Recent Trends in the Hospitality Industry

REFEREED ARTICLES

 Ratio Analysis: Financial Benchmarks for the Club Industry

         Raymond S. Schmidgall and Agnes L. DeFranco

 General Managers of clubs are often inundated with operations and membership issues and may not be able to spend quality time engaging in the analysis of the financial health of the club.  With the aid of a handful of ratios, general managers and club controllers can assess the business trend and financial viability of their operations very easily.  The top ratios used by club managers are: payroll cost percentage, cost of food sold percentage, cost of beverage sold percentage, current ratio and debt-equity ratio.  The results of several ratios focusing primarily on clubs’ balance sheets are presented in this article

Performance Measurement Through Cash Flow Ratios and Traditional Ratios: A Comparison of Commercial and Casino Hotel Companies 

Kisan Ryu and Shawn Jang

 This study  examines the performance of commercial hotel and casino hotel companies by employing both cash flow ratios and traditional financial ratios over the past five years. Using the financial database from the Hotel and Motel section of the Mergent Online with SIC 7011, independent samples t-tests were used for the analysis. The performance of the commercial hotel and casino hotel companies was measured using liquidity, solvency, and operational efficiency indicators. Results show that traditional ratios generated different results from cash flow ratios in liquidity. Casino hotel companies were found to have significantly higher liquidity ratios than commercial hotel companies, indicating a possibility that the difference may be caused by the type of hotel.

 Initial Public Offerings in the Tourism Industry: An International Analysis of Taiwan 

Dar-Hsin Chen and Chun-Da Chen

 This study investigates the short-run and long-run price performances of tourism-related IPOs that listed on Taiwan’s two stock exchanges between 1982 and 2002.  Taiwan’s tourism industry has seen an increasing number of firms going public in recent years. Results are consistent with other studies that IPOs are generally under priced.  The degree of under pricing is more severe when the stock is purchased at the initial offer price.  However, it is still smaller than the overall IPO markets in Taiwan, as well as the tourism IPOs in the U.S.  After removal of outliers, the island’s tourism IPOs perform poorly one year after IPO relative to the market benchmark, while the overall IPO markets show no abnormal return one year after IPO.  Moreover, both the magnitude of short-run under pricing and long-run underperformance exhibit wide variations among the sample firms.

An initial investigation of firm size and debt use by small restaurant firms 

Michael C. Dalbor, Amy Kim and  Arun Upneja

 This study examines whether or not size affects the use of debt used by small restaurant firms.  Owners often use debt as a mechanism to minimize agency costs in large firms.  However, there is no consensus in the literature about how to measure firm size.  This study uses different proxies for size and finds the significant measures to be total assets, total sales, number of owners and number of employees.  The study finds number of owners and total assets to be variables with maximum explanatory power.

Scholarly Contributions in Hospitality Finance – Some Trends in 2002-2003 

Atul Sheel

 This study reviews salient trends in scholarly contributions relevant to hospitality financial management during the period 2002 – 2003. Five major refereed journals were examined - the Cornell Hotel and Restaurant Administration Quarterly, Journal of Hospitality and Tourism Research, International Journal of Hospitality management, the Journal of Hospitality Financial Management, and Briefings in Real Estate Finance. Refereed presentations at the 2003 annual conferences of the International CHRIE and the Association of Hospitality Financial Management Educators were also reviewed. A review framework was established after examining the trend of research topics in the above journals and conferences for the period 2002 – 2003. All refereed studies in hospitality finance for 2002 - 2003 were discussed using the above framework. As such the trend of scholarly contributions in hospitality finance during 2002 - 2003 is better understood.

U.S. Supreme Court Reviews Employers’ Responsibilities Regarding Tip Reporting and FICA Taxes 

Robert H. Wilson and Linda K. Enghagen 

The recent Supreme Court Case, U.S. v. Fior D’Italia, Inc. (2002) has given the Internal Revenue Service broad new authority to conduct audits of restaurant owners in order to estimate and assess the amount of FICA taxes owed for employee tips and wages.  The court approved the use by the IRS of the “aggregate method” to estimate the amount of tips received by employees in employer tax audits without requiring the prior audits of individual employees.  The decision will force restaurant employers to become much more actively involved in obtaining accurate information from their employees as to the precise amount of their tip income in order to avoid the “employer first” audits. As such the various alternatives for restaurant owners in deciding how to handle employee tips and FICA taxes are better understood.

  INVITED ARTICLE 

AHFME Academic Member 2002 Total Annual Earnings Survey 

Raymond S. Schmidgall 

This study was conducted to determine the 2002 annual earnings of hospitality financial management educators.  Fifty-two percent of AHFME’s members affiliated with educational institutions responded.  Annual base salaries ranged from $38,000 to $172,000.  The lowest-paid member is an instructor while the highest-paid member is a full professor.  Most respondents supplement their base salaries by both teaching during summer school and consulting.  The total annual earnings of members ranged from $43,000 to $245,000.  Hospitality financial management educators appear to be more highly compensated than hospitality industry financial executives.

VIEWPOINT

 Linking Cost-Volume-Profit Analysis with Goal Value Analysis in the Curriculum Using Spreadsheet Applications 

Lea R. Dopson 

This paper is designed to demonstrate successful innovations in education, namely, combining a managerial accounting concept with a menu analysis concept using spreadsheet applications.

  BOOK REVIEWS

 Weygandt, J.J., Kieso, D.E., Kimmel, P.D. and DeFranco A.L. Hospitality Financial Accounting