Hotel Privilege Cards

Objective :

It is becoming increasingly popular for hotels to contract individually or as part of an area/regional initiative, an organization to market and sell hotel privilege cards. Typically the privilege card entitles the holder to discounts when using hotel facilities. The net profit from the sale of the card is shared in the proportion detailed in the contract signed with the marketer.

Procedure :

1. Accounting for Revenues Generated by Privilege Card Sales 

   It is common for the hotel and marketer to share the net profit generated by the sale of the privilege card. Currently there is inconsistency in accounting for this. By way of example: 

   
   

   1. Some operations book revenue from card sales and the associated expense of selling the cards to respectively deferred income/expense accounts in the balance sheet; the resulting net profit being booked to other income in the appropriate department’s P&L (e.g. to F&B other income if the primary purpose of the card is to market F&B), with the marketers share being recognized as a liability and paid through accounts payable.

      
      

   2. Other operations choose to credit total card sales to other income in the relevant department and total costs to the relevant department. The marketer’s share of net profit being reflected as an operational cost. 

      
      

   3. The approach to be taken will depend on the agreement the hotel has signed with the marketer.

      
      

   If the presumption and implication under the agreement is that the marketer does not act as an agent for the hotel but acts on their own account, the hotel should follow ref: 1. (1). If the marketer acts as agents for the hotel, ref: 1. (2) will be the preferred accounting treatment.

   
   

2. Accounting for Costs Associated with Selling Privilege Cards

   Typically the marketer will not act as an agent and will be responsible for compiling their own P&L, detailing revenues generated and expenses incurred. The controller will put in place a formal process to audit the accuracy of the marketers P&L. Defendant on the volume of business generated; it is recommended that the marketer be required to produce a weekly P&L.

   
   

3. Accounting for Food and Beverage Discounts 

   Privilege cards entitle holders to discounts when using hotel services. Typically the discounts are given on consumption of food and beverage and usage of guest rooms (discounted room rates and or complimentary rooms). Given the aim of the card is to drive departmental revenues and thus profits, the discount will be borne by the relevant department?

   
   

4. Complimentary Rooms Awarded 

   In the event that the cardholder is given a complimentary room, the room should be booked as such.

   
   

5. Tracking Usage of Privilege Cards 

   It is important to track cardholders spend and the associated discounts given. The POS should be configured or a manual system put in place to facilitate this.