Management Accounting Report: Harriot Hotel Cost Reduction Strategies

This report provides a comprehensive cost analysis of Harriot Hotel, a global hotel chain founded in 1941, focusing on its expansion into the Chinese market and the need for cost reduction strategies. The analysis examines various cost heads, including employee wages, advertising expenses, interest on loans, housekeeping supplies, and customer discounts, to identify areas where costs can be managed effectively. The report highlights the impact of the COVID-19 pandemic on the hotel's operations and emphasizes the importance of strategic financial management for long-term sustainability and profitability. Recommendations are made for modifying employee pay scales, adjusting advertising expenditure, and refining discount policies to optimize financial performance. The conclusion underscores the significance of cost reduction techniques in enhancing productivity and ensuring the hotel's ability to overcome financial challenges and achieve its expansion goals.

Harriot
Hotel accounts

Table of Contents
INTRODUCTION...........................................................................................................................3
Main Body.......................................................................................................................................3
Introduction to Harriot Hotel......................................................................................................3
Approach to cost items individually...........................................................................................4
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Management accounting is a branch of finance in which managers make relevant
decision-making by viewing necessary accounting statements which will aid organisation to
rectify any deviations in actual performance in order to increase efficiency of operations and
promote efficiency. Management accounting and cost reduction techniques are one of most used
methods which are adopted by various organisation in order to manage cost and revenue in
appropriate manner. As it is seen that Covid-19 has impacted operations of various organisations
in respect of its operations and survival as global lock down was initiated which has crippled
operations of hotel and tourism industry. In this report, Harriot hotels wants to expand its
operations further in order to advance revenue and eliminate losses which were incurred at the
times of Covid-19. As given hotel is thinking about expansion of its operations in china through
formulation of strategic techniques. In order to increase its room capacity expansion, it has
adopted technique of cost reduction to manage its relevant cost and profits. There are various
types of costs in respect of given hotel such as employee based costs, advertising expenses,
interest on loans, customer discounts, stationary usage and so on. Through adoption is technique,
organisations can cope with contingencies being occurred at time of pandemic so that optimum
market position can be retained.
Main Body
Introduction to Harriot Hotel
Harriot hotels is a wide chain of hotels which was initially founded by Sir John D.
Brockville in 1941. During the period respective hotel has become one of the most developed
and known market player which has operations all over the world. It has managed to outgrow
across various parts of globe which has made it one of wealthy hotel chain over the world.
Though Covid-19 has broke down flow of operations due to lock down across globe which
disabled such hotel to operate its activities in smooth manner, Harriot hotel has somehow
managed to expand its operations further in china with the use of strategic focus and techniques.
Therefore in order to expand its operations ahead, respective hotel needs to make certain
modification in its costing policies in order to advance profits of the hotel. It will be done by
analysing various cost heads and their respective importance in long term.

Approach to cost items individually
Employee Wages
Point: This cost relates to payment of wages to employees and labours of Harriot Hotels.
Explain: Employee wages consists of variable and fixed costs and should be in adequate
proportion so that profits can be managed in effective manner (Ningaraju and et. al., 2020). In
given situation, employee are paid wages at 25% of revenue which is considered as high. There
are different factors which should be considered while giving a pay. In current time, Covid-19
has affected organisations worldwide and paying such huge percentage of revenue to employees
can cause decrease in profits which is not good for long term. As organisation consists of
different types of employees among which some work on contractual basis and other on timely
basis whereas some are devoted for organisation for fixed term. Therefore, wages can vary from
employee to employee and their nature of work.
Relate: Harriot Hotels should adopt more effective pay scale basis on which each employee is
paid in such a manner that its profits are not compromised in any manner. Also it should offer
labours on the basis of payment of wages act being provided by government.
Advertising cost
Point: It relates to promotional and advertisement cost.
Explain: Advertisement cost is generally considered as fixed cost which needs to be incurred by
organisation in order to attract maximum of customers (Chakraborty and et. al., 2018).
Advertising cost in given situation is taken as 7% of revenue which is high and needs to be
reduce in order to increase overall profitability and cover losses at time of pandemic.
Relate: Harriot Hotels is advised to modify its advertising expense and it should be done in a
particular manner so that extra cost can be eliminated due to market fluctuations.
Interest on loans
Point: It is a cost which is paid over loans taken from banks or other financial institutions
(Shrestha and et. al., 2021).
Explain: Interest is a said to be fixed expense which is payable by organisation. Rate of interest
differs from bank to bank. Therefore organisation should focus on choosing such institution
which provides most appropriate rate on interest (Sittimart and et. al., 2021). Here interest on
loan is 17% which is moderate and cannot be modified as it is fixed expenditure which is

required to be paid by company. Therefore, organisation must emphasise over adopting right
institution from which it will take loan.
Relate: Harriot Hotel is required to reduce other expenditure in order to earn targeted profits
over the time as interest on loans cannot be changed.
House keeping and cleaning supplies
Point: This expense is paid to servants for providing cleaning services.
Explain: It is considered as Variable cost and paid on hour basis over the work provided by
cleaners and house keepers. Here organisation is paying 8.3% of revenue to such house keepers
which is said to be lowering profits of the company. It includes equipment expenditure, labour
cost and others (Köseoglu and et. al., 2019).
Relate: Here, Harriot Hotel is recommended to adopt effective strategy by employing single
individual in order to manage such expenses in effective manner.
Customer discount
Point: It is a cost which is incurred in favour of customer retention.
Explain: It is a variable cost which depends upon occupancy of rooms by customers. Customer
discounts are common practice which is adopted by various organisations in order to attract large
audience in this regard (Julião, Gaspar and Alemão, 2020). It is not fixed cost and therefore
varies as per the consequences. It is generally provided in order to increase customer base by the
company. In given situation, 13.3% of discount is being provided to customers which is quite
high and required attention of management in order to manage profit- margins.
Relate: Harriot Hotels should amend its discount policies as such heavy expenditure over
discounts will cost loss to newly expanded unit.
Stationeries used in front desks and restaurants
Point: It is related to stationary items being required by front desk staff and others.
Explain: It is considered as variable expenditure which is dependent upon requirement as per
customers which are present in hotel premises. Front desk requires stationary items in order to
record information related to customer (Alnawas and Hemsley-Brown, 2019). Here 3% of
revenue is being charge over stationary which is concluded as inappropriate and should be
reduce to at least 1% in order to eliminate extra expenditure of hotel.

Relate: Harriot hotel is advised to rectify its cost being incurred in relation to stationary so that
adequate profits can be drawn. It must purchase stationary as per the requirement in order to
reduce extra cost being incurred.
CONCLUSION
By analysing above report, it is concluded that Harriot hotels are most established hotel
chain which has been grown in various parts of world such as America, Asia, Europe and Africa.
In order to cope with incurred losses at times of pandemic, Harriot hotels should reduce cost in
order to increase profits so that such losses can be covered in later years. It is necessary for an
organisation to manage financial activities so that maximum profitability and sustainability for
long term can be promoted. Also cost reduction is one of most effective technique in order to
manage relevant cost of business operations so that maximum productivity can be achieved.

REFERENCES
Books and journals
Alnawas, I. and Hemsley-Brown, J., 2019. Market orientation and hotel performance:
investigating the role of high-order marketing capabilities. International Journal of
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Chakraborty, P. and et. al., 2018. Mechanistic insight into sorptive elimination of ibuprofen
employing bi-directional activated biochar from sugarcane bagasse: Performance
evaluation and cost estimation. Journal of Environmental Chemical Engineering. 6(4).
pp.5287-5300.
Julião, J., Gaspar, M. and Alemão, C., 2020. Consumers' perceptions of circular economy in the
hotel industry: evidence from Portugal. International Journal of Integrated Supply
Management. 13(2-3). pp.192-209.
Köseoglu, M.A and et. al., 2019. Strategic decision tools and organizational performance in the
hotel industry. Journal of China Tourism Research. 15(1). pp.15-32.
Ningaraju, V. and et. al., 2020. Improving breakdown voltage for 120 V level up shifter by using
vertical and lateral assisted depletion layers in 0.35 μm CMOS technology. Japanese
Journal of Applied Physics. 59(SG). p.SGGD15.
Shrestha, P. and et. al., 2021. Assessment on scaling-up of mini-grid initiative: Case study of
mini-grid in rural nepal. International Journal of Precision Engineering and
Manufacturing-Green Technology. 8(1). pp.217-231.
Sittimart, P. and et. al., 2021. Enhanced in-plane uniformity and breakdown strength of diamond
Schottky barrier diodes fabricated on heteroepitaxial substrates. Japanese Journal of
Applied Physics. 60(SB). p.SBBD05.