Summary
Full-service hotels are bundling complimentary meals with rooms as they react to competitive pressures from suite-style and economy hotels. This bundling can lead to sub-optimal overall results if the internal accounting treatment of cost and revenue allocations is chosen without consideration of the potential impact on standard industry performance measures. The resulting performance evaluation and incentive conflicts between departmental managers can undermine the cooperation needed to run a full service hotel. This paper examines the industry 's environment, performance measures, and incentives, and then assesses the impact of four potential accounting treatments.
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Extract
The Development of an Accounting Performance Measure to Minimize Inter-Departmental Conflicts in the Hospitality Industry
Introduction
Full-service hotels are in fierce competition with suite and economy hotels for business travelers. One marketing tactic that has emerged in this competition is the inclusion of a complimentary breakfast in the cost of the room (Raleigh & Roginsky, 1995). Conflicts can arise when the revenues and costs of bundled services are measured and allocated between supporting departments. If the accounting treatment of the included meal does not consider the incentives of various involved departments, these issues may create performance evaluation problems and incentive issues. This paper examines the industry's environment, performance measures, and incentives, and the...See the full content of this document
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