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370 management contract
participate in the decision-making processes. They
also develop systems of internal control designed to
increase the operating efficiency of the business
and reduce fraud.
Management accounting differs from financial
accounting in that the latter generates and reports
accounting information that is used internally by
management and accountants, and externally by
stockholders, bankers, creditors and brokers. The
former links very closely with cost accounting in
the analysis and interpretation of financial statements,
cash flows and cost±volume±profit analysis.
Cost accountants are responsible for assigning costs
to goods and services. This activity drives selling
price of an enterprise's goods and services.
Hospitality management accountants address the
issue of whether to take a purchase discount and
compute the effective interest rate on loans, and
are responsible for cash management. They supervise
cashiers, cost controllers and the night audit
function in hotels, and it is they who prepare
appropriate financial reports and are responsible
for compliance with government regulations and
tax laws.
Hospitality management accountants can earn
the Certified Hospitality Accountant Executive
designation from Hospitality Financial and Technology
Professionals or the Certified Management
Accountant designation from the Institute of
Management Accountants. These professional
designations require certain educational and professional
requirements and the passing of an
examination. Many hospitality management accountants
also are Certified Public Accountants.
All of these professional designations require a
hospitality management accountant to maintain
integrity, avoid conflicts of interest and communicate
information objectively.
Other relevant areas to the hospitality management
accountant are break-even point analysis,
budgetary controls, budgeting, corporate finance,
expense estimation, feasibility studies,
financial objectives, food and beverage cost
analysis, hospitality information systems, investment
decisions, payroll cost analysis, profit
centre analysis, profit sensitivity analysis,
profit variance analysis, property management
systems, return on investment and
revenue forecasting.
Further reading
Coltman, M.M. �1994) Hospitality Management
Accounting, 5th edn, New York: Van Nostrand
Reinhold.
Ilvento, C.L. �1996) Profit Planning and Decision
Making in the Hospitality Industry. Dubuque:
Kendall Hunt.
Needles, B.E., Anderson, H.R. and Caldwell, J.C.
�1994) Financial and Managerial Accounting, 3rd edn,
Boston: Houghton Mifflin.
Schmidgall, R. �1997) Hospitality Industry Managerial
Accounting, 4th edn, East Lansing, MI: Educational
Institute of the American Hotel and Motel
Association.
management contract
STEPHEN M. LEBRUTO, USA
The management contract is a business format
which separates ownership from operation. In the
hotel industry it has provided the opportunity for
much-needed capital to fund the demand for new
construction in world markets, while creating the
vehicle for such tourism management companies to
expand their networks and market shares with
reduced exposure to investment and political
risks. The growth in contracts has also been
driven by hotel owners' need for experienced and
established operators for their own peace of mind
and to satisfy investor's demands.
There is no standard definition of a hotel
management contract, but it is usually defined as
a formal arrangement under which the owner of a
hotel or another tourism business employs the
services of an operator to act as his/her agent to
provide professional management, in return for a
fee. The operator assumes full responsibility for the
management of the business, while the ultimate
legal and financial responsibilities and rights of
ownership of the property, its furniture and
equipment, its working capital and the benefits of
its profits �or burden of its losses) remain those of
the owner. The owner may be a private individual,
a financial institution, a real estate company or a
government. The operator is most likely to be an
established hotel chain offering marketing
strength, brand names, bargaining power, systems