Tourism in Kenya, Essay Example

Introduction

The hospitality industry consists of companies with food services, accommodation, leisure and other recreational services (Patricia; 2001). It is one of the highest revenue generating industries in the world today. Many countries, especially those in Africa and other well developed tourist destinations, benefit greatly from this industry.

Finance in this industry is important and very critical for both the firms and the house holds. For the firms, it is mainly/basically a question of minimizing the costs of operation while they maximize the profits. The households on the other hand, it is a question of maximizing utility while trying to capitalize on the disposable income (Galbraith; 2000).

As far as this industry goes, it is the firms that worry much about the financing and other possible sources. Owing to the fact that this industry is a multi billion dollar industry, it is imperative that the amount of money and finance put into this industry be of a similar nature. This paper seeks to analyze finance in the hospitality industry. The paper will look at the most commonly used sources of finance and other ways of generating this revenue. It will also address issues pertaining to how big the hospitality industry is in as far as looking at the finance section of it is concerned. Financial management in every industry is also important as it facilitates the growth of that industry. This will also be looked at in this paper.

Sources of finance and ways of generating revenue in the hospitality industry

Just like in many other industries, generation of revenue in the hospitality industry will depend on how much the firm is willing to spend on the industry. This is because, it is only logical that the more a person or a firm spends on an enterprise, the higher he/she is likely to receive from the enterprise. In the hospitality industry, much of the revenue collected is from the services offered by the industry. Services such as accommodations, recreation, entertainment, travels and tours are the ones that generate immense revenue for this industry (Patricia; 2000). It is least likely that governments and the state for that matter will come in and chip in creating some source of finance for the industry although in some cases they actually do. In this case, it’s no longer more of creating and generating revenue for the industry, but doing it for the country. A good example is the hotel and tourism industry in Kenya. Recently Kenya had their annual tourism week where they sensitize the public and foreigners on the country’s potential in the industry. The government hosted the event and it was under the flagged ship of the tourism minister in the country. Costs such as advertisement fee and marketing of hotels, were took care of by the government. In as much as these costs is waived from the normal costs the hotels and other sectors of the industry are used to, it was done mainly for the benefit of the country in general as opposed to generating company revenue and maximizing profits.

The tourism industry in Kenya is the biggest earner of the country revenue after agriculture. This industry is the one that creates employment for many of the locals. In the tourism industry, falls the hospitality industry. In Kenya, firms in this industry record the highest revenues after firms in the agricultural and telecommunication industries (Ong’onga; 2009). One such firm is the Hilton Hotel. This is a perfect example of a firm in the hospitality industry in the world. The Kenyan branch of this hotel recorded a pretax profit of 126% in the financial year ended 2008/2009. Other major hotels in the country also recorded high profits in the year. The revenue collected in this industry is purely from the services offered by the industry. Other sources might be availed by the government but they are rarely availed to the industry.

Financial management in the hospitality industry

The management of finances is the key in all sectors of any industry. It is only through the management of finances that an industry grows to its potential. We have mentioned that the hospitality industry is among the greatest in the world in as far as generation of revenue and spending is concerned. How is this revenues maximized and to what extent can the spending be contained? These are the two main questions addressed when looking at financial management in the hospitality industry (Cooper; 2003).

To what extent can spending be contained in the industry?

This is one of the main questions asked. In many restaurants and hotels, it is a policy that, one has to pay for the service before he/she receives it. Take an instance where a client makes an order of food, and has to wait for close to thirty minutes for the food to be prepared. These are just but some examples of ways in which parties in the hospitality industry try to contain spending. Take an instance where the customer orders for food and after consuming it, he/she declines to pay for the service, this is a straight loss for the firm. It may look as though it is a minor loss but in the event that it occurs recurrently, it is a great loss for the firm.

Firms in this industry also try to contain the spending by hiring only the necessary staff required. In many of these firms, it is rare to find one of the staff members idle or not engaged in some sort of work. All the staffs hired, are laborers who are required in the firm. Minimizing the cost of spending is one key factor in the hospitality industry.

How is Revenue Maximized?

Maximization of revenue and profits is the idea behind firms as opposed to maximization of utility in the households. The hospitality industry maximizes its revenues in various ways because it is what keeps the industry running. In the events that the spending of a firm exceeds the revenue generated, the firm is in a financial quagmire and should think of some contingency measures. If the firm’s revenues balance with the spending, the firm is also in a poor position and the management needs to rethink the policies. In this industry, the firm’s aim is to make sure the revenue exceeds the spending. In this level, the firm is in a good position.

How then does a firm in the hospitality industry maximize its revenues? One of the ways and one that is most common are by hiking of the prices. The target class of many of the big and medium sized hotels in the world is the highest income earners and the middle class persons. Rarely do the low-income earners spend on recreational activities. The firm’s idea in this case is to ensure that they collect a large chunk of the disposable income of many of these people. The reason why many people goes for holidays or recreational activities after a long period (mainly during the festive seasons) is simply that they have accrued some savings in their accounts. People go a convention for holidays after a long time because they now have the time. This is not the case; the reason is that they are now in a position to go for the holidays as they have saved part of their disposable incomes. The firm’s then capitalize on this; they hike their prices to his extent that if a person fails to visit the hotel for a while the impact will not be as great to the hotel as it will be to him if he spends a night in the hotel.

Another way of maximizing revenue in this industry is by having good marketing strategies. All the sectors of this industry have a marketing department specifically charged with the sole responsibility of marketing the firm fully. The more people reached to, the higher the chances of maximizing on the revenues.

Conclusion

The hospitality industry is a key industry in every market. It provides a balance of the economy ands the markets. Finance and its management in this industry is very critical for the firms. It is important that the people understand how to generate the revenue and how to cut on spending. Many of the firms in this industry have managed to so. Others have however failed to meet the requirements. The point, however, remains that financial generation and management is the most important fact to look into in this industry.

References

Cooper A. Financial Management. New York. Harvard University Press. 2003.

Galbraith J. The Elements of Micro Economics; Theory Of The Firm. London. London School of Economics Press. 2000

Ong’nga A. Tourism in Kenya; The Kenya Tourism Board Journal. July 25^th 2009.

Partricia P. Hospitality in the World. 2001.