The USALI 12 operating statement, explained line by line

A hotel profit and loss statement looks intimidating until you see the one idea holding it together. It is built as a staircase.

You start at the top with revenue, and at each step you subtract a particular kind of cost, until you reach the figure that lands in the owner's pocket. Once you can see the steps, you can read any hotel's accounts, spot where a number is in the wrong place, and tell whether a cost is the operator's problem or yours.

This page walks the whole staircase under USALI 12, the standard that becomes mandatory on 1 January 2026. If you have not read what USALI 12 is and why it matters, start there, then come back here for the detail.

The shape, in one breath

From top to bottom, the statement goes: revenue by department, minus the direct cost of each department, gives departmental profit. Take away the costs of running the whole hotel and you get gross operating profit. Take away the costs the owner carries, the fees, taxes, insurance and reserves, and you reach the owner's return. Revenue at the top, the owner at the bottom, and every cost sorted by who controls it. That last point is the key to the entire document.

Step one: revenue by department

USALI groups income by the department that earns it. The big two are almost always rooms and food and beverage, with a set of smaller operated departments and other income beneath them.

Rooms is the engine of nearly every hotel. It carries the highest revenue and, because a sold room costs little more than a clean and a check-in, the strongest margin. Food and beverage covers restaurants, bars, banqueting and events, and it runs on a much thinner margin because it carries real cost of sale and heavy labour. The smaller operated departments, such as spa, parking or a golf course, sit below. Other income picks up the genuinely incidental: commissions, cancellation fees, and similar.

The reason USALI splits revenue this way is that a pound of rooms revenue and a pound of banqueting revenue behave nothing alike once you take their costs off. Grouping by department keeps that honest.

Step two: departmental expenses and departmental profit

Each department then carries its own direct costs, the costs that exist only because that department operates. For rooms, that is housekeeping labour, linen, guest supplies and commissions. For food and beverage, it is the cost of food and drink plus kitchen and service labour.

Subtract each department's direct cost from its revenue and you get its departmental profit. Add those together and you have total departmental profit, sometimes called the gross operating income. This is the hotel's earning power before any of the shared, building-wide costs are counted.

Step three: undistributed operating expenses

Now come the costs that keep the whole hotel running but cannot be pinned on a single department. USALI calls these undistributed operating expenses, and they are where a lot of the real management story lives.

Administrative and general covers the back office: management salaries, finance, credit card fees, legal and the like. Sales and marketing is the cost of filling the hotel, from the team to advertising to brand marketing contributions. Property operations and maintenance keeps the building working. Information technology covers the systems. And then there is Energy, Water, and Waste, the department USALI 12 renamed and widened from the old Utilities line, reflecting how seriously energy and sustainability cost is now taken.

These are real and large, and unlike departmental costs they do not rise and fall neatly with occupancy. They are the cost of being open at all.

Step four: gross operating profit

Subtract the undistributed expenses from total departmental profit and you reach gross operating profit, GOP. This is the most-watched number in the hotel, and for good reason: it is the cleanest measure of how well the hotel is actually run. Almost everything above GOP is inside management's control. That is exactly why operators are usually judged on it, and why a management contract's incentive fee is so often tied to it.

For an owner, GOP is important but it is not the finish line. It is the point where control starts to pass from the operator to you.

Step five: the costs the owner carries

Below GOP sit the costs that fall on ownership rather than operations. This is where the deal structure does its work.

Management fees come first: the base fee the operator charges for running the hotel, and any incentive fee tied to performance. Then the fixed charges: property taxes, building insurance, and, if the hotel is leased, the rent. And then the replacement reserve, the money set aside each year to replace furniture, fixtures and equipment as they wear out, usually a percentage of revenue.

Here is the part owners miss. Two hotels can post an identical GOP and deliver their owners completely different returns, because the costs in this band are not the same from one deal to the next. A heavier fee, a higher reserve or a ground rent can quietly eat the result. The staircase above GOP is about operations. The staircase below it is about the deal you signed.

Step six: down to the owner's return

Work through the fees, the fixed charges and the reserve and you arrive at the bottom: earnings before interest, taxes, depreciation and amortisation, then the figure left for the owner after the reserve is set aside. This is the number that should drive an owner's decision, and it is the one furthest from the top line, which is precisely why it is so easy to lose sight of.

A worked example

Numbers make the staircase concrete. Here is a simplified single year for a mid-sized hotel, rounded for clarity, in US dollars.

Notice that GOP is 4,000,000, a number the operator will rightly be proud of. The owner keeps 2,450,000 of it. The 1,550,000 difference is entirely the deal: the fees, the fixed charges and the reserve. Change the structure, and that gap changes with it.

What USALI 12 changed in this statement

The 12th edition sharpened several of these lines in the name of transparency. The old Utilities line became Energy, Water, and Waste. A new Payroll Full-Time Equivalent schedule reports full-time-equivalent employees by department, so the headcount behind the largest controllable cost is visible where it is incurred. It records people, not cost. Loyalty programme costs get clearer treatment inside rooms revenue. And a new annual schedule pulls brand and operator costs into a single table, which matters most exactly here, in the fees-and-charges band where owners are trying to see the full operator cost in one place.