Managing capital expenditures Using value engineering

Denton, Gregory A.

doi:10.1016/s0010-8804(98)80009-8

Cited by 6 publications

(7 citation statements)

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“…This percentage is normally low in a hotel’s early years and then ‘ramped up’ until around years five to seven of a property’s life when a maximum stabilised percentage is reached (Eyster, 1997b; Rushmore, 2002). 1 The reason for ‘ramping up’ stems from the need to replace soft‐goods around every 5–7 years (Denton, 1998).…”

Section: Management Contracts and The Ffande Reserve Literature Reviewmentioning

confidence: 99%

“…If funding is insufficient, FF&E projects that need to be completed might have to be deferred or eliminated (Crandell, 2002; Beals and Denton, 2004; Bader and Lababedi, 2007). Bankers and lenders are also beginning to impose covenants on owners, mandating that allocations to the FF&E reserve be set above the 3 per cent annual amount to protect their investment (Denton, 1998; Crandell, 2002; Wilder, 2004).…”

Section: Management Contracts and The Ffande Reserve Literature Reviewmentioning

confidence: 99%

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Accounting for the furniture, fittings & equipment reserve in hotels

Turner

Guilding

2010

Accounting & Finance

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The somewhat idiosyncratic accounting procedure of maintaining reserves to fund furniture, fittings and equipment (FF&E) capital expenditure in hotels mediated by a management contract is examined. Five research objectives have been pursued: (i) ascertaining contrasting motives of owners and operators with respect to FF&E reserve accounting; (ii) determining FF&E reserve accounting approaches adopted in hotels; (iii) determining the amount assigned to FF&E reserves in hotels; (iv) determining the sufficiency of FF&E reserves in hotels; and (v) appraising the degree of ease with which hotel operators can draw on FF&E reserve funds. These objectives have been pursued through the analysis of qualitative field data as well as survey data collected in Australia and New Zealand. The study's more significant findings include the determination that, consistent with the wishes of operators, maintaining cash funded FF&E reserves is the most popular approach (particularly in small hotels). It has also been found that FF&E reserves are 40 per cent underfunded. This deficiency beckons a question over whether hotel FF&E reserve accounting serves any meaningful role. Copyright (c) 2010 The Authors. Accounting and Finance (c) 2010 AFAANZ.

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Section: Management Contracts and The Ffande Reserve Literature Reviewmentioning

confidence: 99%

Section: Management Contracts and The Ffande Reserve Literature Reviewmentioning

confidence: 99%

Accounting for the furniture, fittings & equipment reserve in hotels

Turner

Guilding

2010

Accounting & Finance

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“…Given that in many hotels the day-to-day operations are run by managers who are separate from the owners, Denton (1998) discusses the well-known conflicts in the choice of capitalizing versus expensing these amounts. Because operating managers are generally only responsible for operating expenses, these managers have an incentive to capitalize as much expenditure as possible.…”

Section: Accounting For Ongoing Capital Expendituresmentioning

confidence: 99%

Accounting Research in theCornell Quarterly: A Review with Suggestions for Future Research

Hesford

Potter²

2010

Cornell Hospitality Quarterly

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An analysis of accounting-related articles published in the Cornell Hospitality Quarterly shows a shift from prescription to description, with an increasing use of scientific research methods. The authors found that the literature has examined the industry's use of the Uniform System of Accounts, cost management, and management control systems, including the effects of nonfinancial measures and the balanced scorecard. Although a uniform system of accounts offers consistency, it may limit a hotel manager's ability to match costs with departmental revenues. Budgeting and capital budgeting are particularly difficult issues for the hospitality industry, due to the fact that most hotels involve independent parties as ownership and management. One oddity of the hospitality industry is that few managers adjust budgets to reflect operational outcomes. In addition to their review, the authors provide suggestions for future research.

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“…Guilding (2003, p. 180) notes with regard to management contracting that this "schism between ownership and management signifies that unlike the context of most capital budgeting, where investment decisions are made within the confines of a single hierarchical organisation, two distinct organisations are frequently involved in hotel investment decision making processes". As GMs are typically responsible for the preparation of capital budgeting proposals (Denton, 1998) it is therefore the case than an added layer of complexity exists in hotels operating with a management contract. The GM, for example, acts as an agent to two principals, their owner and their management company meaning that there are potential agency problems at two distinct levels of the relationship -between the two principals and between each of them and their mutual agent, the GM (Hodari, Turner, & Sturman, 2017).…”

Section: Introductionmentioning

confidence: 99%

Precursors to the financial and strategic orientation of hotel property capital budgeting

Turner

2017

Journal of Hospitality and Tourism Management

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The purpose of this study is to develop and test a set of hypotheses concerned with exploring for precursors to the degree of emphasis hotel property General Managers attach to a financial versus strategic orientation in capital budgeting. Results are based on 200 survey responses from the General Managers of Australian and New Zealand hotels. The findings indicate that capital budgeting is more financially orientated than strategically oriented in hotel properties that adopt a management contract and also where the owner gets more involved in the capital budgeting process. No support is found for the hypothesised role of ego-trip hotel ownership, the age of a hotel property, a General Manager's number of years of experience, or public versus private hotel ownership. As an over-reliance on financial capital budgeting information can bias decision-makers against longer-term investment projects, it is conjectured that hotel capital budgeting may be somewhat sub-optimal in those hotels that adopt a management contract and which have a greater level of hotel owner involvement in the capital budgeting process.

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Managing capital expenditures Using value engineering

Cited by 6 publications

References 0 publications

Accounting for the furniture, fittings & equipment reserve in hotels

Accounting for the furniture, fittings & equipment reserve in hotels

Accounting Research in theCornell Quarterly: A Review with Suggestions for Future Research

Precursors to the financial and strategic orientation of hotel property capital budgeting

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