A management accounting perspective on hotel outsourcing

Abstract

Outsourcing carries significant implications for a hotel's cost structure and control procedures. In light of this, it is important that hotel accountants are appropriately equipped to play an active role in outsourcing decision-making and control. The objective of this chapter is to provide a management accounting perspective on issues surrounding hotel outsourcing management. This objective is pursued by initially overviewing accounting and managerial outsourcing commentaries. Following this, the chapter outlines the many costs and benefits that should be considered when deciding whether to outsource, and a discussion of the desirability of applying a long term oriented financial analysis when appraising outsourcing proposals. The chapter is informed extensively by a review of pertinent literature together with findings emanating from the conduct of interviews with fifteen managers representing eleven large hotels in Queensland, Australia. The interviewees comprised three general managers (GMs), nine financial controllers (FCs), two food and beverage managers, and one project engineer. In this chapter, outsourcing will be viewed as '.... the process whereby activities traditionally carried out internally are contracted out to external providers' (Domberger, 1988:12). Outsourcing can assume various forms of inter-firm relationships such as joint ventures, alliances, partnerships, shared service arrangements (Kakabadse and Kakabadse, 2000), franchising (Roh and Kwag, 1997), and the establishment of virtual organizations involving a core of executives and workers supported by outside contractors and part-time help (Handy, 1989). It should be noted that outsourcing is not the same as downsizing.