Accounting and financial management

1 Performance measurement in independent hotels 3Mine Haktanir 2 Productivity in the restaurant industry: how to measure productivity and improve process management 22 Pekka Heikkilä and

Accounting and Financial

Management

Accounting and

Financial Management

Developments in the international

A MSTERDAM • B OSTON • H EIDELBERG • L ONDON • N EW Y ORK • O XFORD

P ARIS • S AN D IEGO • S AN F RANCISCO • S INGAPORE • S YDNEY • T OKYO

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1 Performance measurement in independent hotels 3

Mine Haktanir

2 Productivity in the restaurant industry: how to measure

productivity and improve process management 22

Pekka Heikkilä and Timo Saranpää

3 Performance measurement in the international

Agnes Lee DeFranco

6 Developing a benchmarking methodology for the

hotel industry 105

Peter Harris and Marco Mongiello

7 The profit planning framework: applying marginal

accounting techniques to hospitality services 137

Peter Harris

8 Cross-border reporting for performance evaluation 151

Ian Graham

9 Cost analysis in the hotel industry: an ABC customerfocused approach and the case of joint revenues 165

Paolo Collini

10 Customer profitability accounting in the context

of hotels 188

Vira Krakhmal

11 Room rate pricing: a resource-advantage perspective 211

Jean-Pierre I van der Rest

12 The relevance of restaurant accounting systems 240

15 Hotel asset management: will a North American phenomenon expand internationally? 301

Marco Mongiello and Peter Harris

22 Career directions in financial management in the hospitality industry 446

Howard Field

As a senior executive of a fast growing hotel company in Europe,

Middle East and Africa, with hotel operations in some fifty

coun-tries, I know how difficult it is to find the time to keep track of

new research and development in the areas of accounting and

financial management within our industry

Accounting and Financial Management: Developments in the

International Hospitality Industryedited by Peter Harris and Marco

Mongiello is an effective and indispensable reference that helps

me and others like me keep abreast of research and development

in our industry In addition, I believe this book is of invaluable

importance to those studying at different levels of education,

accountants in the hospitality business and advisors to the

hospi-tality industry

This book is not only made attractive by the range of

interna-tional authors and the combination of well-written chapters, but

also by the demonstration of how accounting and financial

man-agement interrelates and contributes to the broad spectrum of

business activities Written by industry mavens who have drawn

on their practical experience from different areas of the

hospital-ity industry and academic researchers, these chapters are

recom-mended reading for anyone interested in the hospitality industry

Part One of the book deals with performance measurement and

includes six interesting chapters about various aspects of

per-formance measurement in the hospitality industry This section is

loaded with useful information including benchmarking and

measuring productivity in the restaurant industry In my view,

the hospitality business is well structured for benchmarking and

for measuring financial success at all levels of operation Part One

of the book is a true goldmine of knowledge for those seekingadvice on performance management and plenty of references forthose wanting more information

The focus of Part Two of the book is information management,

a highly relevant subject for all of us Most of us struggle with theUniform System of Accounts and have been doing so for a verylong time This section of the book offers several solutions toovercome some of the fundamental weaknesses in the UniformSystem and complements the accounting standard/chart ofaccounts in a meaningful and manageable way Implementingsome of these solutions in our operations is a must if we want tomanage our organizations efficiently and effectively For instance,drawing on the expertise of Peter Harris, we ourselves at RezidorSAS Hospitality have engaged with marginal analysis and imple-

mented The Profit Planning Framework in our organization, an

indispensable tool that helps us understand the behaviour offixed and variable costs in operations

Asset Management is the theme of Part Three of the bookwhich emphasizes a number of longer-term issues and tech-niques The chapters in this section vary from sale and leasebacktransactions, to investment appraisals and to career developmentfor finance professionals in the industry This information ishighly pertinent and important to our business and for our pro-fessional growth

The insight of the editors, Professor Peter Harris and Dr MarcoMongiello, together with the other contributors, makes this book

a significant contribution that will influence the way we developaccounting and financial management in the hospitality industry

in the future

Knut Kleiven

Deputy President & Chief Financial Officer

Rezidor SAS Hospitality

The main purpose of this book is to present new and interesting

research and developments in the field of accounting and

finan-cial management as they relate to the work of managing

enter-prises and organizations in the international hospitality industry

Although the focus is on hotels, the content can readily be

inter-preted in a broader context Many hospitality organizations

con-tain hotel services components such as the provision of rooms,

food and beverage facilities and, therefore, the examples and

illus-trations can be related to restaurants, licensed house management,

hospital and university services, clubs and so on

The content comprises state-of-the-art contributions from a

wide range of academics and practitioners engaged in hospitality

activities around the globe including researchers, university

lec-turers, practising accountants, professional consultants and

sen-ior managers and executives associated with the international

hospitality industry in the UK and abroad The material is drawn

from their work and experience and relates directly to the

man-agement of hospitality undertakings

Most books written for the hospitality industry tend to

concen-trate on accounting and financial management techniques in a

theoretical context In contrast, this work presents new findings

and developments drawn from a combination of live fieldwork,

practical experience and academic research In this context it is

anticipated the readership will include: practising managers and

financial controllers in hospitality organizations, professional

accountants and consultants, postgraduate candidates

research-ing for PhDs and studyresearch-ing for master’s degrees in hospitality and

tourism management, and final year undergraduate students ofhospitality management who elect to take an accounting andfinance option.

Notwithstanding the classification or grouping of the materialpresented here, the range of topics brings together a rich fund ofknowledge and experience from contributors who operate inter-nationally throughout the world, including Europe, North Americaand Australasia Without their generosity and commitment to thesharing and dissemination of information a book of this kindwould not be possible; a debt of gratitude is owed to them all

We are so proud to have them associated with this publication.Acknowledgement is also due to a number of our colleaguesfor their support and tolerance throughout the preparation of themanuscript Finally, thanks go to Sally North, Tim Goodfellowand Francesca Ford of Elsevier/Butterworth-Heinemann who, asusual, have been patient, considerate and supportive throughout.Our single wish is that the reader finds this book to be of practical use

Peter Harris and Marco Mongiello

August, 2005

Peter Harrisis professor of accounting and financial management

at Oxford Brookes University He graduated from the University

of Strathclyde and holds the HCIMA professional qualification

and the Certified Diploma in Accounting and Finance He trained

and held managerial positions in the hospitality industry Professor

Harris is the author of numerous books and articles on applied

accounting and is past Visiting Professor at the Institut de

Man-agement Hotelier International (Cornell University-ESSEC) Paris

Through his research into cost behaviour, profit planning

tech-niques and performance measurement he undertakes consultancy

assignments and conducts seminars in the UK and abroad for a

number of leading national and international hotel organizations

He was recently presented with the British Association of Hospitality

Accountants’ Lifetime Achievement Award for his contribution to

hospitality accounting education

Dr Marco Mongiellois principal lecturer in financial and

man-agement accounting at the University of Westminster He is a

mem-ber of the Italian Institute of Chartered Accountants and obtained

a PhD at Venice Ca’ Foscari University with a thesis on performance

measurement in the service sector He has been teaching and

research-ing at Venice Ca’ Foscari and Oxford Brookes Universities and is

currently leading the finance subject area at the Harrow Business

School, University of Westminster; his research domain being

‘man-agement accounting’ and ‘man‘man-agement accounting applied to the

hospitality and tourism fields’ Dr Mongiello also carries out

edi-torial activities and consultancy assignments internationally

Tommy Andersson is professor of tourism management at burg University He previously served as programme director atthe European Tourism Research Institute in Sweden for 4 yearsand before that as professor in management accounting at BodoGraduate School of Business in Norway Dr Andersson’s interest

Gothen-in tourism economics started Gothen-in 1995 He then undertook an nomic impact analysis of a Bruce Springsteen rock event At thesame time Dr Andersson started to teach hospitality accounting.Today he is programme director of a master programme in tourismand hospitality management taught at the School of Business,Economics and Law at Gothenburg University and is also respon-sible for a module in managerial economics His main researchinterests are economic impact analysis, event management, man-agement accounting in restaurants, and cost-benefit analysis Hehas published books and journal articles and is on the editorialboard for academic journals in tourism and hospitality

eco-Helen Atkinson is a principal lecturer at the school of service management in the University of Brighton She has a background

in hospitality management and is a qualified managementaccountant with CIMA She has lectured, researched and pub-lished in the area of hospitality accounting since 1989 and is currently on the education committee of BAHA (the BritishAssociation of Hospitality Accountants) Her research interestsinclude: strategic management accounting, performance manage-ment, strategy implementation in the hospitality and service indus-tries, and approaches to budgeting in hotels Journal publications

xiii ● ● ● ●

Contributors

include: Atkinson H and Brander Brown J (2001) Rethinking

Performance Measures: Assessing Progress in UK Hotels,

Interna-tional Journal of Contemporary Hospitality Management, 13(3): 128–135,

Brander Brown J and Atkinson H (2001) Budgeting in the

informa-tion age: a fresh approach, Internainforma-tional Journal of Contemporary

Hospitality Management, 13(3): 136–143.

Paul Beals, PhD, is visiting professor at France’s IMHI-ESSEC

Business School, where he is responsible for MBA courses in

finance and hotel real estate For more than 25 years, Beals’s

aca-demic research and consulting have been concentrated in hotel

industry development and financing, asset management, and

management contracts He has taught hospitality financial

man-agement and real estate finance at Cornell University, Boston

University, University of Denver, and Switzerland’s Glion Hotel

School Beals’s writings, primarily in the area of hotel finance and

investments, have appeared in The Cornell Quarterly, Journal of

Real Estate Finance, Real Estate Review, Journal of Hospitality Financial

Management, Journal of Retail and Leisure Property, L’Hôtel Revue,

and Le Monde Beals is the lead editor of Hotel Asset Management:

Principles and Practices A member of Phi Beta Kappa and the

Cornell Hotel Society, Beals earned master’s and doctorate degrees

from Cornell University

Cathy Burgess qualified in hospitality management at Leeds

Polytechnic (now Leeds Metropolitan University) and then spent

thirteen years in various operational and financial management

positions within the hotel and catering industry Her later

appoint-ments were as a financial controller with Marriott Corporation

and Thistle Hotels In 1989 she was appointed senior lecturer in

accounting at Oxford Brookes University, teaching financial

man-agement to degree and master’s level students, and gained her

MPhil in 1993 She maintains close links with industry through

research and consultancy and as a council member and

member-ship officer of the British Association of Hospitality Accountants,

for which she has been elected an honorary fellow Her current

research interests include the role and professional development

of the hospitality financial manager

Paolo Collini is full professor of management accounting and

strategic management at the University of Trento (Italy) From 1993

to 1998 he was assistant professor in management at the University

of Venezia (Italy) He holds an MBA from Boston University and a

PhD in management and economics from University of Venezia

He is a certified public accountant Professor Collini’s main research

interests focus on cost management and control with a strong

attention to the relationship between decision-making and costinformation in complex organizations He is the author of booksand articles in the field of management control and accounting

He is associate dean of the Faculty of Economics at the University

of Trento and member of the scientific committee of CUOABusiness School

Professor Agnes Lee DeFranco began her teaching career in 1988,

specializing in hospitality accounting, finance, cost control, andpurchasing courses Her formal education includes a Bachelor ofScience in hotel and restaurant management, a Master in BusinessAdministration with a concentration in finance, and a Doctorate

in education in higher education administration She has been arecipient of both teaching and research awards and is active in anumber of local, state, national and international organizations Shecurrently serves as the vice president of the ‘Hospitality Financialand Technology Professionals’ She is active with I-CHRIE in theirfinance committee and future fund committee and was their treas-urer from 1999 to 2002 From 1999 to 2003, she also carried anadministrative role as the associate dean and subsequently theinterim dean of the Conrad N Hilton College Her research areasare hospitality finance, cost control, accounting, and cultural anddiversity issues

Howard Field, chartered accountant, fellow of Hotel & CateringInternational Management Association, honorary fellow of BritishAssociation of Hospitality Accountants (founder member andserved on the council and on various committees), honorary Fellow

of Hotel Controllers Association (Hong Kong), visiting fellow atOxford Brookes University, founded FM Recruitment in 1985, specializing in financial, IT and purchasing management, and pro-fessional consultancy appointments within the hospitality sector

He is non-executive director of Airport Hotels General Partner,Arena4Finance, and Hotel Investment Advisors Prior career spansunit, divisional and corporate financial management positions with

UK and international hotel groups and in professional consultancy

Ian Graham is managing director of The Hotel Solutions ship Ltd, a consultancy that works with international hotel com-panies to unlock strategic advantage Ian was formerly a director

Partner-in the travel, tourism and leisure practice of Andersen/Deloitte &Touche Prior to joining Andersen/Deloitte & Touche in 1999, Ianheld a variety of senior executive positions in the hotel industry

in the Europe, Middle East and Africa region, principally withBass Hotels & Resorts and prior to that with ITT Sheraton Ian is

a graduate of the University of Surrey’s department of hotel and

catering management He is a fellow of the Institute of Chartered

Accountants of England and Wales, and a member of the

Interna-tional Society of Hospitality Consultants He has been a visiting

fellow at Oxford Brookes University for eight years and is a

non-executive director of the leading hospitality charity Springboard

UK Ltd

Professor Zheng Gu holds a BS degree in economics, an MA in

applied economics and a PhD in finance He teaches hospitality

finance and quantitative methods at both graduate and

under-graduate levels His research and consultancy focus on financial

management and operations analysis for the hospitality and

tourism industries Professor Gu was the president of the

Association of Hospitality Financial Education (AHFME) in the

USA from 1999 to 2000 He is the editor of UNLV Journal of

Hospitality, Tourism and Leisure Science (HTL Science) and guest

edi-tor, associate ediedi-tor, consulting editor or editorial board member

of six other hospitality/tourism research journals Professor Gu

has more than 100 articles published in academic and professional

journals He has served as editor, section editor, author, co-author,

or chapter author of many books Dr Gu has received numerous

awards for his research achievements in hospitality management

Professor Chris Guilding works with Griffith University’s

depart-ment of tourism, leisure, hotel and sport managedepart-ment and is also

director of Griffith’s Service Industry Research Centre He is a

mem-ber of the Chartered Institute of Management Accountants and has

taught accounting and finance in universities in Australia, Canada,

England and New Zealand Chris has more than 30 publications

and papers in refereed journals that include: Journal of Hospitality &

Tourism Research ; Tourism Management; Accounting, Organizations

and Society ; Business Horizons; British Journal of Management and

Journal of Marketing Management In recent years, he has developed

a specific interest in accounting for tourism and hospitality issues

In 2002 his book Financial Management for Hospitality Decision Makers

was published by Butterworth-Heinemann In 2005 he acted as

chairperson for the ‘Strata and Community title in Australia for the

21st Century’ conference

Mine Haktanir is a lecturer in accounting and financial

manage-ment in the School of tourism and hospitality managemanage-ment at

Eastern Mediterranean University, Turkish Republic of Northern

Cyprus She completed her PhD in performance measurement in

independent hotels at Oxford Brookes University She teaches

management accounting and financial management courses both

at undergraduate and postgraduate levels within the school She

Contributors

is the programme coordinator of the Master’s degree in tourismmanagement and has responsibilities in coordinating the curricu-lar activities of the school She was the assistant director of theschool and has experience in managing the university restaurantfor a number of years Her research interests include understand-ing the performance measurement practices in small service busi-nesses and in independent hotels She has attended both localand international conferences and published articles on hospital-ity performance measurement.

Dr Rebecca Hawkins is a freelance consultant offering specialist

tourism and consultancy services to the tourism sector She is alsocurrently the research and consultancy fellow within the depart-ment of hospitality, leisure and tourism management at OxfordBrookes University During her career, Rebecca has written many

of the reports that have formed the response of the tourism sector

to sustainable development issues These include the WTTC, WTOand Earth Council interpretation of Agenda 21 into an action planfor the sector, the analysis by WWF of the effectiveness of tourismcertification schemes, an assessment of the data required to bench-mark the sustainable development credentials of hotels and highereducation institutions and the development of tourism strategiesfor a range of international organizations Rebecca is currently

a principal of the ‘hospitable climates energy management gramme’, and advisor to the Considerate Hoteliers Association, akey consultant on a programme to improve the amount of glassrecycled from hospitality businesses in the UK She is also workingwith TravelWatch on a project funded by the Travel Foundation toassess the relative local economic benefits of different types ofaccommodation in the Eastern Caribbean

pro-Pekka Heikkilä has been lecturer in business accounting atHaaga Institute Polytechnic for 12 years He was recognized

as Certified HTM-Auditor (Finland) in 1993 and has completedCertification in managerial accounting and finance in the School

of hotel administration in Cornell University, New York (1997).Before the position in Haaga Institute he has worked perma-nently in Ernst & Young auditing in northern Finland where most

of the customers were local tourism operators Currently he forms consulting and auditing in addition to teaching work He isalso writing (with Timo Saranpää) a guide book of businessaccounting for the Finnish Hotel and Restaurant Association

per-Tracy Jonesis principal lecturer in accounting in the Department ofHospitality, Leisure and Sports Management at Cheltenham andGloucestershire University, UK She worked in various sectors

of the hospitality industry before joining Oxford Polytechnic

(now Oxford Brookes University) to complete the HCIMA

pro-fessional qualification, being awarded the Greene Belfield-Smith

Award for achieving the highest marks nationally in the financial

management examination She remained at Oxford, completing a

BSc (Hons) in hotel and catering management and an MPhil for

her research into the financial and operating needs of managers

in hotel companies Her main teaching areas are finance and

accounting within the hospitality programmes and she is

cur-rently in the process of researching hotel budgeting practices in

the UK for a PhD She has published her work in a number of

journals and books

Vira Krakhmal obtained a Bachelor’s degree in business and

eco-nomics from Kiev State University, Ukraine and a Master’s degree

in international hotel and tourism management at Oxford Brookes

University Since graduating, she has gained wide experience

work-ing as a research analyst at HVS International, a hotel valuation

con-sultancy Vira is currently completing her PhD research project in

the area of customer profitability analysis in hotels, the findings of

which are planned to be disseminated to the industry in the form of

a BAHA Recommended Practice Guide The project involved her

work-ing closely with a number of major international hotel groups that

participated in, and sponsored, the project

Dawne Lamminmakiis a lecturer in accounting at the Graduate

School of Management at Griffith University Dawne is a member of

the Certified Management Accountants of Canada and has worked

and studied in Canada, England, New Zealand and Australia She

has been in academia for over ten years, seven of which were with

the school of accounting and finance at Griffith University Dawne’s

research interests are in the area of management accounting, and

she has conducted research in the areas of capital budgeting, trade

credit management, management accounting systems, and

out-sourcing More recently, her research interests have been in the area

of hospitality In September 2003 she graduated with her PhD

which looked at outsourcing in the hotel industry Publications in

refereed journals include: International Journal of Contemporary

Hospitality Management , Journal of Business Finance & Accounting,

Australian Accounting Review , International Journal of Accounting and

Pacific Accounting Review

For over 30 years, Geoff Parkinson has specialized in the

interna-tional hotel markets of the UK, Europe and the Middle East Prior to

establishing HiA, he was the managing director of a number of

international hospitality consulting firms including Horwath UK,

Contributors

BDO, Christie Consulting and Hospitality Consulting International.Working for and with many of the world’s leading hotel operatinggroups, investors and financial institutions, he has advised onacquisitions and disposals, formulated and implemented expan-sion and repositioning strategies, researched, benchmarked andimplemented profit improvement plans, carried out operationalreviews, competitive market assessments, feasibility and invest-ment viability studies He has a particular expertise in the negoti-ation of key commercial clauses within operational leases andmanagement agreements HiA works as the owner’s representativeand hotel asset managers for major investors providing hotel sectorexperience and knowledge and ensuring their relationship withhotel operators is equitable and to the owners advantage.

Timo Saranpää has worked in the restaurant business as anentrepreneur and a manager for 15 years He has built up a cater-ing chain based on an idea of a partial entrepreneurship and own-ership He sold the company to ISS Finland (part of the ISS Group,Denmark) at the beginning of 2004 While working as a restau-rant entrepreneur he has also been conducting lecturing and con-sulting business in the hospitality industry and in the municipalsector He has also participated in writing two books in account-ing for the restaurant business, one being an official guide book ofbusiness accounting for the Finnish hotel and restaurant industry –currently under preparation with Pekka Heikkilä Mr Saranpää ispreparing his doctoral thesis on the subject of entrepreneurship

in municipal services

Jean-Pierre van der Rest is lecturer in business economics andstrategic marketing at Leiden University, The Netherlands Hereceived his Bachelor in Business Administration in hotel admin-istration from the Maastricht hotel management school, and his

MA in managerial economics from the University of Durham.Prior to joining Leiden University in 2002, he was lecturer in busi-ness administration at The Hague University of professional edu-cation He has been a visiting lecturer in finance at the InternationalHotel Management Institute Switzerland, and the Maastrichthotel management school He has written two book chapters

on pricing, a number of entries for the Elsevier Heinemann International Encyclopedia of Hospitality Management,and contributed several articles to professional journals He spe-cializes in theoretical and applied pricing theory His teachinginterests include management accounting, strategic marketingand business methodology

Butterworth-Charles Whittaker began his career in the hospitality industry as

Controller of the 400-room Lisbon Sheraton in Portugal and then

was promoted to vice-president and divisional controller for

Europe, Africa and Middle East, based in Brussels He later held

the post of director of finance and development with Scott’s

Hospitality, a major franchisee of Holiday Inn and Marriott

Charles subsequently worked for Hilton International as finance

director for 40 hotels in Europe In the above roles his

responsi-bilities included accounting, finance, IT and legal matters and the

negotiation, acquisition, disposal and construction of major hotels

in the UK and overseas Academically, Charles is a fellow of the

Institute of Chartered Accountants, holds an honours degree in

economics from Sheffield University, a first class honours degree

in Arts from the Open University, and an MA in English Studies

with distinction at Oxford Brookes University

Contributors

P A R T

Performance Management

This part of the book opens with two reviews of performancemeasurement literature and practices in the hospitality industry;the first refers to the independent hotels, chapter 1, and the secondembraces the broader range of productivity measures, chapter 2.The first two chapters serve as an introduction to the core topic ofperformance management, which is subsequently addressed in astrategic perspective and with reference to traditional and moreinnovative performance management techniques The strategicperspective is presented in chapter 3, where an extensive literaturereview comprises contributions from the generic and the hospital-ity industry literature Evidence of the use of budgeting as a tradi-tional technique of performance management is then provided inchapter 4, while the last two chapters introduce theoretical reflec-tions on benchmarking in the hospitality industry, chapter 5, andpropose an innovative performance management methodology,corroborated by first evidence of application, chapter 6

1 Performance measurement in independent hotels

2 Productivity in the restaurant industry: how to measure ductivity and improve process management

pro-3 Performance management in the international hospitalityindustry

4 Budgetary practice within hospitality

5 Benchmarking: measuring financial success in the hotel industry

6 Developing a benchmarking methodology for the hotel industry

C H A P T E R

Performance measurement

in independent

hotels Mine Haktanir

Introduction

Performance measurement is an important ponent of decision-making processes As the overallobjective of all forms of organization is to providesatisfaction for their stakeholders, developing appro-priate performance measures and interpreting theoutcomes are vital issues With the growth in inter-national travel and therefore, increasing demand inhospitality businesses, performance measurement

com-in the hospitality com-industry has gacom-ined particularimportance as a tool for effective decision-making.Accounting information systems provide formalmeans of gathering data to support and coordinatethe decision-making of businesses in light of overallorganizational goals Although profitability is themost commonly used basis for defining success, othermeasures, including cost, revenue and asset and liabil-ity accounts, are utilized The comparison of budgetedand actual results is recognized as forming the basisfor evaluating overall performance and helping to

monitor and control operations In hospitality businesses, ratios,which facilitate benchmarking, are commonly used.

However, these traditional performance measures have beenheavily criticized for encouraging short termism, lacking stra-tegic focus, discouraging continuous improvement and for notbeing externally focused In an attempt to overcome these criticisms,performance measurement frameworks have been developed, pri-marily to encourage a more balanced view For example, Lynchand Cross (1991) described a pyramid of measures which integratesperformance through the hierarchy of the organization Fitzgerald

et al (1991) distinguished between the results and their nants Kaplan and Norton (1992) use the four perspectives of thebalanced scorecard (BSC)

determi-Although a number of studies (see Bolton, 1971; Stanworth andGray, 1991; Jarvis et al., 2000; Marriott and Marriott, 2000) haveexplored the way performance measurement is perceived andemployed in independently owned businesses, there appears to beinsufficient detailed research into actual performance measurementpractices of such organizations When hotel businesses are consid-ered, independently owned and managed hotels are considered asthe traditional model of hotel operations and understanding theoperational characteristics of hotel provision begins with them(Jones and Lockwood, 1989) They are a dominant feature of thehotel industry in many countries and the majority of establishmentsare independently owned and operated (Morrison, 1998) In con-trast to this, they have received limited attention from researchers(Shaw and Willams, 1994; Main, 1995) where group hotels havebeen the core of research in the management control and perform-ance measurement literature With increasing pressure from cus-tomer expectations and growing competition, independent hotelsmust start to develop effective performance measurement systems

in a strategic context In particular, they require accurate tion in terms of sales and costs for an effective decision-makingmechanism (Adams, 1997) Objective financial data are not publiclyavailable and access to performance data is severely restricted forindependent, privately held companies (Jogaratnam et al., 1999).Therefore, this chapter largely focuses on the research that has beencarried out on performance measurement in independent hotels

informa-Defining performance measurement

The term ‘performance measurement’ has been in existence for along time as an important component of the decision-makingprocess, yet it only gained popularity in 1990s, particularly in thedevelopment of new management accounting techniques

Among the many definitions, one suggests performance ment is ‘ the process of quantifying actions, where measurement

measure-is the process of quantification and action leads to performance’

(Neely et al., 1995:80) There is a range of reasons for utilizing formance measures, including:

per-•to indicate where more or less effort is required

•to monitor activities in units and/or divisions and through timefor diagnosing problems and taking corrective actions

•to carry out planning, monitoring and control functions

Performance measures provide a realistic basis from which toconstruct plans

•to facilitate continuous improvement in key areas and to mote behaviour in ways that would help sustain competitiveadvantage

pro-•to support improvements in resource allocation and betterdecision-making

•to specify responsibilities and to reinforce the accountability

of employees and managers and, in particular, to detect ciencies with the help of management accounting information

ineffi-•to provide regular information for staff appraisal, motivationand rewarding Performance measurement is perceived as onemeans of motivating people towards achieving organizationalgoals

Although there are several reasons for utilization of performancemeasures, overall it is considered to be an integral part of themanagement processes, to identify areas of poor performance oropportunities so that better plans can be developed

Financial measures of performance

Information regarding end results of operations is provided byfinancial performance measures and there is evidence that, inmany countries, financial performance measures are of primaryimportance Accounting information systems provide a formalmeans of gathering data to support and coordinate the decision-making of businesses in light of overall organizational goals They

‘provide quantitative and common yardsticks to evaluate ment relative to a plan or to compare parts of the company’

achieve-(Emmanuel et al., 1990:222)

Performance measurement in independent hotels

Profitability is the most commonly used basis for defining success, such that it is used in the lead tables of performances

in Business Week, Management Today and similar journals Profit

sometimes is an absolute measure but more often is a ratio, such asearning per share, return on investment or return on shareholders’funds, and is presented as a comparison with other companiesover a period of time Traditionally, businesses have relied uponaccounting information, such as cost, revenue and asset and liabil-ity accounts, in order to explain the cause and effect relationshipthat determines the financial outcome of the operations In recentyears, responsibility accounting that provides financial informa-tion and forms the basis for the performance measurement andmanagement control system in many organizations is recognized

as a key to management control systems

Budgets have consistently proved to be an important financialtool to represent a standard for effectiveness and efficiency meas-ures Performance reports are a common means of providing thekey financial budgeted and actual information for each responsibil-ity centre in order to control the organizations’ operations effect-ively This comparison of budgeted and actual results is recognized

as forming the basis for evaluating overall performance, helpingcontrol future operations and providing incentives for motivatingthe staff The roles of budgets in organizations are diverse:

1 a system of authorization

2 a forecasting and planning tool

3 a means of communication and coordination

4 a motivational device

5 a means of performance evaluation and control

6 a basis for decision-making (Emmanuel et al., 1990)

Although financial performance measures provide objective resultsand are mainly utilized as a rewarding and motivational tool, therehas been increasing recognition that the implementation of financialperformance measures on their own were seen to provide a limitedperspective on the performance of a company The main short-comings are:

•Short termism, in particular of profitability measures, is mined as a handicap for businesses Measures of share/equity,asset return, bottom line profit and residual income emphasize

deter-a ‘short-termist’ deter-approdeter-ach However, mdeter-arketing/sdeter-ales rdeter-atio deter-andprofit sales margin would emphasize a longer-term approach

•The past information provided relative to ongoing operations isinappropriate in the dynamic business environment Measuresthat are flexible and that can assist managers to make decisionsfor the current operations are highly important It also encour-ages managers to keep minimum variance from the standardrather than continual motivation for improvement.

•Results, rather than ongoing managerial efforts, are reflectedwith financial measures Better performance measures arerequired to cope with the emerging managerial techniquessuch as total quality management

•Lack of strategic focus and failure to provide data on quality,responsiveness and flexibility

•Failure to provide information on the external factors, such aswhat customers want and how the competitors are performing

Operational measures of performance

Although financial measures of performance are of primaryimportance for the success of businesses, they can produce betterperformance information when used in conjunction with non-financial measures They are valuable supplements to financialmeasures as they are expected to supply information that wouldimprove the financial outcome and support and monitor thestrategic initiatives

New, non-financial measures are needed in order to cope withthe changing operational environment, which primarily includesquality, just-in-time delivery and increase in product ranges

These new measures must be flexible, directly related to the egy, non-financial, easily understood and highly responsive tothe daily production situation In addition, performance meas-urement systems require non-financial measures at operationallevels, particularly to be used as a tool for motivating employees

strat-It is also noted that ‘ day to day control of the manufacturingand distribution operations are better handled with non-financialmeasures’ (Maskell, 1989:33)

The financial systems were normally used as a feedback anism to report the outcomes and their variance with the planned –once the financial goals were met, some other criteria becameimportant Other systems that dealt with more critical or uncer-tain areas of performance, for instance customer satisfaction,cycle time improvement and quality, were used in a more inter-active fashion by management

mech-Operational measures were used in service businesses to a largeextent, such that the service quality, flexibility, resource utilization

Performance measurement in independent hotels

and innovation were the operational determinants of the tiveness and financial performance outcomes in Fitzgerald et al.’s(1991) performance measurement framework for service busi-nesses Empirical work in certain businesses has resulted in eitherdominance of financial outcome measures rather than the means

competi-of achieving these outcomes, or more interest in operationalmeasures, resulting in an imbalance between the two dimensions

Performance measurement in the hospitality industry

The Uniform Systems of Accounts for the Lodging Industry(1996) isthe commonly practised method of recording and analysingaccounting data in hospitality businesses The characteristics ofthe industry play an important role in utilizing an appropriateapproach to accounting and performance measurement For thisreason, the key features of hospitality businesses are reviewed byHarris (1999) to include fixed capacity, perishability, erraticdemand, product range, real-time activity, labour intensity, loca-tion, size, production and consumption, capital intensity and coststructure It is suggested that the business orientation and theindustry context of the business is a key determinant of develop-ing effective accounting, control and performance measurementmethods (Kotas, 1975)

The results of financial statements have significance if they arecompared with some form of yardstick The main source of infor-mation for comparison comes from two sources: internal per-formance, which is past results and budget performance, andexternal performance, which is inter-company results and indus-try studies There is a considerable degree of consensus amongmanagers in hospitality organizations and academic writers alikethat the budgetary control process is a valuable control and man-agement tool in hospitality businesses Ratios, which facilitatebenchmarking, are the most commonly used measures in hospi-tality businesses in order to monitor and control operations Thisinformation is compared and measured against goals to indicatewhere problems and successes are Andrew and Schmidgall(1993:58) state that ‘by tracking a selected set of ratios, hospitalitymanagers are able to maintain a fairly accurate perception of theeffectiveness and efficiency of their operations’

The monthly occupancy percentage, the cost of labour age and the cost of food sold percentage were the three most com-monly used measures in hospitality businesses, however, differentgroups of users assign different values to the ratios The mainusers of ratios are the management, the owners and the creditors.They all rate different measures to be important such that themanagement uses operating ratios more than others, the owners

percent-consider profitability ratios extensively and the creditors utilize

solvency ratios for making decisions It is believed that the results

reflected their natural interest in the business In another study, it

was identified that guest satisfaction measures are the key

indica-tors used at operational levels of hotels and financial measures are

utilized at the senior management levels (Haktanir and Harris,

2005) In addition to the above common measures, cash flow

analysis is important, in particular, its relationship to three major

activities of the business: operations, investment and finance

A Chartered Institute of Management Accountants’ (CIMA)

study, carried out by Collier and Gregory (1995), exhibited

inter-esting findings for both financial and non-financial measures of

performance Return on investment, which is believed to be the

favourite measure in manufacturing businesses, is used only

when new investments are undertaken The most common way of

measuring performance is through a comparison of actual with

budgeted figures From the six hotel companies studied, the

com-mon performance measures used can be listed as room yield, hotel

profit contribution, occupancy rates and labour costs to turnover

Although the importance of measures of quality was well

under-stood, a number of different ways of measuring it were captured,

such as guest questionnaires, mystery guests and quality

stand-ard forms Rewstand-arding, referred to as a bonus system, is used in

two-thirds of the cases studied where the budgeted versus actual

results were the basis of the entire system Overall, hotel

per-formance measurement is not only criticized for its high reliance

on quantitative measures, but also for its short-termist approach,

its focus on efficiency rather than effectiveness measures and its

high consideration of internal rather than external analysis

Although both operational and financial measures are

con-sidered in hospitality businesses, in parallel to the developments

in generic management accounting, it is stressed that there is high

dependence on financial measures, which can lead to lack of

bal-ance and strategic focus Geller (1985a) provided a list of the most

commonly used performance measures by US hotel companies,

which indicates the majority to be operational measures A

simi-lar study carried out in the UK by Brander Brown et al (1996)

revealed that the users of performance measures consider both

financial and operational measures to a high extent but, in

con-trast to Geller (1985a,b), they found a high reliance on financial

measures, which may imply an unbalanced managerial focus

Further to this, Brander Brown and McDonnell (1995) reported

the results of a pilot study designed to apply the BSC approach to

the hotel sector They suggest that the specific nature and value of

any BSC would be contingent upon its level (unit or corporate

level), context of application (department or functional area) and

Performance measurement in independent hotels

the time period/prevailing circumstances during which it is to beused In addition, the empirical research of Brander Brown andHarris (1998) yielded evidence that achieving a balance of per-formance information, in terms of type, financial-operation dimen-sions and the links between key performance areas are necessaryfor the design of appropriate performance management systems infull-service hotels It was also emphasized that effective communi-cation of performance information at all levels, therefore produ-cing and communicating clear and understandable performanceinformation, is a core element of the performance managementsystem.

Performance measurement in independent hotels

A recently completed research project (Haktanir, 2004) providesinteresting insights into the complex nature of performance meas-urement in independent hotels It investigates performance meas-urement practices in the real-life context of independent hotels inorder to develop a framework for use in these businesses

A grounded theory approach was undertaken and a multiplecase study approach was adopted This research strategy facili-tated the development of a rich understanding of the perform-ance measurement practices, through in-depth study of the issue

in its own context The following aspects were developed ing the case selection of the research:

regard-•The hotels were selected from the population ‘independenthotels in Northern Cyprus’ Statistically, individually ownedand managed hotels are some 45 per cent of the total hotel busi-nesses In addition, a large part of the partnerships, which are

48 per cent of the overall figure, are believed to be ently owned and managed properties (The figures are obtainedfrom the Ministry of State and Deputy Prime Ministry of theTurkish Republic of Northern Cyprus The information was atabular listing of properties rather than statistical presentations.The researcher processed the obtained data to come up with thepercentage share of each ownership type.) An examination ofthe hotel industry indicates that independent hotels dominatethe hotel industry in Northern Cyprus and, therefore, thisresearch into the performance measurement practices of inde-pendent hotels covers a relevant group within the industry

independ-•The selected cases represent two groups within the independenthotel category: remotely owned (where the owner is not involved

in the management of the business) and owner-managed (wherethe owner and the manager is the same person) hotels

•The property features that are believed to be important for theresearch are listed below:

– the size of the hotel needs to be above 100 room capacity sothat the appropriate information and reservation systemswould be available

– the four or five star hotels were decided upon to be in thesampling group so that there is a certain level of service anddifferent facilities available to study

– almost all hotels in Northern Cyprus are holiday and resorttype, therefore, studying the ‘resort’ hotel group is both eas-ily accessible and more representative

Eventually, six cases were selected for this research They arelisted in chronological order in Table 1.1

Performance measurement in independent hotels

Case Stars Ownership Room Room & Catering Main

type type bed no type contact

Case I: 5 Remotely Hotel & 392 rooms BB, half, GM

Mediterranean owned bungalow 912 bed full

Hotel

Case II: 4 Remotely Hotel 108 rooms BB, half, GM

Case III: 4 Owner Hotel & 133 room BB, half, F&B

Hotel Aqua managed bungalow 72 full, Self- manager

bungalow catering

515 bed Case IV: 4 Owner Hotel 110 room BB, half, F&B

Case V: 4 Owner Bungalow 105 BB, half, Mother

River Hotel managed bungalow full, Self- of GM

290 bed catering Case VI: 5 Remotely Hotel 192 room BB, half, FO

BB: Bed and breakfast, GM: general manager, F&B: food and beverage, FO: front office.

Table 1.1

Information about the participant cases

Data were collected from owners, general managers, departmentmanagers and employees by using an in-depth semi-structuredinterviewing method In addition, observation and documentation

methods of data collection were utilized in order to triangulate thefindings and to gain a deeper insight into the real-life processes

of the case studies The informants from each case and the datacollection method utilized are shown in Table 1.2

Informant Case Case Case Case Case Case

Staff – front office I, D, O I, D, O (2) I, D, O (2) I, D, O I, D, O (2) I, D, O (2)

Staff – F&B service I (2) I

Source: Adapted from individual case reports I: interview, D: documentation, O: observation

(2): two informants from the same unit.

1 The organizational structure of Case IV did not have one food and beverage manager,

instead, two separate units of kitchen and food and beverage service Both of these

persons were informants.

2 Assistant GM was the acting GM at the time of the case study The researcher was also

informed that the assistant GM has been with the hotel for very many years and he would give better information about the inquired issues.

Table 1.2

The informants and the data collection methods

An inductive data analysis approach was employed in order toallow the theory to emerge from the data Primarily, within caseanalysis of each case was carried out In the second level of analy-sis, owner-managed independent hotels and the remotely-ownedindependent hotels are compared in separate groups Each of thetwo groups had three case hotels, where, in the next level ofanalysis, all the six cases were compared and contrasted

The analysis process resulted in the development of a number

of categories:

•Business dynamics (explores the decision-making mechanism,core elements of the business, and the information flow) Thiscategory has emerged as the central category

•Overall performance aspects (explores the kind of performancemeasures used, the reasons for utilizing them, the way they areconducted for the hotel in general, and for the departmentsspecifically)

•Employee measures of performance (incorporates all employeerelated issues with employee performance measurement)

•Customer satisfaction measures (explores the type of ance measures utilized and explains how they are incorporated

perform-to overall activities and decision-making)

•Financial measures (reflects on the type, form and the wayfinancial measures are utilized in relation to performancemeasurement practices)

•Innovation activities (explores and identifies the new ities and their importance for the business’s performance measurement)

of revenue generating points and the profit figures are otherimportant elements of the accounting systems Therefore, thefinancial information and the accounting system are designed

to satisfy the requirements of the owners and this information

is not shared with non-family members In addition to tions of the receipt of financial information, there are also limi-tations involving access to computerized systems – once again,the family member department managers generally have morechances of accessing the system and reaching information Thefamily members, together with the founder and the general

Performance measurement in independent hotels

manager, are the final decision-makers, particularly for morestrategic issues like investments.

•Family involvement has consequences in terms of ment and operational control as well The personal presence ofmanagers and the general manager is a key type of performancemeasurement used for different purposes, including employeeperformance, guest satisfaction and operational success meas-urement The control through personal presence is felt more inone of the hotels where the management team comprises ofsiblings The efficacy of their ‘we are always present’ (food andbeverage manager, River Hotel) personal control system isdemonstrated by the fact that they use the least amount of fig-ures for cost control of the three case study hotels

manage-•Additionally, the families’ other businesses and occupationsare effective in determining their management styles and con-trol Family members are influenced by their founder and otherfamily members in establishing their management style It wasnoted in the River Hotel that ‘rent-a-car’ is a department of thehotel – this is due to the fact that the family’s original occupa-tion was car rentals and they still have a reasonable size of busi-ness operating alongside the hotel business In order for thefamily to control and combine the two businesses, they operatethe rent-a-car business under the same roof Similarly, the BeachHotel has established their cost system according to the otherbusinesses of the owner The two restaurants the family ownsspecialize in ‘kebabs’ which use beef and lamb, and it was rec-ognized that the cost report of the hotel is named as the ‘meatusage report’ This indicates that systems and information usedfrom them are affected by the other occupations of the family

•Another significant point is the extended role of front officedepartments – it is more than the front office notion of hoteliers

It acts as a guest information and relations point in order toreach the widely accepted aim of guest satisfaction in all hotels.Further to this, in the River Hotel, the housekeeping depart-ment also reports to front office, which extends the responsibil-ities of the department even more One reason for doing this isfor the better understanding of the guests requirements fromthe rooms and thus to provide better service in return

As a result of an overall analysis of the remotely-owned casehotels, the following key issues are concluded:

•All the owners of the remotely-owned case hotels live inTurkey Owners of the Mediterranean and Chance Hotels are

Turkish and have no relationship in Northern Cyprus In

con-trast, the owner of the Palm Hotel is a Turkish Cypriot The two

Turkish owners are involved in businesses in tourism,

trans-portation and leisure industry and their key reason for having

such investments in Northern Cyprus is to develop their already

existing businesses outside the boundaries of Turkey However,

the Palm Hotel owner has a metal plant in Turkey and has no

other hospitality or tourism involvement His primary aim was

to invest in his home country As a result of this, the owner of

the Palm Hotel visits the hotel more frequently, whereas the

others are mostly remote to the property This has a further

impli-cation such that the owner of the Palm Hotel has more informal

means of measuring the hotel performance He receives

infor-mation from the family in Northern Cyprus who visits his

hotel and has personal observation of the business during his

visits to Northern Cyprus

The key people in these hotels are the general managers

Financial information is supplied and decisions made by the

owners and the general managers The financial information

dissemination is limited and the monthly performance reports

are supplied to the owners and the general managers only The

department managers can reach the information they need,

however, this depends on the capability of the computerized

system and the access they have For instance, the access is

wider in the Chance Hotel as each department is responsible for

reaching its own budget targets However, in the Palm Hotel,

only the food and beverage department manager receives

some financial information in the form of cost reports

The accounting system is primarily based on the principles

of generally accepted uniform systems of accounts for hotels

The key information comes from the monthly and annual

finan-cial performance reports that include profit and loss statement,

food and beverage cost statement, itemized sales statement and

occupancy statement The computerized information systems

enable managers to reach primarily the revenue and occupancy

figures

•One of the consequences of owners being remote to the business

is the formality regarding information flow The general manager

and owner base their communication and performance

measure-ment on reporting In addition, the departmeasure-ment managers and

the general manager have scheduled meetings and formal

decision-making They also have daily one-to-one

communica-tion for operacommunica-tional follow up When examining the

depart-ments, it is noted that they are generally informal, having large

reliance on personal observations and guest communications

Performance measurement in independent hotels

The guest relations departments also play important liaisonroles in order to facilitate simultaneous decision-making.

•Other businesses of the owner are effective in determining themanagement styles and the control in the hotels For instance,the accounting department of the Chance Hotel was one of thelargest departments in the hotel, and the largest accountingdepartment compared to the other case hotels The reason forthis is the presence of a sizable casino operation as part of rou-tine hotel operations Further to this, some of the managers ofthe Mediterranean Hotel were transferred from the owner’sother hotel property in Turkey Additionally, the hotel is used

to support the operations of the airline company, therefore, it isnot surprising that good pricing and selling strategies were theprimary concern of the managers

•The guest relations department plays an important role in terms

of performance measurement of the hotels They supply related information both in verbal and written forms so thatemployee and departmental performances can be determined.For instance, the guest comment card results are the key indica-tors of employee performances and the ‘employee of the month’rewards are given as a result of their evaluations However, it isimportant to note that the front office departments also have guestrelation roles besides their front office functions

guest-Evaluation

As a result of the comparison between all case hotels in the form

of owner-managed to remotely-owned hotels, four key assertionsare made First, the management of these hotels should recognizethe importance of the owner’s involvement in the management ofthe hotel The four main aspects developed are:

1 the quality of life, provision of job opportunities to family bers and good status aims of owner-managers as opposed to theprofit maximization aim of remotely-owned businesses

mem-2 the owner-centred structure of owner-managed hotels in ition to the formal structure of remotely-owned ones

oppos-3 the verbal and face-to-face management style of owner-managers

as opposed to the more formal, report-based, management style

of remotely-owned businesses

4 owner-managers’ reliance on basic computerized systems withlimited access, in contrast to generally accepted computerizedsystems with wider access and use in the remotely-owned ones

Secondly, independent hotels relate their management and

oper-ations to other significant external and internal factors including:

1 proximity to the seaside influences the atmosphere, formality

and kind of activities

2 high seasonal demand variations have significant influence on

employee policies resulting in short-term perspectives for the

independent hotels

3 the front office department is the centre of communication,

coordination of functions and guest requests, where it plays a

crucial role in building the desired hotel image

4 operational alternatives and investments for better operational

results are commonly practiced in independent hotels; their

measurement generally occurring in their results, primarily in

the form of revenue generation of such activities

Thirdly, it is suggested that the management of independent hotels

should understand and recognize the importance of guest

satisfac-tion and its measurement for their businesses This would require

them to identify the elements of the service industry, including

primarily the simultaneity feature that consequently leads to high

guest interface and high reliance on measurement through guest

feedback In addition, the organizational culture – primarily

com-municated through the owner – is a powerful determinant of the

extent of one-to-one guest relations at all levels of management

and the resulting repeat business

Lastly, independent hotels develop a range of performance

measures in three categories:

1 ‘overall measures of performance’ – due to the totality of

pro-cesses (thus service-production-facility), non-financial measures

for handling day-to-day operations, primarily occupancy and

occupancy related information, and on-the-spot service

measure-ment are utilized

2 ‘employee measures of performance’ – due to the service

fea-ture of independent hotels, service quality measures interact

with employee performance measures, simultaneous

measure-ment of inputs and outputs is required and dependence on

qualitative measures (verbal feedback and observation) is

iden-tified In addition, the seasonal demand changes of the hotel

industry in general and in Cyprus, in particular, cause difficulty

in formalizing staff policies and lead to a high reliance on

on-the-job training

Performance measurement in independent hotels

3 ‘financial measures of performance’ – although there is morereliance and more tendency to use financial measures in hospi-tality businesses, the extent of access and communication offinancial information at different levels is limited; this is mainlydue to the owners’ perception of such information as beingconfidential to family members Monitoring cash flow indica-tors at owner and general manager level, and measuring finan-cial success of operations by sales and occupancy information

is the accepted practice

Conclusion

The findings indicated that performance measurement in the context of independent hotels is influenced by various organiza-tional factors For instance, the degree of owner’s involvement inthe operations and management of business is determined to be

an important factor affecting the way management operates and performance measurement takes place It is identified thatwhen owners are involved in the management of businesses theyrestrict the flow of information and, in so doing, limit the involve-ment of managers and employees In the case of an owner’s directinvolvement in management, the kind of information and infor-mation dissemination is limited by the owner The extent ofacceptance and usage of uniform accounting systems is largelyinfluenced by the involvement of the owner In addition, infor-mation to decision-makers is limited by cash flow and revenuerelated information It is also apparent that owners require moreflexible control systems as they establish business structuresaround themselves and their family members This leads to thedevelopment of measures based on personal observation and,therefore, greater reliance on informal business processes

The kind of business and the kind of services/products the ness provides is another significant determinant of the perform-ance measurement methods For instance, utilization of ‘overallmeasures of performance’ in order to acquire an overview of thehotel performance is a common practice in independent hotels.The issue of the ‘total hotel product’ has been discussed by Harris(1999) who highlighted the complex nature of operating a hotel

busi-in terms of the total experience customers receive Therefore,although the hotel information and accounting systems rely on a

number of revenue and support centre departments (see Uniform

System of Accounts for the Lodging Industry, 1996), designing thecontrol systems of hotels with the use of such accounting informa-tion may prove insufficient The ‘total guest experience’ impliesthat the consequences of any mistake at any point during a guest

stay in the hotel can become a substantial overall issue and thus,the control and measurement of discrete parts (i.e departments)

of the business can only assist management to a limited degree Ineffect, the financial information from the accounting systems ofhotels requires to be supplemented by qualitative operationalmeasures, such as on the spot (simultaneous) service and guestsatisfaction measurement, in order to present a more comprehen-sive view of the hotel performance

Department managers utilize employee measures and related measures to a larger extent in their evaluation of depart-mental success It is identified in the same research that one-to-oneguest satisfaction feedback and repeat business figures are ofprime importance to decision-makers The simultaneity feature ofservice encounter at the hotels is the key reason for having such areliance on one-to-one guest information Management by per-sonal presence facilitates direct interaction of managers both withstaff and guests at every level of the business This brings informa-tion through observation and verbal communication and therefore,action can be taken in real-time In addition, having a guest rela-tions department can also support the management by passingtimely guest-related information

guest-References

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A Strategic Approach Cassell, London

Andrew, W.P and Schmidgall, R.S (1993) Financial Management for

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Bolton, J.E (1971) Report of the Committee of Inquiry on Small Firms

(Bolton Report), Cmnd 4811 HMSO, London

Brander Brown, J and Harris, P (1998) Performance management

in the Hotel Industry: an Application of Eisenhardt’s ‘Roadmap’

Paper presented at the Management Accounting Group Conference,University of Aston, Birmingham

Brander Brown, J and McDonnell, B (1995) The balanced

score-card: short term guest or long term resident? International

Journal of Contemporary Hospitality Management, 7 (2/3), 7–11.

Brander Brown, J., McDonnell, B and Lang, L (1996) Performancemeasurement in UK hotel organisations: towards a balanced

scorecard? Paper presented at the Council on Hotel, Restaurant and

Institutional Education 50th Annual Conference, Washington, DC

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Performance measurement in independent hotels