Hospitality: deposits and daily revenue

Saltmarsh Bay Hotel has 120 rooms, a restaurant and a small spa. Hotels earn revenue every night, collect cash weeks in advance and handle money that isn't theirs. Four issues shape the books.

1. Advance deposits. Guests pay a 30% deposit when they book. Until the stay happens, the hotel owes them a room: the deposit is a contract liability (IFRS 15.106). On check-in it is applied to the guest's bill. Room revenue is recognised night by night as the stay is provided — not at booking, and not at check-out.

2. The daily revenue report. Every night the night auditor closes the day in the property management system. The daily revenue report shows revenue by department (rooms, food and beverage, spa) and, separately, how it was settled: cash, cards (which the card acquirer pays a day or two later), the city ledger (corporate accounts invoiced monthly, i.e. receivables) and deposits applied. The two halves must agree — revenue earned equals settlements — and the report is posted as one compound entry. Hotels also track occupancy (rooms sold ÷ available), ADR (average daily rate: room revenue ÷ rooms sold) and RevPAR (room revenue ÷ rooms available), which combines both.

3. Cancellations and no-shows. Booking terms decide what the hotel keeps. A fee retained under the terms — a forfeited deposit or a no-show charge — is revenue when the guest cancels (the hotel's obligation ends). The refundable part is cash owed back. Where a predictable share of prepaid rights is never used (for example, gift vouchers), IFRS 15.B44–B47 requires that breakage be recognised in proportion to the rights that are used, rather than waiting for expiry.

4. Other people's money. Tips added to card payments belong to the staff; the hotel collects them as an agent and owes them on: a liability, not revenue. Tourism levies and sales taxes collected from guests are likewise liabilities to the authority.