IFRS 9 ECL Calculator
for Hospitality

IFRS 9 Expected Credit Losses for Hospitality

Hospitality and tourism entities have a distinctive IFRS 9 profile because the majority of revenue is collected at or before the point of service — through prepaid online bookings, credit card settlement at checkout, or advance deposits for events. This means trade receivable balances are relatively low compared to revenue. However, several receivable categories do require IFRS 9 ECL assessment: corporate account receivables from business clients with monthly billing arrangements, event and conference receivables from corporate event bookings, OTA (online travel agency) receivables where commission calculations and virtual card settlements may create outstanding balances, and group booking receivables from tour operators and travel agents. The credit risk varies significantly across these categories and warrants separate assessment within the provision matrix.

Receivable Characteristics — Hospitality

Corporate account receivables represent the largest category for hotels and restaurant groups that offer credit terms to business clients. These are typically billed monthly and carry moderate credit risk. Event and conference receivables can be individually large (a single conference booking may exceed €50K) and may be subject to post-event disputes over service quality or quantity. OTA receivables are unique — they represent amounts owed by online platforms after deducting commissions, and disputes frequently arise over commission calculations, virtual card payment failures, and rate parity violations. Group booking receivables from tour operators carry the credit risk of the tour operator rather than the end traveller — tour operator insolvencies have historically caused significant losses in the hospitality sector. Franchise fee receivables (for hotel chains operating under a franchise model) represent ongoing obligations from franchisees.

Forward-Looking Factors

Tourism demand indicators are the primary forward-looking data for hospitality ECL. Tourism arrival statistics and occupancy rate forecasts directly correlate with the financial health of hospitality counterparties. Consumer confidence indices affect discretionary travel spending and therefore the payment capacity of end consumers and the booking volumes of corporate clients and tour operators. Business travel expenditure indices affect corporate account receivable risk. Geopolitical events (travel advisories, visa policy changes, health restrictions) can rapidly affect tourism demand and counterparty credit risk. For resort and seasonal properties, weather forecasts and climate trends may affect seasonal demand patterns.

Regulatory and Audit Context

Auditors of hospitality entities should verify that all receivable categories are identified — OTA receivables and franchise fee receivables are sometimes overlooked. The seasonal concentration of revenue and receivables means that the timing of the reporting date relative to peak season significantly affects the ECL calculation. Common audit findings include: omitting OTA receivable ECL (despite platforms carrying intermediary credit risk), failure to specifically assess material event receivables, and inadequate forward-looking adjustment following demand shocks (e.g., travel restrictions, economic downturns). For hotel chains with management agreements, receivables from hotel owners for management fees require assessment based on the financial health of each property owner.

Hospitality entities with management agreements should separately assess receivables from property owners for management fees, which carry the credit risk of the individual property rather than the hotel brand.