Interpreting and Auditing Hotel Accounts in 2016 Part 2 of a Series - What is a hotel ?
A typical hotel is a complex business unit. It has distinguishing features from other businesses that demand an organised approach to monitoring and recording its activities and transactions, and a depth of knowledge to be able to interpret its operating performance.
What comprises a hotel is starting point. In the days when there were tax allowances for hotel buildings the taxation authorities defined it as ‘a business that provides overnight accommodation and serves breakfast and at least one other meal’. The description hotel now covers businesses where a far wider range of options is offered.
room only properties
properties that provide only breakfast
extended stay properties where kitchens are included
hostel type properties where multi-occupancy is possible
conference, spa and golf properties with bedrooms
restaurants with rooms
properties with both day and overnight use
properties that are only open seasonally
Add to these the growing availability of serviced apartments, hostels and airbnb type offerings, and it can be seen that a precise definition is no longer possible.
For the purposes of these articles, a hotel is considered to be ‘full service’ and to offer a wide range of accommodation, catering and other services both to residents and non-residents. It is also assumed to be a year round operation.
The services offered might include:
service to residents in bedrooms
other catering (food and beverage), such as restaurant, bar, outside locations - all of which could be for residents and non-residents
telephone and internet communications
in-room guest entertainment, minibar and shopping services
guest laundry, dry cleaning and valeting
spa, gym, sports and leisure facilities
beauty and hairdressing gift shop
meeting and conference rooms
weddings, banquets and all types of events
The business comprises a mix of manufacturing and service elements.
As a whole, the product is highly perishable. The major revenue producer for most hotels being overnight accommodation, this can not if unsold be held in stock and sold twice the next day. Pricing particularly of accommodation has to be flexible to optimise revenue, creating the need for systems enabling differential pricing to reflect supply and demand, and market sector variations.
The principal manufacturing element, catering, involves the input of raw materials, and a process to prepare these for onward retail sale. Varying inputs of labour are needed to provide the production and service elements of the catering operations, and the hotel’s other outputs of accommodation, bars, leisure etc.
The customers, the guests, are transient – coming and going as they please - that
in itself presents a challenging feature from a business control standpoint. Whilst there,
they give rise to a numerous transactions varying from small to large in value, some
for credit and some for cash, creating complex system demands.
A variety of parties will be interested in the review and interpretation of the operating data generated by the hotel. Depending on the ownership structure of the hotel, these might include:
departmental and unit operational management
regional and corporate hotel group management
third party management companies
landlords of leased hotel sites and properties
bankers and financiers
advisors, asset managers, valuers
owners and investors
The next part of this series will identify in more detail the management information structures and logic used by the Uniform System of Accounts for the Lodging Industry when accounting for, controlling and reporting the various elements of income and direct and indirect operating costs.