Hotel and hospitality audit: room revenue cut-off, F&B and loyalty points

Auditing a hotel means testing three risks a generic trading business audit doesn't carry: room revenue cut-off around the night audit process, since a guest checked in on one day and checked out the next (or still in-house at the reporting date) needs revenue split or deferred correctly by the property management system's own night-audit routine, which is easy to override; food and beverage inventory, which moves fast, spoils, and gets consumed internally (staff meals, complimentary guest service, promotional events) in ways that a simple purchase-minus-closing-stock calculation doesn't capture; and the loyalty or rewards point liability for chains running a points programme, which represents a real future obligation to provide free or discounted stays and is frequently under-provided because hotels tend to treat it as a marketing cost rather than a deferred revenue liability.

Room revenue cut-off

Hotel property management systems run a nightly 'night audit' batch process that closes the day's room revenue, typically run at a fixed time overnight. A guest in-house at the reporting date, or checking out just after the cut-off, is exactly where revenue cut-off errors concentrate — and because the process is automated, an error here is usually systemic across many room-nights rather than a single transaction.

1. 01Confirm the exact night-audit cut-off time against the reporting dateCheck whether the system's night audit for the reporting date actually ran, and at what time, rather than assuming the financial cut-off and the system's own batch cut-off are the same moment.
2. 02Test revenue for guests in-house at the reporting dateRevenue for nights already stayed as of the reporting date should be recognised to that date; revenue for nights still to come (an advance booking paid in full) should not be.
3. 03Reconcile the room revenue report to the occupancy report for the same periodAverage room rate times rooms sold should tie to reported room revenue; a mismatch usually means complimentary rooms, rate overrides or a reporting period boundary issue.
4. 04Test advance booking deposits as a liability until the stay occursPrepaid bookings, especially for a future season, should sit as a liability (advance from customers) and not be recognised as revenue before the guest actually stays.

F&B inventory

Food and beverage is a high-shrinkage, high-turnover inventory category with legitimate internal consumption (staff meals, manager's hospitality, complimentary amenities) that needs to be tracked and costed, not simply written off as an unexplained variance between purchases and closing stock.

• Obtain the internal consumption log — staff cafeteria, complimentary guest offerings, banquet tastings — and confirm it is costed and charged against the relevant cost centre rather than disappearing into an unexplained shrinkage number.
• Attend or review the physical stock count for high-value items (liquor, specific F&B categories) specifically, since F&B counts are often rushed relative to other inventory counts.
• Check wastage and spoilage write-offs are authorised and logged at the point of disposal, not estimated at year end as a balancing figure.
• Test complimentary and promotional F&B (loyalty programme benefits, package inclusions) is costed through the right revenue stream rather than silently reducing reported F&B margin.

The loyalty point liability

Under Ind AS 115, loyalty points granted to a guest as part of a stay represent a separate performance obligation — a portion of the transaction price needs to be allocated to the points at their stand-alone value and recognised as revenue only when the points are redeemed or expire, not recognised in full at the time of the original stay.