Hospitality accounting: the key IFRS issues

The hotel business has split into owners, operators and brands. Some groups own their hotels; many now own almost none and earn fees for managing or franchising hotels that others own. Each model produces very different accounts: one is full of buildings and depreciation, another of fee revenue and loyalty liabilities. This guide maps the key IFRS issues for hotels and other hospitality businesses, explains why each matters and links to the detailed guides.

By Awais Jameel, Chartered Accountant. Reviewed by Muhammad Bilal, Chartered Accountant. 3 minute read.

Short answer

Hospitality accounting under IFRS depends on the business model. Hotel owners recognise room, food and beverage revenue under IFRS 15 as guests stay and are served, and carry their hotels as property, plant and equipment under IAS 16, depreciated by component; an owner-operated hotel is not investment property. Hotel management companies earn base and incentive fees, which are variable consideration recognised as the management service is provided, and franchisors earn royalties on a brand licence, recognised as the hotels' sales occur. Loyalty points earned by guests are a separate obligation, so part of the room price is deferred until the points are redeemed. Leased hotels and restaurants fall under IFRS 16, prepaid stays and vouchers are contract liabilities, and each hotel is usually tested for impairment on its own.

At a glance

Room and food revenue
IFRS 15, as guests stay
Management fees
Variable consideration
Franchise royalties
As hotels' sales occur
Loyalty points
Deferred until redeemed
Owned hotels
IAS 16, by component
Leased hotels
IFRS 16 right-of-use asset
Hospitality accounting: the key IFRS issuesRoom and food revenue: IFRS 15, as guests stay; Management fees: Variable consideration; Franchise royalties: As hotels' sales occur; Loyalty points: Deferred until redeemed; Owned hotels: IAS 16, by component; Leased hotels: IFRS 16 right-of-use asset.KEY FACTS AT A GLANCEHospitality accounting: the key IFRS issuesRoom and food revenueIFRS 15, as guests stayManagement feesVariable considerationFranchise royaltiesAs hotels' sales occurLoyalty pointsDeferred until redeemedOwned hotelsIAS 16, by componentLeased hotelsIFRS 16 right-of-useassetTax BakersHospitality accounting: the key IFRS issuesRoom and food revenue: IFRS 15, as guests stay; Management fees: Variable consideration; Franchise royalties: As hotels' sales occur; Loyalty points: Deferred until redeemed; Owned hotels: IAS 16, by component; Leased hotels: IFRS 16 right-of-use asset.KEY FACTS AT A GLANCEHospitality accounting: the keyIFRS issuesRoom and food revenueIFRS 15, as guests stayManagement feesVariable considerationFranchise royaltiesAs hotels' sales occurLoyalty pointsDeferred until redeemedOwned hotelsIAS 16, by componentLeased hotelsIFRS 16 right-of-use assetTax Bakers
Key facts at a glance, as set out in this guide.

Why is hospitality accounting different?

Hotels combine property and services: a hotel is a building, but what a guest buys is a night's stay with services. The same hotel can involve three parties, an owner, a management company and a brand, each with its own accounts. Large hotel groups have moved towards an asset-light model, earning fees from managing and franchising hotels owned by investors, which shifts their accounts from depreciation and property values to fee revenue, contract costs and loyalty programmes. See IFRS 15 revenue.

Which IFRS issues matter most in hospitality accounting?

Key hospitality accounting issuesKey hospitality accounting issuesStandardAccountingRooms and foodIFRS 15As guestsstayManagement feesIFRS 15Variable,as earnedFranchise feesIFRS 15Royalties assales occurLoyalty pointsIFRS 15Deferred untilredeemedOwned hotelsIAS 16ComponentdepreciationLeased hotelsIFRS 16Right-of-useassetVouchersIFRS 15Liability,breakageImpairmentIAS 36Each hotela CGU
Eight issues drive most hotel groups' accounting.

How is hotel revenue from guests recognised?

Room revenue is recognised over the nights a guest stays, and food, beverage and other services as they are provided. Deposits and prepaid stays are contract liabilities until the stay. A hotel owner that uses a management company is still the principal in sales to guests, so it reports the full room revenue and treats the management fees as an expense. Booking platforms that sell rooms for hotels are usually agents, reporting only their commission. See principal versus agent.

How do management companies account for their fees?

A management company provides a continuous service of operating the hotel, paid through base fees, usually a percentage of hotel revenue, and incentive fees based on profit. Both are variable consideration, recognised as the service is provided in each period. Payments the manager makes to owners to win contracts, known as key money, reduce revenue over the contract. See hotel management agreements.

How do franchisors account for franchise fees?

A hotel franchise licenses the brand, its standards and its reservation systems to a hotel owner. The brand licence is a right to access intellectual property, recognised over time, and royalties based on the hotel's room revenue are recognised as that revenue is earned. Initial fees are usually spread over the franchise term. See hotel franchise fees.

How are loyalty points accounted for?

Points earned by guests give them a right to free or discounted stays, which IFRS 15 treats as a separate performance obligation. Part of the price of each stay is allocated to the points and deferred until they are redeemed or expire. Points sold to partners such as credit card issuers raise further allocation questions. See hotel loyalty points.

How are owned hotels accounted for?

A hotel the owner operates, directly or through a manager, is owner-occupied property, not investment property, because the services to guests are significant to the arrangement as a whole. It is property, plant and equipment under IAS 16, at cost or revalued amount, depreciated by component: structure, building services and furniture, fixtures and equipment have very different lives. See hotel property and depreciation.

What other issues arise?

Leased hotels and restaurants are accounted for under IFRS 16, often with rents linked to sales. Gift vouchers and prepaid stays create contract liabilities and breakage. Hotels are usually tested for impairment one by one, because each generates its own cash inflows. The detailed guides cover restaurant leases, gift vouchers and prepaid stays, hotel impairment, timeshare revenue, tour operators and service charges and tips.

How does US GAAP differ?

ASC 606 gives similar answers on fees, royalties and loyalty points, and private franchisors can use a practical expedient that treats certain pre-opening services as distinct from the franchise licence. Hotels are carried at cost under ASC 360, with no revaluation option, and impairment uses a recoverability test before measuring the loss. See IAS 16 and US GAAP compared.

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Questions people ask

Is a hotel investment property under IFRS?

Not if the owner operates it, directly or through a manager: an owner-operated hotel is property, plant and equipment under IAS 16.

How are hotel management fees recognised?

As the management service is provided each period; base and incentive fees are variable consideration.

Are franchise royalties recognised over time?

Yes. The brand licence is a right to access, and sales-based royalties are recognised as the hotels' sales occur.

How are hotel loyalty points accounted for?

As a separate performance obligation: part of the room price is deferred until the points are redeemed or expire.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IFRS Foundation: IFRS 15 Revenue from Contracts with Customers
  2. IFRS Foundation: IAS 16 Property, Plant and Equipment
  3. IFRS Foundation: IAS 40 Investment Property
  4. IFRS Foundation: IFRS 16 Leases

Rules and fees change. If you are reading this long after October 10, 2026, confirm the figures with the source before you rely on them.

HospitalityHotel management agreementsHospitalityHotel franchise feesHospitalityHotel loyalty points

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This guide is general information. It is not tax or legal advice for your situation.