organizations, municipalities, partnerships and REITs.  Of the various ownership arrangements, REITs seem to provide some of the more interesting, and perhaps more involved sets of rules. 

Many firms desire to convert to the REIT status because the taxable income that is distributed to the shareholders is not taxed.  Therefore, REITs avoid double taxation.

Effective January 1, 2001, REITs were allowed to wholly own taxable subsidiaries.  These taxable subsidiaries were, in turn, allowed to lease hotels from the related REIT and/or its affiliates, provided certain conditions were met, and provided the subsidiary did not manage or operate any hotels or health care facilities. 

These comments are some highlights of the REIT status.  A full analysis the law applying to REITs is clearly beyond the scope of this document.

Also beyond the scope of this document are numerous potential employment tax issues, unrelated business income issues in the case of non-profits, and any other areas which generally fall outside the purview of LMSB.  Nevertheless, it should be kept in mind that the hotel industry entails a great variety of business arrangements which include not merely hotel owners, but also hotel operators, designers, builders and so on.

Government Regulatory Requirements

A.     Federal Requirements

The Federal Trade Commission (FTC) publishes the rulebook for promotional allowance marketing, titled Guides for Advertising Allowances and Other Merchandising Payments and Services, these guides are usually referred to as “The Guides,” “the FTC Guides” or the “Fred Meyer Guides.”

Text of the Americans with Disabilities Act, Public Law 336 of the 101st Congress, enacted July 26, 1990. The ADA prohibits discrimination and ensures equal opportunity for persons with disabilities in employment, State and local government services, public accommodations, commercial facilities, and transportation. It also mandates the establishment of TDD/telephone relay services.

B.    State Requirements

Each state has their own specific requirements and regulations regarding the manufacture, sale, resale, and consumption of alcoholic beverages.

C.    Local Requirements

Many localities have controls over the purchase, sale, resale and consumption of alcoholic beverages.


Significant Law and Important Issues

A. Coordinated Issues

 

 

Issue

Brief Summary of Issue

  There are currently no coordinated issues

B. Emerging or Other Significant Issues

 

 

Issue

Brief Summary of Issue

Depreciable Life of a Hotel’s Small wares Asset Account and Treatment of Replacements When a hotel opens a location, they will purchase thousands of dollars worth of smallwares (towels, sheets, blankets, glassware, china, silverware, linen, etc.).  A potential issue had been identified relating to the recovery period of these assets and how to treat the replacement costs of these items. 

Losses Incurred When a Hotel is Closed

 

 

 

 

Is a taxpayer entitled to deduct the difference between the adjusted basis of the property and its appraised value when a location is closed but not disposed of?    Some taxpayers are taking the position that when the building is owned, they are entitled to a loss in the form of bonus depreciation equal to the difference between the adjusted basis and the appraised value of the building, when a decision is made to close an unprofitable location.  The current IRS position is that a loss on the Section 1250 property is not allowed until an actual disposition (sale or abandonment) has occurred.  The mere closing of the property is not an actual disposition. 
Deferral of Gift Card Sales Are taxpayers properly following the rules for deferral under Treas. Reg. § 1.451-5?  Is a CAM required?  Was an information schedule attached to the tax return?  Is income from unredeemed gift cards brought into income after 2 years?  Was a separate company set up to manage the program?   Can the taxpayer track the outstanding liability?
Guest Loyalty/ Reward Programs

1.  What is the proper character of a reward point?  Is a reward point a “rebate or refund” as provided in Treas. Reg. § 1.461-4(g)(3) or a “trading stamp or premium coupon” as provided in Treas. Reg. § 1.451-4(a)?  The characterization will affect the timing of expense recognition.  Whereas a trading stamp or premium coupon may reduce gross income at the time of the corresponding sale, a rebate or refund will not reduce gross income until payment is made to the person to which the liability is owed.  Furthermore, when is the liability fixed: at the time a customer is issued or redeems a reward certificate? 

2. What is the cost of a reward point?  How was the estimated average cost of redeeming each point computed?  Did the retailer include only the costs to acquire the merchandise, cash, or other property required to redeem the points, or did the taxpayer include other costs such as advertising catalogs, transporting and storing merchandise, operating redemption centers, etc.?

3. What methodology was used to estimate future redemptions?  Does the methodology result in a reasonably accurate estimate of the points outstanding at the end of the taxable year that will ultimately be presented for redemption? Although an expense may be deductible before it is due and payable, the liability must be firmly established.  Is the liability fixed prior to the customer’s accumulation of the minimum number of points needed to earn a reward certificate?  Does the methodology take into consideration any expiration of previously earned points?

4. Does the recurring item exception provided under Treas. Reg. § 1.461-5 apply if the reward certificate is determined to constitute a rebate?

Cost Segregation Studies Many hotels are the subject of cost segregation studies.  An Audit Technique Guide (ATG) for the preparation and examination of cost segregation studies was initially issued in April 2004 and was most recently updated in January 2006.  The primary goal is to provide examiners with an understanding of why cost segregation studies are performed by taxpayers, how such studies are prepared, and what to look for in the review and examination of these studies.  This guide will also assist taxpayers and practitioners in understanding some of the items the Service will consider to support property allocations based on these studies.  Included in the ATG is industry specific guidance for land-based casinos, restaurants, and retail establishments which were previously issued as Industry Director Directives.   It should be noted that this ATG is not an official Service pronouncement and may not be cited as authority.
Contributions of Hotel Beds

Some of the problems encountered during examinations are as follows:

  • Contribution made to an organization that is not a qualifying organization.
  • Fair market value (this is the area where most disputes between the taxpayer and the Service occur).
WOTC/WTW Claims Rev. Rul. 2003-112 provided guidance on whether an individual meets the family membership requirements permitting certification for the WOTC and WTW credits.  Some states may have applied a narrower definition in issuing certificates.  Many taxpayers are currently filing claims using the revenue ruling as justification.  These claims SHOULD NOT be allowed without proper substantiation.   The current Service position is that additional credit should only be allowed when the taxpayer has documented certification from the state agencies.
Tax Abatements At issue is the proper tax treatment on State & Local Economic Development Subsidies.  This might include inducements & Enticements to persuade companies to relocate or maintain their investment in that particular area.  Some taxpayers are taking the position that they are entitled to a deduction for a tax abatement.  Further, they account for the abatement as income under IRC § 118 and then reduce basis in long life assets or land under IRC § 362.  This accounting treatment is an emerging issue in all industries.
FICA Tax Tip Credit
  • Should a taxpayer be allowed a credit under section 45B on Service Charges allocated to servers? 
  • Should a taxpayer be allowed a credit under section 45B on both directly tipped and indirectly tipped employees? 
  • Should a taxpayer be allowed a credit under section 45B for the difference paid for minimum wages for the first 90 days for employees under age 21? 

These are some of the issues that hotels with restaurants will face.  When a service fee is charged by the restaurant, typically on large parties, banquets, or catering, these amounts are not eligible for the FICA tax tip credit under IRC § 45B.

Franchising Fees Some hotels are requiring nonrefundable franchisee fees upfront, perhaps several years before the franchisees actually get their hotels.   When examining franchisers, you should inquire as to their policy for reporting these advance fees.  Some are properly including them in income and some are not.
Upfront Payments In some situations vendors will enter into long term agreements with hotels.  These contracts typically call for a large up-front payment from the vendor to the hotel.    In return the recipient agrees to purchase product for a given time period or the recipient agrees to purchase a stated amount of product in the future with no time period mentioned.  The contracts will usually stipulate that the vendor will either be the exclusive supplier of the product or that the vendor is the primary vendor and will receive preferential placement of the product for an extended period of time.  Typically in hotels you may see this from the soft drink provider.
Lobbying Deductions

The principal issue is whether costs incurred to influence legislation that impacts a taxpayer's business or industry are deductible as ordinary and necessary business expenses under IRC § 162(a).

The general audit approach is to determine if the activity is covered by IRC § 162(e).  If yes, no deduction is permitted.  If no, the activity is deductible to the extent it meets the requirements of IRC § 162(a).

Generally, IRC § 162(e)(1) provides for no deduction of amounts paid or incurred in connection with any of the following four activities:

  1. "Influencing legislation" (i.e., direct lobbying of the legislature);
  2. Participating in a political campaign of a candidate for public office;
  3. Attempting to influence the public regarding elections, legislative matters, or referendums (i.e. grassroots lobbying); or;
  4. Communicating with "covered executive branch officials."

Treas. Reg. § 1.162-29 defines "influencing legislation" as any attempt to influence legislation through a lobbying communication and all ancillary activities engaged in for the purpose of making or supporting a lobbying communication.

One area that is often overlooked is dues paid to trade associations. 

The following website allows you to search by company name and see who is registered to lobby on the company's behalf and the amount of lobbying-related income from the company/client. http://sopr.senate.gov.

C.  Recent or Pending Legislation

 

 

Effective Date

Title

Summary and Impact of Legislation

N/A    

D.  Specific Industry Related Tax Law

 

 

Effective Date

Code Section

Summary and Impact of Law

Temporary Provision that is Usually Renewed Periodically Sections 51 and 51A Employers who hire certain targeted low-income groups may be eligible for an annual tax credit of up to $2,400 for each qualifying employee who works at least 400 hours during the tax year. Additionally, a maximum credit of $1,200 may be available for each qualifying summer youth employee.    These credits are known as the Work Opportunity Tax Credit and Welfare to Work Tax Credit.
Current Section 170(e)(3) Allows C Corporations an enhanced deduction for qualified contributions of inventory to qualified organizations.
Current Section 190 This annual deduction of up to $15,000 is available to businesses of any size for the costs of removing barriers for people with disabilities, including the following: providing accessible parking spaces, ramps, and curb cuts; providing wheelchair-accessible telephones, water fountains, and restrooms; making walkways at least 48 inches wide; and making entrances accessible.

 

July 25, 1991

Section 197 Generally, section 197 intangibles include designs (package designs).  However, if the design is self-created, the asset is a Section 197 intangible, but not an amortizable Section 197 intangible.  Therefore, the 15-year recovery period does not apply.  The aforementioned Coordinated Issue Paper discusses the methods available for cost recovery.

E. Important Revenue Rulings or Revenue Procedures

 

 

Effective Date

Title and Number

Summary and Impact of Ruling and Procedure

     
     
Retroactive Revenue Ruling 98-39 Ruling discusses year end accruals relating to outstanding liability a manufacturer has under cooperative advertising arrangements with retailers, specifically the ruling states that the fact of liability is established when a retailer conducts qualified advertising vs. when a claim for reimbursement is received from the retailer.  Revenue Ruling 98-39 was the desirable method of announcing that the Service has changed its position on the issues addressed in TAM’s, 9320001, 9343006, 9204003 and 9416004.
2002 Revenue Procedure 2002-12 On January 7, 2002, the Service issued guidance (Rev. Proc. 2002-12) on a safe harbor method of accounting for the cost of smallwares for restaurants.   The IRS will now allow for the cost of certain restaurant smallwares to be current year deductible expenses.

F.  Important Court Cases

 

 

Date Opinion Issued

Name of Court Case and Citation

Summary of Importance of Court Case

1990 Jefferson Pilot Corp. v. Comm.  98 T.C. 435 (1992), affd. 995 F2d 530 (4th Cir. 1993)

The court determined that a license is a franchise as defined in IRC Section 1253(b)(1).  The Courts looked to the legislative history of IRC Section 1253 and found that it does not limit the application of IRC Section 1253 to private commercial franchises.  This has resulted in taxpayers filing Forms 3115 to change their method of accounting for the cost of liquor licenses.  Previously the Service’s position was that a liquor license had an indeterminate life and therefore costs were not recoverable through depreciation or amortization.  As a result of this decision, taxpayers can amortize the cost of their liquor license. See also

Tele-Communications Inc. (TCI) v. Comm. 95 T.C. 495 (1990)

Affd. 12F 3d 1005 (10th Cir. 1993)

1999 H Group Holding, Inc. v. Commissioner, T.C. Memo 1999-334 The court modified the IRS’s holding that petitioner subsidiary for mark licensing outside the United States should be increased by 1.5 percent of the gross revenues of those hotels whose management fees were remitted to two subsidiaries in Hong Kong and Singapore that were also hotel management companies, taking into consideration adjustments.
2001 WestPac Pacific Hotels, et. Al. V. Commissioner, T.C. Memo 2001-175 The Tax Court has held that a partnership that distributed goods to related grocery chains wasn’t entitled to defer recognition of upfront cash payments as income from various manufacturers beyond the year of receipt.

G.  Technical Advice Memorandums - Field Service Advices

PLRs AND TAMs ARE ADDRESSED ONLY TO THE TAXPAYERS WHOREQUESTED THEM.  FSAs ARE NOT BINDING ON EXAMINATION ORAPPEALS, NOR ARE THEY FINAL DETERMINATIONS.  FURTHERMORE,SECTION 6110(k)(3) PROVIDES THAT PLRs, TAMs, AND FSAs MAY NOTBE USED OR CITED AS PRECEDENT.

 

 

 

Number

Description

FSA 200203009 Recovery Period for various components of a hotel/casino

back to table of contents

 

Alternative Issue Resolution Considerations

Cost Segregation Studies Relating to Hotel Structures Members of the industry have expressed an interest in developing an industry wide agreement on the treatment of the costs of a building used as a hotel or it may be a good pre-filing candidate.

Industry Resources

A. Websites

Name of Site

Summary and Available Information

Int’l Assn of Amusement Parks and Attractions Provides a variety of information about this industry segment.
Travel Industry Assn of America Gives an overview of this related industry.
Cornell, School of Hotel Admin. Links to hospitality education links around the country.
Hotel Resource “The Resource for Hospitality Professionals sponsored by The Buyer’s Guide”
Int’l Tax Treatment of REITS Self explanatory
FASB Summaries FASB Summaries
AICPA Home Page Information from the AICPA
Rutgers Resources Information from business library
Association for Accounting Administration Self-explanatory
CPA Journal Home Page Self-explanatory
Wall Street Journal Home Page Self-explanatory
Internal Auditing Web Page Self-explanatory
Stock History Self-explanatory
Company Profiles Self-explanatory
Tax and Accounting Sites Links to CPA Sites
Search SEC documents Self-explanatory
SEC home page Self-explanatory
Library of Congress Self-explanatory
Thomas Legislative Research Self-explanatory
TCU Professor-Tax Links Provides links to various tax sites
News Articles Self-explanatory
News Articles Self-explanatory
Tax Gateway Provides links to various sites
Wall Street Research Net Information on publicly traded hotels
Corporate Information Information on companies

B. Trade Associations

Name

Address

Purpose, Goals, Objectives, etc.

International Hotel & Restaurant Assn. 48, Boulevard de Sebastopol, 75003
Paris, France
Non-profit organization which represents industry issues before policymakers, monitors tourism issues, creates programs to serve the industry, etc.
American Hotel & Lodging Assn 1201 New York Ave, NW, #600
Washington, DC 20005-3931
Represents lodging industry’s business interests on Capitol Hill. It is the largest national trade association for the U.S. hotel and lodging industry.
Hotel Tax Executives Committee None Organization is affiliated with the American Hotel & Lodging Assn.’s governmental affairs unit.
Tax Executive Institute 1200 G. St. Suite 300
Washington, DC 20005-3814
A professional organization of business executives who are responsible for taxation matters on an administrative or policymaking level, or whose work is otherwise primarily concerned with the problems of business taxation.

C. IRS and Other Training Courses/Videotapes

Name of Course

Course Number

Delivery Method

Developer of Course and Procedures to Secure Material

None      

D. Trade Magazines and Newsletters

Title

Frequency of Publishing

Summary of Purpose/Information Included/Availability

Hotels Monthly Subscription is free to industry people. Contains information about the global hotel marketplace.
Hotel Business Review Weekly Subscription rate is $295.00/yr. Contains information about the industry’s best practices, insights and trends.
Lodging Magazine Online Free.
Hotel & Motel Management Online Free.
Advertising Age Weekly Subscription rate is $99.00/yr. Contains information about corporate advertising strategies, new products, etc.

E. Industry Books

Date of Latest Edition

Title

Summary of Contents

2004 Hospitality Sales: Selling Smarter by Judy A. Siguaw and David Bojanic, Publisher: Thomson Delmar Learning This book addresses the process of selling in the Hospitality Market.
2004 Hospitality Strategic Management: Concepts and Cases by Jeffrey S. Harrison and Cathy A. Enz, Publisher: Wiley This book provides a practical view of the field. It provides the reader a glimpse into the strategic manager’s role, including acquisition, development, and management of internal resources, in addition to relationships with external stakeholders.
2003 Hospitality Management Accounting by Martin G. Jagels and Michael M. Coltman, Publisher: Wiley As the hospitality industry continues to grow and become more competitive, it must become increasingly profit and cost-conscious in order to maximize revenue and minimize costs. This book combines essential information, illustrative examples, and useful problems and exercises.
2002 Convention Sales and Services, 6th Edition by Milton T. Astroff and James R. Abbey, Publisher: Culinary and Hospitality Industry Publications Services

This book provides a guide in reaching and servicing the meetings market. The book provides a step-by-step process to both sell and service to groups.

 

2001 Hospitality & Travel Marketing by Alastair M. Morrison, Publisher: Delmar The book provides a thorough and current look at marketing theory and techniques for the hospitality industry. It provides a glimpse into the collaborative efforts between hotels, airlines, restaurants and travel agencies.
1995 Hospitality Accounting by William S. Gray, Publisher: Prentice Hall This book addresses the practical accounting requirements for some of the latest developments in hotel operations. It looks at all phases of hospitality accounting and finance from basic recording to long-range projections.
1995 Co-Op Advertising by Bob Houk, available from the Association of National Advertisers The book describes marketing activities, development of marketing budgets, cost controls, marketing jargon, legal considerations for price structures, etc.  Helps the reader understand the motivations and internal procedures relative to marketing strategies.
1993 Great Advertising Campaigns Discusses successful marketing strategies, brand building, etc.
1991 Internal Control: A Fraud-Prevention Handbook for Hotel and Restaurant Managers by A. Neal Geller, Publisher: Self-explanatory.
1988 Negotiation and Administration of Hotel Management Contracts by James Eyster, Publisher: Self-explanatory.
Annual

 

Thomas Hotel Registry

Lists companies and their products and brands, d/b/a names and other statistical information.

F.  Internal Revenue Manual Citations

IRM Section

Title

Summary of Information Included

None    

G.  AICPA Auditing Standards and Publications

Date of Issuance

Title

Summary of Information Included

3/81 S45 – Accounting for Franchise Fee Revenue Discusses treatment of franchise fee revenue.  Since many hotel chains are franchisers, this statement provides guidance.
6/99 S121- Leases Accounting for leases:  Sale-Leaseback Transaction, Involves R/E, Sales-Type Leases of Real Estate- Definition of the lease term and Initial direct costs of direct financing leases-an amendment of FASB ‘s #13, 66, 91
1993 SOP 93-7 Discusses the treatment of advertising costs for financial accounting purposes.
2001 FASB 144 FASB 144 is effective for fiscal years beginning after December 15, 2001.   It provides for asset impairment losses to be recognized for financial accounting purposes

H.  Market Segment Specialization Program (MSSP)

Guide Name

Number

Bed and Breakfasts #3149-105,  5/93  TDPS 83186H
Page Last Reviewed or Updated: 14-May-2013