Costs allocation practices: Evidence of hotels in Australia

The purpose of this research is to provide an insight into the practice of costs allocation in hotels. Data for the study were collected through semi-structured interviews with 19 Directors of Finance (DF) in the first stage and five DFs in the second stage. The results indicated that while overwhelming numbers of the DFs perceived their hotels were being operating in a competitive environment, there was little evidence of accurate apportioning of indirect costs, and instead, they allocated costs to aggregated revenue. In addition, it was noted that hotels treated various food and beverage outlets as a one unit of operation where indirect costs and some of the key direct costs were also aggregated. The results imply that the eleventh edition of the Uniform System of Accounts for the Lodgings Industry (USALI) does not support hotels in managing accurate cost figures. The contribution of this research is amplified by the fact that managers operating in competitive environments do not have access to accurate cost information which may hamper their ability to make effective decisions.