Finance in the Hospitality Industry, Essay Example

Modern hospitality industry is various today, than it was long time before. The changes in the hospitality industry in past “building on insatiable globalization and ever increasing customer expectations” (Wood, & Brotherton, 2008, p. 229). Historically hospitality industry in various countries has appeared from “domestic or institutionally based provision” (Wood, & Brotherton, 2008, p. 16). The forms of first non-profit-making hospitality and the diversity of commercial and financial hospitality that have developed over the time were encouraged by evolution in trade, Wood and Brotherton (2008) found.

The early years of the 21-st century demonstrated “several challenges for the hospitality” (Adams, 2006, p. 17). Wood and Brotherton (2008) believe that hospitality industry is “hypersensitive to the economy cycle and world events” (p. 229). It is one of the major assistant to the economic of each country and “highly diversified with the majority of hotels, restaurants and pubs being small to medium sized enterprises” (Wood, & Brotherton, 2008, p. 229).

Hospitality industry is influenced by economic, technological, social and industrial evolution. At the same time, modern structure and operation of the hospitality industry is impacted by modifying opinions of industrial organization, the action of stock and investment markets and management opinion, and behaviour whether they appear in the past or was borrowed from other country experience, Wood and Brotherton (2008) emphasize.

The impact of factors for example trade, travel and transportation has always obtained more likely natural treatment in the hospitality industry learning (Wood, & Brotherton, 2008). The modification in the forms and location of commercial hospitality operation over the time is proportional upon previous modifications in the economic and technical point of views of these three impacts whether they appear by birth or are borrowed from other country, Wood and Brotherton (2008) supposed.

The financial ground of hospitality industries is consequently as really significant, “perhaps even more so, than the softer more behavioral elements more usually associated” (Wood, & Brotherton, 2008, p. 18) with the concept and idea of hospitality. Hospitality industry is different with various kinds of enterprises where hospitality product is many-sided.

As DeFranco and Lattin (2007) suppose finance in hospitality business depends on the customers’ discretionary income. High level of intangible property establishes “customer service and customer satisfaction key issues” (Wood, & Brotherton, 2008, p. 230) consequently measuring performance is arduous and difficult. Wood and Brotherton (2008) suppose that together these features are uncommon to service operations and realize especial request on financial management and management of that kind of organizations and companies.

In the past several years it has been evident that over all spheres of business the duty of the finance function is developing and changing. The proceed introduction of “automated process for the collection of data, book-keeping and maintenance of records” (Adams, 2006, p. 17 – 18) liberate the financial officer from the accountant type role of the past, Adams (2006) underlines. In the hospitality industry they are basic members of the management expert team and operate as the basic in the planning process (Adams, 2006).

Nowadays, for finance management it is important to “learn all the technical and operational aspects of their job” (Hales, 2005, p. 7). The leaders in finance management have their responsibilities and duties to “allocate company resources” (Hales, 2005, p. 7). This involves allocating money, time, functioning and notion to the most efficient or profitable and lucrative areas. Hales (2005) underlines that the leaders in financial management do this by paying attention to the customers and employees. After this they are giving preference to the projects or functions and then approve them with well-grounded and valid resources (Hales, 2005).

DeFranco, and Lattin (2007) believe that hospitality financial management gives a straight, real and useful approach to assistance financial manager efficaciously investigate and examine hospitality industry management reports and assertion, make the business forecasts and resulting cost level control.

Hales (2005) underlines that the financial managers should understand that they must be comfortable in application numbers to influence and effect their departments. This contains developing the capacity to fulfill each financial and accounting aspect of their position rationally and accurately involving finance forecasting, wage rate schedule, activity-based budgeting, level of coasts and the whole process of purchasing, Hales (2005) believes. That means that they will have additional time to spend with the employees and their customers. Such understanding will help them to comprehend the way to ameliorate and growth the profit and revenues.

“Hospitality education survived for many years” (Wood, & Brotherton, 2008, p. 15) without considerable investigation the culture. Wood and Brotherton (2008) strongly believe that in hospitality management the education “has always been an option” (p. 230).

Adams (2006) underlines that lots hospitality companies and organizations must consider coming back to the “front-line managers” (p. 176) as the manager with amenability for decision-making and planning. As a result the system of financial performance measures should be focused on the “balance range of performance indicators” (Adams, 2006, p. 176).

As Hales (2005) supposes, that the financial analysis in the hospitality industry supply finance managers the experience and attainments to be convenient working with the numbers to control their companies efficaciously. This can help the managers attain the skills and ability which are important for performing rationally and accurately in their financial roles.

“Hospitality business are multifaceted enterprises” (Wood, & Brotherton, 2008, p. 229). Today, hospitality enterprises have started to examine and use various strategies to finance their “international expansion plans in ways designed to control the risk endemic in such ventures” (Wood, & Brotherton, 2008, p. 18). They use strategies on market entry for distributing “ownership / investment and operator risks” (Wood, & Brotherton, 2008, p. 18) and to reflect and arose modifications of the market and consumer preferences. Wood and Brotherton (2008) show that hospitality industry also enterprise absence of methodological improvement or pluralism. “In terms of the range of methodological choices” (Wood, & Brotherton, 2008, p. 18) the financial researches have done the kind of research behavior, and the “coverage and coherence of the research effort in relation to particular specialisms and their sub-areas” (Wood, & Brotherton, 2008, p. 18).

The development of appropriate fulfillment actions needs diligent and thorough planning. Lots of companies and organizational work is complicated and the fulfillment could not be “reduced to a single measure that is meant to serve as a summary of overall performance” (Adams, 2006, p. 176). The multidivisional structure, which is also known as M-form, is appropriate to the companies and organizations that are centering on limiting factors which are land, labor and finance. Also it is appropriate for companies and organizations which are using a “management philosophy based on command, control, contract and compliance” (Adams, 2006, p. 176).

The players on both sides of finance, those who establish companies and those who wants to stock and fund them have to understand how the financial planning and appraisement must be done and how they must be estimated (Leachm, & Melicher, 2008).

Adams (2006) determines five main factors of finance in the hospitality industry contrary to which the action is “normally measured” (p. 176). They are: similar department or section in foregoing period; action of both external and internal department or sections to the company or organization; appraise of what could be attained; performance actions needed for attaining the goals; appraise of prospective acting in the form of forecasting and budget.

There are seven fundamental components of the best performance in hospitality, which are: setting goals that are focused on the customer; organizing and supervision the operation; partnership and arrangements of contracts: clear external and internal communication; setting and reaching appropriate levels; controlling the labor force effectively; performance management and best practice (Adams, 2006).

Adams (2006) found several financial items which are having especial meaning to the hospitality industry. These items are particular to an industry which is up to the use of the established assets and a theme to the established costs. The items include: regular appraisement of ownership and assets; appraisement of brands; data which request arising from modification “patterns of ownership management contracts and franchising” (Adams, 2006, p. 18); performance management and best practice (Adams, 2006).

Occurrence in informational technology has influenced the systems which are uses to regulate and checkup “businesses in the hospitality” (Adams, 2006, p. 16). Informational technology has found a whole series of resources which are connected with procurement. Especially informational technology potential is focused purchasing “allowing larger chains across the sector to leverage their size and purchasing power to achieve significant cost savings” (Adams, 2006, p. 16).

Lots people in the sphere of hospitality industry find finance and accounting noticeably dissimilar “from the operational areas of the hospitality business, tough to master” (DeFranco, & Lattin, 2007, p. 17). They consider finance and accounting as different spheres. DeFranco, and Lattin (2007) strongly believe that accounting consists of management and financial accountant. The main purposes and goals of financial accounting is to carry out financial statements which “accurately present the financial condition of the company and its operating results over time” (DeFranco, & Lattin, 2007, p. 17). On the other hand, the purpose of management accounting is to give timely operational data which are connected with profit and costs to assist management heighten the operating fulfillment of the business, DeFranco, and Lattin (2007) emphasize.

The system of finance management and accounting should be centering on the level costs checkup and competitive analysis to perfect, ameliorate, and determine capabilities and facilities for “developing a competitive cost advantage” (Adams, 2006, p. 176).

While the hospitality business needs comparatively “low level of operating inventories” (DeFranco, & Lattin, 2007, p. 2) it needs a comparatively high level of stock for “its real estate component” (DeFranco, & Lattin, 2007, p. 2).

Wood and Brotherton (2008) believe that hospitality industry is attractive and hopeful sphere in which to “engage financial management research and arguably” (p. 230) give the chance for the researches in the hospitality industry to provide recent concept and theory to “mainstream the research” (p. 230).

With the development predicted in the leisure and travel sphere over the beginning decades and the “industry’s track record of innovation the future for the hospitality industry” (Wood, & Brotherton, 2008, p. 18) seems encouraging even though is highly admissive to unforeseen external impression, as has been noticed in the past in the form of “terrorist attacks and natural disasters” (Wood, & Brotherton, 2008, p. 18).

It is self-evident that existence of and modification in the course of time, lots of business and market routes, technologies, public modification in attitude to economic improvement and public norms, have conspired to impact the emergence of business and trading hospitality provision during lots of years, and still do so, (Leachm, & Melicher, 2008).

References

Adams, D. (2006). Management Accounting for the Hospitality, Tourism and Leisure Industries: A Strategic Approach. London, UK: Thomson Learning.

DeFranco, A. L., & Lattin, T. W. (2007). Hospitality financial management. Hoboken, New Jersey: John Wiley & Sons.

Hales, J. (2005). Accounting and Financial Analysis in the Hospitality Industry. Burlington, MA: Elsevier Butterworth-Heinemann.

Leachm C. J., & Melicher, R. W. (2008). Entrepreneurial Finance. Mason, USA: South-Western Cengage Learning.

Wood, C. R., Brotherton, B. (2008). The SAGE Handbook of Hospitality Management. London, UK: Sage Publications.