Magazine article Financial Management (UK)

Hotels Plan Sector-Wide ABC Model: FDs throughout Europe Are Supporting a Major Study

Magazine article Financial Management (UK)

Hotels Plan Sector-Wide ABC Model: FDs throughout Europe Are Supporting a Major Study

Article excerpt

Improving the way the finance function measures customer profitability is the major challenge facing the hotel industry, according to speakers at the fifth annual forum of FDs in the industry, organized by American Express and Deloitte & Touche.

"Finance departments were very good at bookkeeping but less efficient at supporting decisions to drive the business forward," said Hans Lindh, head of the hotel and restaurant industry at American Express, but he stressed that this was now changing. "The finance function is now focusing on building future cash flow - it's trying to look through the windscreen, not the rear-view mirror."

To improve the measurement of customer profitability, hotel companies are planning to introduce an industry-wide activity-based costing (ABC) model. FDs throughout Europe are supporting a research project at Oxford Brookes University to examine the practical applications of ABC for the industry. Now in its second year, the research will be published in 2005.

Howard Atkinson, finance director at Four Seasons Hotels, welcomed the research, but warned that it was a difficult climate in which to introduce another reporting level without being clear about where the added value was. He stressed that it was essential that the industry co-operated closely on implementing ABC. "We don't want ABC to compete with the standard hotel accounting system-it can't be an either/or:"

There are still barriers to going beyond traditional accounting systems to measure customer profitability, according to Lindh. …

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