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Li 15889767 critical article review
- 1. ADD SLIDE TITLEHEREArticle review of Hospitality Financial Management Jun Li 15889767
- 2. introduction Managers of hospitalityindustry 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 performanceanalysis Working capital management Cost management Revenue and yield management Sustainability and environmental management accounting 1 5
- 4. Financial performance analysis Howto enhance performance of hospitality industry
- 5. Complex analysis ofFinancial performance using ratios (KRIVKA & STONKUTĖ, 2015)
- 6. Contemporary topics ofhospitality 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
- 7.
- 8. Social capital–Performance Relationships (Dai,Mao, Zhao, & Mattila, 2015)
- 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
- 10. Future Financial performance analysis Morecomprehensive More factors Joint effect Indirect influence
- 11. Cost management Manage costin a more strategic way
- 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. Add keywords Add keywords What are the differences between SCM and traditional cost management methods?
- 14. Modern Cost ManagementInnovation 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 Quantitythe 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)
- 17. More strategic More customer-oriented Moremarket-oriented More topic Future
- 18. 18 Revenue and yieldmanagement How it will impact the bottom line of a hotel
- 19. Current trends ofyield 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 Add keywords Informationization Usingtechnologies 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 pricingframework of hotel revenue management Add keywords 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)
- 22. External and internalfactors of RM (Willie, Clarke, & Chandra, 2015)
- 23. Future Revenue and yieldmanagement More Alliances More Channels More Dynamic More Factors
- 24. Working capital management Howto manage cash flows
- 25. Working capital management(WCM) working capital cycle in a firm (Nwankwo & Osho, 2010)
- 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 managementstrategy 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 biasesaffect 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)
- 29. Cash conservation More cooperation Moreinformative More variables Future
- 30.
- 31. A creativity frameworkfor greater sustainability in hospitality Add 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 sustainabilityin 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
- 34. Modern framework ofEMA Comprehensive Framework of EMA (Kamruzzaman, 2012)
- 35. EMA in thehospitality 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.
- 36. Future Sustainability and environmental managementaccounting More comprehensive More creative More detailed More digital
- 37. Conclusion Financial analysis performance Complexanalysis/Non-financial factors1 Cost management CBA/SCM/Cost Utilization/TCM/Other modern approaches 2 Revenue and Yield Management TRM/Dynamic pricing/External and internal Factors 3 Working capital management Liquidity/Cash levels/Behavioral biases4 5 1 Creativity/Physical and Monetary Units/ Quantification Sustainability and environmental management accounting
- 38. THANK YOUTHANK YOU JunLi 15889767
- 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
Editor's Notes
- #2 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
- #3 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.
- #4 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.
- #5 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.
- #6 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).
- #7 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.
- #8 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).
- #9 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.
- #10 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.
- #11 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.
- #12 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.
- #13 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”.
- #14 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.
- #15 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.
- #16 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.
- #17 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.
- #18 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
- #19 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.
- #20 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.
- #21 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.
- #22 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.
- #23 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).
- #24 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. .
- #25 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.
- #26 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.
- #27 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.
- #28 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.
- #29 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.
- #30 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.
- #31 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.
- #32 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).
- #33 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).
- #34 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.
- #35 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.
- #36 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.
- #37 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.
- #38 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.