BTHM THH3113: Cost and Performance Management for Elephant Hotel

This report provides a comprehensive analysis of the Elephant Hotel's cost and performance management. It begins with an executive summary highlighting the importance of budgeting in the hospitality sector. The report is divided into three parts: cost control, performance analysis, and cost and revenue analysis. The cost control section identifies fixed and variable expenses and suggests strategies to reduce costs, such as controlling advertising expenses, water charges, and hiring costs. The performance analysis section evaluates the hotel's performance against set standards, identifying areas for improvement. The cost and revenue analysis explores methods to increase revenue and reduce operating costs. The report concludes with recommendations, including utilizing digital media for promotion and offers an income and expense statement for the year ended 30th June 2018.

Running Head: Cost and Performance Management 0
Cost and Performance Management

Cost and performance management 1
Executive summary
Budgeting is the primary source of the organisation to understand where they are at
present and where they want to reach in future. The term budgeting is used in every sector
and this report will focus on the hospitality and the tourism sector. The term budgeting is one
of the most crucial terms in the history of the finance. The hospitality and the tourism
industry are also driven by the certain factors due to which the implementation of the
budgeting is necessary; hence an overall analysis of the Elephant Hotel is undertaken with
regards to the cost control mechanism, performance analysis and recommendations on how to
improve the position of the Elephant Hotel.

Cost and performance management 2
Table of Contents
Executive summary...............................................................................................................................1
Introduction...........................................................................................................................................3
Part 1.....................................................................................................................................................3
Cost control...........................................................................................................................................3
Part 2.....................................................................................................................................................4
Performance Analysis............................................................................................................................4
Part 3.....................................................................................................................................................5
Cost and Revenue Analysis...................................................................................................................5
Make a plan...........................................................................................................................................5
Recommendations and Conclusions......................................................................................................6
References.............................................................................................................................................7
Appendix...............................................................................................................................................7

Cost and performance management 3
Introduction
Cost control is the method of identifying and reduction of the operating business expenses
to enhance the earnings and these initiates with the process of the budgeting. The ideology of
the business owners is such that the actual revenue and the costs are compared against the
planned or the budgeted costs to take the relevant action. There are the three major stages that
include the arrangement, control of the costs and the process of the auditing. The same has
been presented below.
 The wages and the salary of the staff is taken care of with due diligence.
 The proper plans are prepared and the decision of the subsidies is also taken.
 The expenses are compared against the budgeted scenario and the initiatives are taken
to settle down the variances (Rubin, 2019).
Part 1
Cost control
The case study of the Hotel Elephant determines that there are enormous amount of the
costs which are tied up with the hotel and the same have been bifurcated into the fixed and
the variable expenses. The fixed expenses are those expenses that are permanent in nature
and are to be incurred by the company. As per the list of the expenses it can be stated that
there are few of the expenses which are fixed and there are few expenses which are variable
in nature. Further there are certain expenses that are recommended to curb them (Dopson &
Hayes, 2015).
From the table above it can be stated that the advertising expenses have increased from
$3937 to $4953. This is a crucial scenario as the advertising expenses can change the entire
performance of the company. The focus of the Hotel Elephant shall be on keeping the low
advertising costs and increasing the quality factor so that the positive word of mouth is spread
across.
 The water charges of the hotel can be controlled by keeping a check on the usage of
the water and fitting the auto stop tabs so that the water is used when required.
 The hiring costs can be controlled if the management is willing to give training to the
people having little experience, rather than hiring the skilled people who will demand

Cost and performance management 4
high salary and the wages. On the other hand the training will be the one time process
and this would surely be a cheap way (Phillips, Barnes, Zigan & Schegg, 2017).
 If the hotel uses the biodegradable energy than the Hotel Elephant will have to pay the
less electricity charges.
 The credit card commission charges can also be slowed down when the banks are
ready to give the facility of the long term payments rather than the short term
payments.
Part 2
Performance Analysis
Performance analysis is the plan which is used to analyse the position of the company
with respect to the standards set. The performance plan in the sector of the hospitality and
tourism is necessary otherwise the performance of the hotel cannot be recorded. It is
necessary to record the performance of the hotel to make necessary changes to attract more
customers. This performance plan will also help in analysing the future growth and the
stability of the Hotel Elephant (Pan, 2015).
From the results it can be stated that although the Elephant hotel has performed better
in most of the areas yet the company needs to improve the certain areas, which is neglected
today can become a bigger source of the problem in the later years. There are certain
expenses which saw a major shift which are repair and maintenance that increased from
$9375 to $12531 and increase by 25%, seems to be a huge expense. The water charges and
the advertising game have also changed. The overall profit might have increased by 62% but
the sales have also increased by 4.71%. The overall increase is low. Hence this affects the
performance of the Hotel and it’s necessary to keep a practice of the performance analysis on
to get the better results in comparison to the previous years (Gémar, Moniche & Morales,
2016).

Cost and performance management 5
Part 3
Cost and Revenue Analysis
The cost and the revenue analysis can reveal certain costs which can be either fixed or
variable. After the analysis the BOB and BIB can take certain steps to reduce the costs.
 The sales could be accelerated by diversifying the areas of the product such as the
hotel can expand into the pool activities and can generate the fees from it.
 The decision of the spending shall be taken wisely in advance.
 The regular members can be given the membership facilities (Wang, et al 2015).
 The operating costs can be reduced by eliminating the unnecessary costs.
Make a plan
Cost information
The costs are found in the income statement such as electricity, wages, website
charges, water, advertising, property insurance and bank charges, Netflix subscription are all
the combined costs that are incurred by the hotel industry. For the purpose of the plan the
costs are assumed to be the variable and to give a regular approach to the company (Bösch,
Becker, Becker & Axhausen, 2018).
Variable costs and fixed costs
Variable costs Advertising expenses, Netflix subscription,
website hosting expenses.
Bank charges, repair and maintenance,
electricity and gas, water charges, permanent
full time employees and wages,
superannuation expenses, property insurance
Differentiation
From the excel sheet the expenses that can be turned into the fixed nature are the
wages of the employees, the electricity and the gas expenses. The actual expense is $37125
whereas the budgeted expenses are $37000, so the unfavourable factor can be eliminated. The

Cost and performance management 6
variable expenses will be turned into the fixed expenses because they are bound to happen
(Kaplan & Atkinson, 2015).
Recommendations and Conclusions
After analysing the overall performance of the Hotel Elephant it can be stated that
overall recommendation the Hotel must use the digital media to promote the hotel and its
facilities. Meanwhile there are various websites like Instagram, Twitter and Facebook that
will deliver the presence of the hotel to the customers even in the remote areas. The brand
will grow and it’s the best method and the effective utilisation of the sources.

Cost and performance management 7
References
Bösch, P. M., Becker, F., Becker, H., & Axhausen, K. W. (2018). Cost-based analysis of
autonomous mobility services. Transport Policy, 64, 76-91.
Dopson, L. R., & Hayes, D. K. (2015). Food and beverage cost control. John Wiley & Sons.
Gémar, G., Moniche, L., & Morales, A. J. (2016). Survival analysis of the Spanish hotel
industry. Tourism Management, 54, 428-438.
Kaplan, R. S., & Atkinson, A. A. (2015). Advanced management accounting. PHI Learning.
Pan, F. C. (2015). Practical application of importance-performance analysis in determining
critical job satisfaction factors of a tourist hotel. Tourism Management, 46, 84-91.
Phillips, P., Barnes, S., Zigan, K., & Schegg, R. (2017). Understanding the impact of online
reviews on hotel performance: an empirical analysis. Journal of Travel
Research, 56(2), 235-249.
Rubin, I. S. (2019). The politics of public budgeting: Getting and spending, borrowing and
balancing. CQ Press.
Wang, X. L., Yoonjoung Heo, C., Schwartz, Z., Legohérel, P., & Specklin, F. (2015).
Revenue management: Progress, challenges, and research prospects. Journal of Travel
& Tourism Marketing, 32(7), 797-811.

Cost and performance management 8
Appendix
Income & Expenses Statement for The Elephant Hotel
for the year ended 30th June 2018
ACTUAL
INCOME &
EXPENSES
BUDGETE
D
INCOME
&
EXPENSE
S
Varianc
e
Variance
Analysis
F/
UF
2017-2018 2017-2018
INCOME
RESTAURANT Sales $445,000.00 $425,000.0
0
$20,000.
00 4.71% F
Sale From Bar $245,000.00 $250,000.0
0
-
$5,000.0
0 -2.00% UF
TOTAL SALE $690,000.00 $675,000.0
0
$15,000.
00 2.22% F
Expenses
Advertising $4,953.13 $3,937.50 $1,015.6
3 25.79% UF
Bank charges $810.00 $1,080.00 -$270.00 -25.00% F
Casual employee
wages $180,625.00 $187,500.0
0
-
$6,875.0
0 -3.67% F
Cleaning & cleaning
products $1,215.00 $1,620.00 -$405.00 -25.00% F
Credit card
commission $16,192.50 $13,590.00 $2,602.5
0 19.15% UF
Electricity/Gas $37,125.00 $37,000.00 $125.00 0.34% UF
FOOD DELIVERY
Vehicle service costs $3,937.50 $4,050.00 -$112.50 -2.78% F

Cost and performance management 9
kitchen utensils hire $1,350.00 $1,250.00 $100.00 8.00% UF
Netflix subscription $1,350.00 $1,350.00 $0.00 0.00% F
Permanent full time
employees wages $315,000.00 $315,000.0
0 $0.00 0.00% F
property insurance $1,181.25 $1,575.00 -$393.75 -25.00% F
Public liability
insurance $945.00 $1,260.00 -$315.00 -25.00% F
Repair & maintenance $12,531.50 $9,375.00 $3,156.5
0 33.67% UF
Superannuation for
employees $47,084.38 $47,737.50 -$653.13 -1.37% F
Waste removal $1,822.50 $2,430.00 -$607.50 -25.00% F
Water charges $9,450.00 $10,600.00
-
$1,150.0
0 -10.85% F
Website hosting
expenses $2,995.31 $3,993.75 -$998.44 -25.00% F
Total Expenses $638,568.06 $643,348.7
5
-
$4,780.6
9 -0.74% F
Month Net Profit /
(Loss) $51,431.94 $31,651.25 $19,780.
69 62.50% UF