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Nuevo Hotel Budgeting Control - Essay Example

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The well known Comodo Inns Inc. of North America, currently operating some 110 hotels in the USA, Canada and Mexico, and having its Home Office in Dallas, Texas, has decided to expand its business operations to UK and Europe. It chose Manchester, 'the dynamic regional "capital" of north west of England', as the location for establishing its new 360- bedroom 4-star hotel, Nuevo, as the 'flagship' property to serve as the 'catalyst' for further expansion into the European market…
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Nuevo Hotel Budgeting Control
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Download file to see previous pages For its management Nuevo adopted the normal Comodo team-structure, consisting of the General Manager with a five-member advisory 'Board of Directors' and ten independent business unit (IBU) managers. This organisational arrangement was "intended to generate a flexible and entrepreneurial spirit, so promoting creativity and risk taking while still ensuring sound responsibility and accountability". It was also intended to emphasise "empowerment, teamwork and knowledge-sharing - enabling all management and staff to use their initiatives and 'do what they have been trained to do' in order to provide an outstanding standard of service". Nancy Foster, an experienced and highly respected GM in the Comodo group was appointed as GM of Nuevo, to be assisted by a management team, some of whose members had been experienced in and imbued with the 'management culture' of Comodo, while the others, experienced in hospitality business shared Comodo's mission of making it "the best business and leisure hotel company in the world", through their energetic, committed and responsible work., 'which always exceeded their guests' expectations'.
Nancy was very experienced as a GM, but this was her first experience of 'opening' a new property. She thought it obligatory for her to make Nuevo the 'standard-bearer' for Comodo Group's "UK and European operations in the rapidly evolving 'information/virtual' age". To achieve this she thought it wise and prudent to involve the entire management team in developing key control systems for the hotel. She was well aware, of course, that management control system was a 'two-edged sword' in that while it could influence employee behaviour to achieve the company's goals, it could also "lead to large losses and possibly even to organisational failure". The team had already completed the management system in almost all areas of hotel management except in the important area of 'management accounting controls, including establishing the hotel's first budget'. In the management team meeting held to chalk out this problem, what emerged was the implications of the benefits and drawbacks of the 'traditional' budgeting procedures for designing an effective budget control system for Nuevo.
Traditional Budget Control System
Traditionally 'management teams of Comodo hotels usually based their first few annual income budgets on the feasibility study projections carried out to 'inform' the decision to invest in the project'. This helps the Home Office to get an early view of how the hotel is doing compared with the project appraisal. But then, these would be outdated in that they were drawn up years ago, and in the case of Nuevo, three years ago. Nancy wanted the first year budget proposal handed down to them by the Home Office to be revised because since the time of the project report two other hotels had come up in Manchester and competition had become 'hot'. However, Nuevo's Finance director advised Nancy to go long with the Home Office because everyone would be busy in ...Download file to see next pagesRead More
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