Hotel Accounting: How Small Hotels and Inns Track the Money

Revenue comes from more than rooms

Rooms are the main revenue line, but food and beverage, parking, fees and events add to it. Track each separately.

Separating revenue by source shows what is working. Typical categories include room revenue, food and beverage, meeting space, parking, resort or amenity fees and gift shop sales. Each has its own cost structure, so mixing them hides the real margins.

Many hotels use a property management system that posts charges to guest folios and exports to the accounting software.

Departmental accounting

Hotels commonly report by department: rooms, food and beverage and other operated departments, then overhead.

Each department shows its revenue and direct costs, giving a departmental profit. Overhead such as sales and marketing, utilities, property maintenance and administration is reported separately. This setup is often based on the Uniform System of Accounts for the Lodging Industry, and your accountant can tell you how closely to follow it.

Fixed costs, including mortgage, insurance and property tax, continue whether rooms are full or empty. That is why occupancy swings affect profit so much.

Metrics every owner should know

Occupancy, average daily rate and revenue per available room summarize performance on one page.

RevPAR equals occupancy times ADR. Raising price and filling more rooms both help, but they trade off, so track the combination.

Daily routines that prevent errors

A nightly audit that reconciles charges, payments and deposits catches mistakes while they are small.

1. Close out the day's folios and reconcile to the property system.
2. Match card settlements and online travel agency payments to bookings.
3. Record deposits and advance bookings as liabilities until the stay occurs.
4. Review the daily cash report. See our note on the daily cash report.

Tracking taxes collected, such as lodging taxes, separately is important since those are owed to the government and are not your revenue.

Seasonality and cash flow

Hotels earn unevenly across the year but pay fixed costs monthly, so cash planning is essential.

Peak season may carry the whole year. Build a monthly forecast with expected occupancy, rates and fixed costs, and set aside cash for the slow months. Read about cash flow projections to get started.

Common reporting mistakes

Mixing taxes, deposits and revenue distorts results.

Watch for lodging taxes recorded as income, advance deposits counted before the stay, and credit card fees buried in general expenses. Commissions paid to booking sites should be tracked separately so you can see the true cost of each channel. Repairs and capital improvements need different treatment, since improvements are generally depreciated over time. A monthly review with your accountant keeps these categories straight and makes owner and lender reports more reliable.

Financing renovations and slow months

Renovations, furniture and working capital are common needs, and the right product depends on payback.

Updating rooms can raise ADR and occupancy, but the work is paid before the benefit arrives. Illustrative example: a $120,000 refresh of 40 rooms that lifts ADR by $15 at 60% occupancy adds about $131,000 a year in room revenue before costs. Test the numbers conservatively.

ROI Funder offers term loans, working capital and lines of credit for operating businesses with 500+ FICO, 6+ months in business and $20,000+ monthly revenue. Property purchase or refinance falls outside what ROI Funder places.