UNIT IX

MONEY MATTERS

TEXT 1

Perhaps more than any other industry, hospitality industry is not one which just relies on individual components. Its products are made up of several inter-related ingredients,which together de­liver a total experience.

Superficially, many hotels seem alike, especially in coastal resorts. They offer similar facilities and are often within a short distance of one another. A guesthouse may have the same number of bed­rooms and basic services as its neighbour but is somehow made different by less tangible elements, i. e. the view from bedroom windows, pleasant garden, cosy lounge or warm welcome from the owners. The basic elements of a hotel service may appear very similar but they can be brought together in different ways to de­velop an experience which is vastly different from competitors. This could mean a quicker service, one which is easier to book, an all inclusive price or warmer welcome.

Competing on price can be dangerous. Reduce your prices and at some point customers will either begin to suspect that you offer an inferior service or ask for further discounts. During the recession many hotels and attractions offered special discounts, accepted plenty of two-for-the-price-of-one vouchers and similar promo­tions. Some of these are losing their effect because they have be­come so commonplace and customers cease to value the product at its real value.

Hotels are expected to offer group discounts or commission to the travel trade and most attractions also offer 10—20 per cent discount. It is general practice to offer one free place for the driver or guide or group leader if there -are more than 15 people in a group. The hospitality industry needs flexible payment systems because as a major economic activity, it creates direct and indirect employment and provides an important source of foreign currency.

The growth of the hotel trade has come about as a resuet of tradi­tional industry adapting to current conditions and modernising.

The hotel trade displays features associated with both heavy and labour-intensive industries:

- Investments in hotel construction tie up large amounts of capi­tal for medium — to long-term periods, a typical feature of heavy industry;

- The activities connected with running a hotel are those of a service industry which is labour-intensive. The ratio of em­ployees to the number of rooms is very high, particularly in superior-category establishments.

Industrialised countries have a competitive advantage,since sources of finance for investments are generally more easily avail­able to them. Although developing countries have plenty of man­power,they often lack the necessary resources to develop tourism adequately and to manage their services in a competitive manner.

A hotel is a commercial establishment offering rooms or furnished apartments to a market which is either passing through the area or staying for several nights. It may offer a catering service, bar and complementary services. It can operate all year round or season­ally. The hotel trade constitutes the principal accommodation capacity in industrialized countries. However, the whole structure of the hotel trade is undergoing profound change. The number of small independent and family-ran hotels is falling, while the num­ber of hotel chains is growing rapidly. A study of the UK hotel sector reveals that in terms of profitability per room, hotel chains are seven times more profitable than non-affiliated hotels. Inde­pendent hotels are grouped together by hotel consortia,in order to compete with integrated and franchised chains. Hotel consortia benefit from economies of scale when it comes to purchasing and marketing. The main benefits of joining a consortium are:

- joint production of guides and brochures, which advertise all the hotels in the chain and are distributed at each hotel through tour operators and travel agencies;

- joint national and international publicity campaigns;

- links into computer reservation system (CRS) which allow agents to book directly from a screen;

- centralized purchasing of hotel equipment to achieve economy of scale;

- technical assistance and management consultancy.

This enables the small hotel to be represented on the international market while still keeping its managerial independence.

One of the most important divisions of the hotel's administrative staff is the accounting department. Hotel accounting has many dis­tinctive features because guests' bills must be kept up-to-date.

All charges' that a guest incurs must be entered, or posted, on his or her account as soon as possible. In addition to the charge for the guest's room, there may also be charges resulting from the use of the telephone, the laundry service, the restaurant and room service. In addition to posting the guest accounts, all the charges must also be entered on other ledgers or financial records. In many hotels, these postings are done by computerised accounting machines, but in smaller operations they are still done by hand.

All the financial transactions not only must be posted, but also must be checked for accuracy. This is usually the job of a night auditor,who goes through this mass of figures on the night shift, when there is little activity in the hotel. The size of the accounting staff varies with the size of the hotel. A large operation employs a chief accountant,who is on charge of all the hotel's financial re­cords. The statements that he prepares for the management are im­portant in locating trouble spots in the hotel's operation and thus in determining overall policies. A good accountant can analyze an unprofitable operation quickly. Management then can either try to correct the problem or eliminate the operation. A small hotel usually employs an outside accountant to check its books periodi­cally.

In addition to the head accountant, bookkeepers on the staff post the transactions in the various ledgers and guest accounts. In a small establishment, the manager may take care of the bookkeep­ing himself.

Cashiers provide financial services to the customers at the front desk, including receiving payment for bills, making change, and exchanging foreign currency. Cashiers in the various restaurants, bars, and shops in the hotel may also be responsible to the ac­counting office.

In addition to the night auditor, mentioned above, who checks the accuracy of the records, another kind of auditor is brought in from outside the hotel to check the reliability of financial statements and records.

Some hotels also have a credit manager on the staff who checks the financial ability of the hotel's customers or others with whom the hotel deals. This individual also is often responsible for trying to collect overdue accounts.