1. ADD SLIDE TITLE HEREArticle review of Hospitality
Financial Management
Jun Li 15889767
2. introduction
Managers of hospitality industry need different kinds of managerial
approach to help them making decisions. Among those methods,
Financial performance analysis, cost management, revenue
management, working capital management and environmental
management are the most commonly used tools to manage financial
position of Hospitality industry.
In this review, certain articles on the 5 mentioned topics has been
chosen to reflect current trends of those topics in hospitality financial
management. The purpose of this review is to discuss how each of
the 5 topics affect hospitality business efficiency and profitability and
explore what possible developments and changes this five topics can
have in the next 5 years.
3. Main Content
1
2
3
4
Financial performance analysis
Working capital management
Cost management
Revenue and yield management
Sustainability and environmental
management accounting
1
5
5. Complex analysis of Financial performance using ratios
(KRIVKA & STONKUTĖ, 2015)
6. Contemporary topics of hospitality firm’s financial performance
Innovativeness
How does hotel
innovativeness
enhance business
performance of hotels
Social Capital
How does social
capital influence the
hospitality firm’s
financial
performance?
EMS
The Influence of
Environmental
Management Systems
on Financial
Performance
9. EMS–Performance Relationships
(Feng & Wang, 2016)
EMSs positively influence financial performance.
EMSs positively influence (a) customer satisfaction
and (b) customer loyalty
Switching cost negatively moderates the relationships
(a) between EMSs and customer satisfaction, and (b) between
EMSs and customer loyalty.
The relationship between EMSs and financial performance is
mediated by (a) customer satisfaction, and (b) customer loyalty.
H1
H2
H3
H4
4
12. Cost benefit analysis (CBA)
Consider all kinds of
benefits including non-
financial benefits and
unquantifiable benefits
that related to the cost
decision.
Think about “how
much dose it really
cost”, including all
kinds of direct costs and
indirect costs.
CBA as a tool in the cost management
(Ho, 2015)
13. Strategic cost management (SCM)
Different purpose
The main aim of SCM is to strength strategic
position of an enterprise while reducing costs.
Different angles
SCM attaches great importance to the
external environment and pays more
attention to the supply and marketing chain.
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keywords
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keywords
What are the
differences
between SCM
and traditional
cost management
methods?
14. Modern Cost Management Innovation and Performance
(Namnai, Ussahawanitchakit, & Janjarasjit, 2015)
15. Target cost management (TCM)
The concepts of TCM has its origin in JAPAN
in 1960s due to difficult situation of Japanese
market at that time.
Origin
1 Price led costing
2 Value chain orientation
3 Focus on customers and designs (process
and product)
Principles
A cost management tool that can reduce the
overall cost by setting the target-selling price
before the design of the product (price led
approach).
Conception
TCM has been shifted from a cost reduction tool to
profit management tool. Nowadays TCM is also
used as a cost strategy in other countries such as
Singapore and Malaysia (Baharudin & Jusoh, 2015)
Development
16. modern costing approaches
1
Quality
Quantity the total
cost of quality-
related efforts and
deficiencies based
on total quality
management,
including costs of
quality control
and costs of non-
conformance.
2
Time
Just in time
production,
keeping minimum
stock in each
phase of
production and
marketing process.
3
Process
Product Life Cycle
Based Costing,
which involves all
costs from
production
development
phase to the end
of customer
support.
4
Performance
Balanced score
card, a mean that
can record and
evaluate the
performance of
the employees via
both financial and
non-financial
criteria.
5
Creativity
The cost of
innovation
includes cost of
renewing products,
cost of developing
new products and
cost of launching
products on
market.
(Apak, Erol, Elagöz, & Atmaca, 2012)
19. Current trends of yield management
(Vinod, 2016)
Restriction-free pricing
Active monitoring and closure of selling fare at the right time
is required to promote sell-up to the higher fare and maximize
flight revenues.
1
Code share partner-ship
Flight segments that are operated by one carrier but
marketed for sale by more carriers, this method can
increase company’s marketing reach.
2
Dynamic availability
Dynamic Availability makes inventory control recommendations by
origin and destination based on outbound and inbound itineraries.
3
Dynamic pricing
Dynamic Pricing is closely related to Dynamic Availability
which is used to approximate the ticketed price.
4
5
Selling the right products
To the right customers
At the right price
At the right time
Total revenue management
Focus on total guest spend including non-air products.
20. Total revenue management
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keywords
Informationization
Using technologies to analyze all the
data gathered from customers.
Multi-sectors’s cooperation
Communication and information
sharing of different departments
Multi channels
A holistic consideration of all
channels that can contribute to
revenue (F & B, retail, golf).
Source (Freed, 2012)
21. A dynamic pricing framework of hotel revenue management
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Contextual variables
Strategic level: the location of a hospitality
service appears of paramount importance.
Tactical level: A contextual variable closely
linked with competition and suitable for
tactical dynamic price strategies is the
booking time.
Reputational variables
On one hand, in fact, reputation are still strategic
because based on long-term attributes. On the
other hand, reputation can also be viewed in a
tactical way, because online reviews update
constantly and focus more on the recent
experiences of consumers.
Tangible attributes
Physical objective characteristics of serves
sold. Tangible attributes are strategic in
nature but they can also be used in a tactical
dimension when the tourism service presents
heterogeneous characteristics.
Source (Abrate& Viglia, 2016)
26. (Nwankwo & Osho, 2010)
Invest idle
funds
Reduce
inventory
Speed up
receivables
collections
Rethink
Payable Terms
Inter firm
cooperation
Financial information
system
Working
capital norms
Standardized and Internalized
management
Maximum using of current asset
How to improve working capital management
27. Working capital management strategy of restaurant firms
(Mun & Jang, 2015)
Working
Capital
management
Working
capital
profitability
Cash
levels
Examine
Examine the moderating effect of cash levels
on the relationship between working capital and
profitability (ROA)
Identify
Identify the optimal level of working capital
rate for restaurant firms (4% of sales based on
GMM estimators)
Investigate
Investigate the impact of working capital
on profitability (ROA: return on assets)
28. how behavioral biases affect WCM decisions
In periods of good performance respondents attribute success
to internal factors, conversely, blame external factors in bad
times.
Self-serving bias
Managers appears to be highly confident when performance is
good but not so in bad times.
Level of confidence
bias
Past experience has a strong effect on future decisions.
Anchoring and
representativeness
bias
Loses are felt with greater intensity than gains since the mean
of disappointment is higher than that of satisfaction.
Loss aversion bias
(Ramiah, Zhao, Moosa, & Graham, 2016)
31. A creativity framework for greater sustainability in hospitality
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keywords
Creativity Sustainability
Thinking in new box to offer ideas and
methods of how to create and maintain
a better sustainable hospitality business.
Creativity
Creativity occurs when there is
successful convergence in the
synthesis of myriad enabling factors
to problem solving.
Sustainability
A holistic consideration of all three
dimension of sustainability (Economic,
Social and Environmental).
Source (Lim, 2016)
32. Issues of sustainability in the hospitality industry
(Jones, Hillier, & Comfort, 2016)
defining
sustainability
within
the industry
The hospitality industry’s way
of defining sustainability are
loosely couched within more
general business goals and
strategies, the definition should be
interpreted as being constructed
around business imperatives
materiality
and external
assurance
materiality and external
assurance are not treated
comprehensively within the
industry, which undermines the
credibility of the sustainability
reporting process
sustainable
consumption
and continuing
economic
growth
the concept of sustainable
consumption and its relation with
economic growth are conspicuous
by their absence in the both the
research literature on sustainability
and in sustainability reporting
within the industry
33. Environmental Management Accounting (EMA)
3
EMA supports companies and organizations to assess and
manage their sustainability performance in five
Ways （Sands & Ki-Hoon, 2015）
Offer businesses
opportunities to
gather information
that identify costs
and savings
supply sustainable
performance measures
for operational
processes
and reporting guidance.
Give business a
chance to
recognize risks and
opportunities
related
to their operations.Provide supports
by measuring
environmental
impacts and loads
Produce physical and
monetary
measurements that
are vital in all efficient
and effective
sustainability
management practices
35. EMA in the hospitality industry
(Jankovic, Persic, & Zanini-Gavranic, 2011)
Analyze
Gather
Organize
Measure
Analyze
environmental
impacts of
hospitality industry
using input/output
analysis
Gather operating
revenues and cost
saving information
Organize all units
using Environmental
Hotel Management
System (EHMS)
Using life cycle costing (LCC) and life
cycle assessment (LCA) and other tools
to enable measurability of EMA.
39. References
Abrate, G., & Viglia, G. (2016). Strategic and tactical price decisions in hotel revenue management.
Tourism Management, 55123-132. doi:10.1016/j.tourman.2016.02.006
Apak, S., Erol, M., Elagöz, İ., & Atmaca, M. (2012). The Use of Contemporary Developments in Cost
Accounting in Strategic Cost Management. Procedia - Social And Behavioral Sciences, 41(The First
International Conference on Leadership, Technology and Innovation Management), 528-534.
doi:10.1016/j.sbspro.2012.04.065
Baharudin, N., & Jusoh, R. (2015). Target Cost Management (TCM): A Case Study of an Automotive
Company. Procedia - Social And Behavioral Sciences, 172(Contemporary Issues in Management and
Social Science Research.), 525-532. doi:10.1016/j.sbspro.2015.01.398
Bigliardi, B. (2013). The effect of innovation on financial performance: A research study involving SMEs.
Innovation-Management Policy & Practice, 15(2), 245-256.
Dai, W. (., Mao, Z. (., Zhao, X. (., & Mattila, A. S. (2015). How does social capital influence the
hospitality firm's financial performance? The moderating role of entrepreneurial activities.
International Journal Of Hospitality Management, 5142-55. doi:10.1016/j.ijhm.2015.08.011
Differences Between Traditional Method of Costing and Target Costing. (n.d.) Retrieved from http://
accountlearning.com/differences-traditional-method-costing-target-costing/
40. References
Eden, T. (2012). Current trends in working capital management. Retrieved from http://www.agprofessional.
com/special-sections/business/Current-trends-in-working-capital-management-148295615.html
Edwards, K.(2016).The Importance of F&B Cost Control. Retrieved from https://www.linkedin.com/pulse/
importance-fb-cost-control-ken-edwards
Feng, T., & Wang, D. (2016). The Influence of Environmental Management Systems on Financial
Performance: A Moderated-Mediation Analysis. Journal Of Business Ethics, 135(2), 265-278.
doi:10.1007/s10551-014-2486-z
Freed, J, Q. (2012). ‘Total revenue management is the future'. Retrieved from http://www.hotelnewsnow.
com/Articles/15787/Total-revenue-management-is-the-future
Grissemann, U., Plank, A., & Brunner-Sperdin, A. (2013). Enhancing business performance of hotels:
The role of innovation and customer orientation. International Journal Of Hospitality Management,
33347-356. doi:10.1016/j.ijhm.2012.10.005
Ho, C. (2015). Strengthen Cost Management. Armed Forces Comptroller, 60(3), 25-27.
Janković, S., Peršić, M., & Zanini-Gavranić, T. (2011). FRAMEWORK FOR DEVELOPMENT OF
ENVIRONMENTAL MANAGEMENT ACCOUNTING IN CROATIAN HOSPITALITY
INDUSTRY. Tourism In Southern & Eastern Europe, 1121.
Jones, P., Hillier, D., & Comfort, D. (2016). Sustainability in the hospitality industry. International Journal
Of Contemporary Hospitality Management, 28(1), 36-67. doi:10.1108/IJCHM-11-2014-0572
41. References
Kamruzzaman, M. (2012). Framework of Environmental Management Accounting: An Overview.
Framework of Environmental Management Accounting: An Overview (November 5, 2012).
KRIVKA, A., & STONKUTĖ, E. (2015). COMPLEX ANALYSIS OF FINANCIAL STATE AND
PERFORMANCE OF CONSTRUCTION ENTERPRISES. Business, Management & Education /
Verslas, Vadyba Ir Studijos, 13(2), 220. doi:10.3846/bme.2015.300
Landman, P. (n.d.). WHAT IS THE IMPORTANCE OF REVENUE MANAGEMENT IN HOTELS?.
Retrieved from http://www.xotels.com/en/revenue-management/importance-of-revenue-
management-in-hotels
Maggioni, I., Marcoz, E. M., & Mauri, C. (2014). Segmenting networking orientation in the hospitality
industry: an empirical research on service bundling. International Journal of Hospitality
Management, 42, 192-201.
Mohan A.(n.d.) Strategic Cost Management: An Overview. Retrieved from http://www.accountingnotes.
net/cost-accounting/strategic-cost-management/strategic-cost-management-an-overview/5704
Mun, S. G., & Jang, S. (. (2015). Working capital, cash holding, and profitability of restaurant firms.
International Journal Of Hospitality Management, 481-11. doi:10.1016/j.ijhm.2015.04.003
Namnai, K., Ussahawanitchakit, P., & Janjarasjit, S. (2015). MODERN COST MANAGEMENT
INNOVATION AND PERFORMNCE: A CONCEPTUAL MODEL. Allied Academies International
Conference: Proceedings Of The Academy Of Accounting & Financial Studies (AAFS), 20(2), 107-
123.
42. References
Nwankwo, O., & Osho, G. S. (2010). An empirical analysis of corporate survival and growth: Evidence
from efficient working capital management. International Journal of Scholarly Academic
Intellectual Diversity, 12(1), 1-13.
Ramiah, V., Zhao, Y., Moosa, I., & Graham, M. (2016). A behavioural finance approach to working capital
management. European Journal Of Finance, 22(8/9), 662. doi:10.1080/1351847X.2014.883549
Rubera, G., & Kirca, A. H. (2012). Firm Innovativeness and Its Performance Outcomes: A Meta-Analytic
Review and Theoretical Integration. Journal Of Marketing, 76(3), 130-147. doi:10.1509/jm.10.0494
Sands, J., & Ki-Hoon, L. (2015) Environmental and Sustainability Management Accounting (EMA) for
The Development of Sustainability Management and Accountability. Issues In Social &
Environmental Accounting, 9(1), 1-4
Stottler, T. (2015) The importance of Sustainability in the Hospitality Industry. Retrieved from http://www.
danacommunications.com/importance-of-sustainability-in-the-hospitality-industry/
Vinod, B. (2016). Evolution of yield management in travel. Journal Of Revenue & Pricing Management,
15(3/4), 203-211. doi:10.1057/rpm.2016.15
Willie, P., Clarke, R., & Chandra, R. (2015). Revenue Management in the Hotel Industry: Comparing US
and Canadian Properties. Journal Of Business Studies Quarterly, 7(2), 169
Notes de l'éditeur
Hello everyone, My name is Jun Li, today I want to talk about five topics of hospitality financial management, and talk about what I have learned from some articles related to those topics
Managers of hospitality industry need different kinds of managerial approach to help them making decisions. Among those methods, Financial performance analysis, cost management, revenue management, working capital management and environmental management are the most commonly used tools to manage financial position of Hospitality industry.
In this review, certain articles on the 5 mentioned topics has been chosen to reflect current trends of those topics in hospitality financial management. The purpose of this review is to discuss how each of the 5 topics affect hospitality business efficiency and profitability and explore what possible developments and changes this five topics can have in the next 5 years.
Current trends of each topic is discussed with reviewing related literatures. The focus of this review is finding out those conceptual frameworks and new ideas inside those articles, which can be used to improve business efficiency and profitability of firms in hospitality industry.
The first topic of this presentation is financial performance analysis. Combined with traditional ratio analysis of financial performance, nowadays researchers add more non-financial factors that related to financial performance into this analytical system and use those factors as independent variables to evaluate financial performance as dependent variables. Furthermore, they integrate the results to analyze how to improve financial performance of hospitality industry.
Although contemporary studies propose various of methodology for enterprise financial performance analysis (KRIVKA & STONKUTĖ, 2015). Ratio analysis is the foundation of financial performance analysis. Gross margin ratio, ROS, ROA and ROE are the most basic data that can reflect business profitability of a firm. What is more, ratio analysis from single aspect is not enough to reflect the full picture of financial performance, there fore, composite analysis of different kinds of ratio (including profitability, liquidity, solvency and asset turnover ratios) has been widely applied for modern research (KRIVKA & STONKUTĖ, 2015).
Other than complex financial ratio analysis, it is also a popular methodology nowadays to combine financial indicators together with non-financial criteria such as innovation, social capital and environmental factors and analyze how dose those non-financial factors influence financial performance of hospitality firms.
In a hospitality context, firm’s innovativeness refers to a firm’s attitude towards innovation such as new ideas, new products and new service modes (Grissemann, Plank, & Brunner-Sperdin, 2013). In recent years, due to fierce international competition, customer orientation market and rapidly changing technologies, innovativeness has been acted as a key factor when consider the success of a hospitality firm (Bigliardi, 2013). Lot of researchers nowadays try to find out the link between innovativeness and financial performance of companies. For example, Rubera and kirca (2012) build a framework to talk about potential relationships between financial performance such as profitability and different kinds of innovative concepts(innovativeness inputs, innovativeness outputs, innovativeness culture, radical innovations and incremental innovations).
Basically, social capital is about relationship, or in the other words, social ties. When applied in hospitality industry, social capital means external social capital including a firm’s cooperation with travel agencies of all kinds, third-party website platforms, suppliers and local tourist resources (Maggioni, Marcoz, & Mauri, 2014) and internal social capital which mainly about relationship between all empolyees of a firm. Ideally, a good exteranl social can help a firm to increase market share and enhance the hotel’s competitiveness (Dai, Mao, Zhao, & Mattila, 2015), and human resource of a firm can be more efficiently managed with a better internal social capital which can contribute to a better financial performance of the firm. However, based on their analysis of a sample of chinese hotels, Dai, Mao, Zhao and Mattila (2015) found out that internal social capital does not have a positive impact on the hotel’s financial performance. Their research indicates the relationship between social capital and financial performance is complicated, and hotels need to make modifications of their social capital to suit their own situations.
Over the past decades, environmental awareness of the public has urged company to make change and put more focus on green capital. Also firms in hospitality industry has found out that energy efficiency and other environmental protection measures can actually contribute to their business profitability. In this background, more and more companies are willing to build their own environmental management systems (EMS) and find out its influences on financial performance. Both Indirect and direct effects of EMS to a firm’s financial performance has been study by some researchers. For instance, Feng and Wang (2016)’s research about EMS-FP relationships has important reference meaning.
Based on the review of related articles, it is not difficult to find out some current trends of Financial performance analysis. It can be seen in the next 5 years that researches of financial performance analysis of hospitality industry will be done in a more comprehensive way, more factors especially non-financial ones will be included in the framework of financial performance analysis, furthermore joint effect of different factors and indirect influence of those factors can have towards financial performance will be further analyzed in the near future.
The second topic of this presentation is cost management. In todays world, profit margins of hospitality industry are under constant pressure from rising costs of doing business and increased competition (Edwards, 2016), it is extremely important to efficiently manage cost and realize the maximum of a firm’s profitability.
Generally, cost benefits analysis (CBA) has been widely used by hotel managers to make cost-related decisions. This methods is simple and effective. Basically, if one cost outweighs benefit, manager should consider reduce this kind of cost unless it is a necessary cost. On the contrary, if the benefits bring by this cost outweighs cost itself, this cost is usually considered as a good cost. However, one difficulty of CBA is sometimes is hard to analyze all kinds of benefits and costs especially those non-financial costs and benefits. Ho (2015) suggested in her article that managers should consider “how much dose it really cost” rather than “how much dose it cost” or “how much should it cost”.
Unlike traditional cost management methods which aims to cut the cost of a firm in a short time. Strategic cost management (SCM) focus more on the strategic position of an enterprise and treat cost as investment that can bring value to the enterprise in the long run (Mohan,.n.d.). Nowadays, more and more operators of hospitality industry understand cost as an strategic issue and use cost manage as a tool to develop the strategic position of their firms (Apak, Erol, Elagöz, & Atmaca, 2012). Moreover, unlike traditional cost management methods which focus only on the internal environment, SCM attaches great importance to the external environment and pays more attention to
value chain of their businesses.
Modern marketing theories believe that when customers consider to purchase one product, they are not just consider this product itself, they also consider the satisfaction this product can bring to them. So when managers of a hotel consider cost management, they should consider quality cost which is highly related to customers’ experience and satisfaction. Namnai, Ussahawanitchakit and Janjarasjit (2015) used the term “cost utilization” to describe managers’ awareness of quality cost and their approaches to use this awareness to improve operational effectiveness and find out how to reduce quality cost without satisficing the needs of customers.
The concepts of TCM has its origin in JAPAN in 1960s due to difficult situation of Japanese market at that time. Unlike traditional methods of cost management, which determine costs before selling prices. Target cost management (TCM) combines market research and consider target selling price (the price customers willing to pay for a product with specific characteristics, then using this target selling price to calculate target costs (“Differences,” n.d.). This target cost will be used as a criterion for cost management afterwards. Nowadays TCM is also used as a cost strategy in other countries such as Singapore and Malaysia (Baharudin & Jusoh, 2015). In today’s competitive hotel marketing conditions, target cost management can help firms maintain their profitability without having more risk of losing customers.
Other than systemic management methods, there are also some modern costing approaches that can be used to assist managerial tasks. Nowadays, topicalization is common phenomenon when it comes to costing approaches. Those topicalized costing approaches which focus on quality, time, performance, process and innovation (Apak, Erol, Elagöz, & Atmaca, 2012) can bring a more detailed view for managers of hospitality industry to make related decisions. Also manager should consider one or more of those modern costing approaches according their own situation and needs.
To sum it up, in order to face challenges of nowadays and ensure business profitability, cost management of hospitality industry need to become more strategic, more customer and market oriented based on the article review. Moreover, It can be forecasted that new costing approaches which will contain more topics and focus on more detailed business information will be proposed to further satisfy the needs of hotel managers in the near future
The third topic of this presentation is revenue management and yield management. Basically, Revenue management is about how to use historical data and sales expectations to maximize revenues. Revenue management is key factor to improve the bottom line of a hotel. It has been proved a hotel can receive at least 25% incremental room revenue with the help of the proper revenue management (Landman, n.d.), needless to say abundant additional revenue received from other products such as F&B and Spa.
Currently, there are mainly three topics of yield management, which is price, market and customer behaviors. First, how to organize pricing structure based on pre-sale period, client’s volume commitment and market situation to maximize revenues. Second, firms of hospitality industry nowadays consider to build alliances with other firms in this industry and companies from other industries in order to maximally expend their market network, a good example of this phenomenon is code share programs of airline business (Vinod, 2016). Other than this, more and more managers in hospitality industry attach great importance to total revenue management, hotels nowadays are put more focus to consuming behaviors of their clients and use those data they collected from both market researches and their customers to adjust their product structure in order to receive more total revenues.
Unlike traditional rooms-revenue model, total revenue focus more on optimizing the revenue from every single customer (Freed, 2012). A holistic consideration of all kinds of channels that can contribute to the firm’s revenue is the foundation of a hotel’s total revenue management. One challenge of total management is the effectiveness and timeliness of related information such as likes and dislikes of customers, which requires multi-sector’s cooperation and in some circumstances, the help of modern technologies.
How to build a dynamic pricing framework that can truly reflect all kinds of variables that can bring impacts to revenues is one of the main concerns of hotel managers. More over, it is also important to consider what level of influences those variables will bring to the firm’s revenue. Based on thoughts like this, Abrate and Viglia (2016) build a framework that contains tangible attributes, reputational variables and contextual variables that can affect revenues and consider their influences both in strategic and tactical level.
In addition to put more focus to external factors such as market position and strategic advantages, managers nowadays also pay close attention to internal factors of revenue management such as human resource and technology. What is more, joint effect of external and internal factors has also been considered by researchers like Willie, Clarke and Chandra (2015).
In current situation, investing in revenue management is considered by managers as a necessary measure to survive in the competitive marketplace (Vinod, 2016). Based on the literature review, it can be foreseen that in the next five years, more alliances will be build for companies to support each other, also a more comprehensive pricing framework that contains more factors in different level and also joint effects of different factors will be established. What is more, total revenue management that contains more channels and focus more on clients’ consuming behavior will be consider by more managers of hospitality industry.
.
The fourth topic of this presentation is working capital management (WCM). Working capital contains two parts which is current assets and current liabilities, and what WCM needs to do is manage the daily cash flows between current assets and current liabilities. It requires managers of hotels to keep checking the financial health of their firms and adjust their working capital investment policies timely in order to acquire the biggest profit for their enterprises.
Liquidity if working capital cycle is essential when it comes to working capital management, also it can reflect the stability of a firm (Nwankwo & Osho, 2010). As for hospitality industry, liquidity is extremely important because firms in this industry usually requires a relatively short operating cycle. So if liquidity goes wrong of a hotel, for example there are too many bad debts, the managers of this hotel will find out they do not have enough current assets to maintain their business quickly.
If managers of hotel want to better manage working capital, the first thing they need to do is make a full use of all kinds of their current assets, including inventory, cash, account receivable, prepaid expenses and other kinds of current assets. In Nwankwo and Osho’s (2010) article, they offered four suggestions to managers about how to better use their current asset, which is investing idle funds, reduing unnecessary inventory, speeding up receivables collections, and eliminating early payment unless a huge discount is offered by suppliers. Other that they also consider the importance of standardized and internalized management of working capital.
Of course, almost all managers in hospitality industry know that how they manage working capital will have impact on their business profitability. But some of them do not know clearly that how exactly dose this system work, by direct influences or indirect influences? Many models have been built to try to answer this kinds of question, Mun and Jang (2015)’s work is one of them. They investigated the impacts of working capital on profitability by mainly examining the adjustment effect of cash levels on the relationship between working capital and business profitability.
Unlike other aspects of financial management, which do not need involvement of managers everyday, working capital management need managers of hotels to make related decision almost everyday if they want to maintain and sometimes improve profitability of their business. So some researchers believe that how managers behave will actually affect the outcome of working capital management. Based on thoughts like that, Ramiah, Zhao, Moosa and Graham (2016) listed four behavioral biases of managers which are self-serving bias, confidence bias, representativeness bias and loss aversion bias and tried to find out what kinds of influences those behavioal biases could bring to managers’ decision related to wokring capital. As a result, they found out that behavioural biases examined in their study affect various areas of WCM.
Cash is most important in the working capital cycle, without enough cash working capital cycle of a hotel will not operate properly. Some managers of hotels nowadays are so worry about liquidity of their working capital and they try to squeeze more cash out of their supply chains, speed up collection of receivables, and reduce inventory (Eden, 2012). There is no doubt that how to do cash conservation will be a big concern of managers in hospitality industry in the next five years. Other than that, based on the article review, it is not hard to find out that working capital management will become more informative by means of more cooperation inside and outside of this firm and modern financial information system. More variables of working capital management such as behavior biases of managers will also be involved into future studies.
The last chapter of this presentation is linked together with one of contemporary topics that attract most people’s attention- sustainable development. Recently, more and more managers of hotels has turned their focus towards the importance of sustainability in hospitality industry including areas of economic, social and environmental impacts (stottler,2015). Sustainability nowadays can bring a lot of benefit to those hotels in different ways such as cost saving, better guest experience, growing reputation. Also hotels can get economic incentives form governments if they are managed more eco-friendly (stottler,2015). All those benefits can contribute to business profitability of hotels.
Hospitality enterprises, as large units with hidden environmental problems and resource consumption such as energy and water consumption, need to think outside their box if firms in this industry want to become more sustainability. However, only think outside the box is not enough and sometimes is unrealistic because it will against the firms’ benefit and profitability. So, the better way is to think both inside and outside of the box and then think in a new box (Lim, 2016).
Although a lot hotels nowadays declare that they are will to accept the idea of sustainability and willing to run their business in a more sustainable way. However, some researchers like Jones, Hiller and Comfort (2016) suggested that there are some issues of the on going sustainability movement in the hospitality industry. They found out three fundamental sets of issues that currently face this industry: first, the lack of a universal and explicit concept of sustainability in this industry which sometimes make sustainability just a gorgeous word for some firms and use as a tool to cover their real issues. Second, lack of external supervision that ensure those enterprises’ approaches towards sustainability is transparent and objective. Third, how to keep a balance between sustainable consumption and the needs of sustainable profitability of those firms will be a big challenge (Jones, Hillier, & Comfort, 2016).
Environmental sustainability is one of the major topics of the topic-sustainable development. In order to deal with that, environmental management account (EMA) was invented for managers to better handle challenge which has been brought up by environmental sustainability. EMA contains both financial and non-financial information and use this information to support internal environmental management processes of a firm (“ENVIRONMENTAL”, 2015). Researchers like Sands and Ki-Hoon (2015) wanted to find out in what kinds of way does EMA support companies and organizations to assess and manage their environmental sustainability performance, they mentioned five related approaches which can be concluded as quantification of those environmental costs, guidance of related processes and offering opportunities and information to run businesses more effectively.
Once managers of hotels decide what kinds of approaches they want EMA support their decisions, they need to think more detailed information related with environmental management. Those information include physical information such as use and flows of energy and water, and also include monetary information such as environmental related costs and saving (Kamruzzaman, 2012). Researchers like Kamruzzaman (2012) suggested that EMA should be divided into two parts and managed in a more in-depth and detailed way respectively.
One big concern of managers in hospitality industry is how to accurately quantify all kinds of environmental impacts into accounting system, in other words, what kinds of processes can help translate the original information into quantitative information in a more accurate way. Jankovic, Persic and Zanini-Gavranic (2011)’s research offered managers of hotels a way to deal with this concern. They suggested that the process of EMA should include four parts which are analyzing related impacts, gathering related data, organizing all units and using managing accounting techniques to enable measurability of EMA.
Under the present social circumstances, sustainability will become more and more important in most of people’s mind, what will happen in hospitality industry will be no exception. A more comprehensive and creative way to look at sustainable development of hotels is one of main challenges managers need to deal with in the near future. Also based on the literature review, EMA, which is a necessary part of modern management accounting in today’s hospitality industry, will become more network-based, digital and information-based and provide more detailed information to help managers making related decisions in the next 5 years.
To sum it up, in this presentation, I talked five topics related to hospitality financial management. I chose some articles that can reflect current trends of those topic and use those articles to talk about some ways that can improve business efficiency or profitability of companies in hospitality industry, also use those articles as references to predict what kind of evolvement those topic can have in the next five years.
