Cost Control and Budgeting in Millennium Seoul Hilton - Case Study Example

POWER CONSUMPTION TREND AS POTENTIAL REVENUE ENHANCER FOR MILLENNIUM SEOUL HILTON Management Summary This report covers a general assessment of the operation of Millennium Seoul Hilton in terms of its cost control and budgeting systems as observed by the author during the placement. Evaluation includes general observation and analysis of budget and expenditure records. The evaluation was primarily aimed to identify problem and propose solutions to this problem that would contribute to the improvement of hotel cost control and budget operations. The evaluation found out that Millennium Seoul Hilton entails high expenditures on hotel utilities. Among these, power or electricity was found to be a major cost contributor. Further analyses revealed that there possibilities the use of electricity can be cut to an optimum level. Reduction of the consumption of power in the hotel would sufficiently reduce operational cost and thereby increase revenue. Based on the problem identified, it is proposed that a power cost saving plan will be developed and implemented. The first step is energy audit which would identify the trend and practices in electrical consumption in all section of the hotel and equate them to the volume of users. Once the information is at hand, areas where reduction can be implemented will be identified. Automated systems will be used instead of manual operations. Electronic devices that detect the optimum level of power needed in a particular area must be installed. For instance, a sensor automatically shuts off a light when there are no more users, etc. The solution will be implemented in few selected area to test the effectiveness. The data prior to implementation and during implementation will be recorded for validation purposes. The affectivity of the systems installed will be evaluated after six months of operation by comparing the consumption rate before and after using the systems. Consumption index will be obtained by dividing power consumption against total persons (consumers and employees). A lower consumption index would mean positive result. If the system is found to be efficient it will be replicated throughout the entire hotel systems. . Table of Contents POWER CONSUMPTION TREND AS POTENTIAL REVENUE ENHANCER FOR MILLENNIUM SEOUL HILTON 1 Management Summary 1 Table of Contents 3 Introduction 4 Findings 5 Analysis/Discussion 6 Recommendations 7 Conclusion 8 Bibliography/References 9 Hilton Hospitality, Inc. 2007. Millennium Seoul Hilton hotel. [Online]. Available: http://www1.hilton.com/en_US/hi/hotel/SELHITW-Millennium-Seoul-Hilton-hotel/index.do (19 October 2007) 9 Review Procedure 10 Introduction The Millennium Seoul Hilton is a Five Star Hotel situated at the foot of Mount Namsan and 1.5 miles from the business district of Seoul City, South Korea. The hotel can be considered a complete facility for business and leisure. For business purposes it has an Executive Lounge, a business center, and 8 meeting rooms that can accommodate 500 persons. It also has high-speed Internet access. Its support amenities for leisure and relaxation include 7 restaurants and bars catering Italian, French, Chinese, and Japanese foods aside from its native Korean specialties. It also has a health club, a golf driving range, a shopping area, a sauna, 82-foot swimming pool, and a well-equipped gym. Millennium Seoul Hilton hotel caters to individuals and families seeking for relaxation and leisure. But its services primarily is aimed on executives seeking for a place to do their business and other functions, meetings, conferences, seminars, and the likes. To suit the needs of the family they have babysitting services, children's video rental, cribs, high chairs, and family package offers. For the convenience of the business costumers they have audio-visual equipment rental, communication facility rental, office space rental, photo copying service, printer, secretarial service, and video conferencing service. The hotel offers several packages for tourists and family trips. The bulk however of its services is geared towards attracting a huge portion of the business sector. It is suitable for both local and international business gatherings. Despite the prestige of the company and the experience of the management every single establishment have some minor and major shortcomings that when addressed may have impact on improving further of its operation. Evaluation of the operation of a certain enterprise would reveal areas where improvement can be initiated to enhance systems and its operations. One of the basic areas where periodic evaluation are necessary to evaluate performance and areas for improvement is the accounting process. These include accounting procedures, budgeting, and cost saving approaches. This report therefore provides a brief analysis of the operation in Millennium Seoul Hilton Hotel particularly on the Cost Control and Budgeting Aspect of Business Management. The author wishes to identify a specific problem within this area that the establishment needs to address to improve its operations and services Findings Identifying a problem is a crucial step in evaluating the operations of a certain company. Considering a firm with very huge facility and wide costumer base, the task is isn't easy. However, the task maybe simplified if we look at specific section of operation. The accounting division and the aspect of cost control and budgeting is the main focue of the review. At first one may look at an old practice helpful unless a cost effective alternative is being evaluated and found more profitable and beneficial to the organization and the concerned parties within the firm. By direct evaluation on office records and observation during the course of the authors' exposure in the company several problems were identified. One of the expenditures that made up the bulk of the operations budget is on utilities. There are several utilities which include water, gas, electricity, and others used in hotel operation, but let us focus our concern on power consumption. Electricity is a major input in the better delivery of hotel services. Removing it from the system would paralyze every operation since almost everything in the firm requires electrical power. From the lights in the entrance, to the sensors in the doors, the cameras, the water pumps, the computers, heaters, air-conditioners, TV, audio-systems, and almost everything in the hotel uses electrical power. However usage of power can be modulated for the benefit both of the consumers and the management. To maximize revenue without hampering hotel services and comfort of the consumers, the management must consider an approach that may reduce power consumption. There are a lot of other areas to save on cost but the focus that will be addressed here to improve the cost control and budgeting system is power saving measure. Analysis/Discussion Most systems in the hotel are ran by electricity and are used 24/7, meaning 24 hours daily and 7 days a week. Lights, heaters, air-conditioners, fans, audio systems, computers, and a lot of electrical devises consume power. Payment of electricity to power providers, aside from hotel's back-up power system constitutes one of the highest budgets for hotel utilities. This is not considered a major issue in the operation since enough resources had been allocated and programmed annually for this, such as electrical bill payments, maintenance services, and electrical supplies. There is no study within hotel records that show the optimum per capita power consumption of hotel occupants. And there was no attempt by the management to control the use of these utilities aside from manual checking and periodic checks by servicing maintenance personnel. The point here is there are electrical systems functioning at full capacity even during lean hours, meaning fewer users in a particular period. But monitoring as to when and where be these devices located considering the huge facility of the hotel. To cite a few are air-conditioners, heaters, and lighting systems run unnoticed since someone may have used them and forgot to turn it off.. Sometimes lights are turn-on 24 hours without anybody using them. Office air-conditioners and other electrical devices are running at full capacity even though few are using them. These usages can be minimized if systems of control will be used. Since this cost has been included in the services charges the management does not recognize this as a potential revenue enhancer. Besides, record show that power consumption trend has been regular for the past years. The management therefore overlooked the potential of cost saving for this particular input. Recommendations The problem can be addressed by instituting a program to reduce power consumption in the financial management system. The following are the suggested steps to carry out the process: 1) First a careful study on the power consumption trend of every section of the hotel must be conducted to determine peak and lean hours. Each section such as the rooms, the Executive Lounge, swimming pool, the gym, and other service facilities must be checked if it really provided more than what is optimum in terms of lighting, cooling, and others. Although design of the facility has been professionally initiated, actual usage may differ. This step will be done to evaluate how much the management can save. If the potential saving will be worth pursuing the plan must proceed. 2) The second step is identification of how to institute control. Hiring personnel to monitor peak and lean hours of power consumption is an impractical solution. Latest technology using sensors are available in the market or can be made by local expertise. Instruments that automatically adjust air-conditioning units setting with changes in room temperature; lights automatically reduces level with volume; and other automated systems can de designed and obtained and can be used for this purpose. Reducing the use of electrical systems for a particular section in the hotel by at least 30 minutes a day would mean a lot of savings since the effect would be compounded. In the implementation of the system, a trial section must be considered and included in the study. 3) The final step is to determine the magnitude of the savings. The evaluation process include pre-implementation and post-implementation. The pre and post period would be 3 months each. After the post evaluation when the system is favorable, it will be replicated throughout all of the sections of the hotel. Conclusion The report was centered on identifying a problem in the operations of the Millennium Seoul Hilton hotel in Seoul, South Korea particularly in the area of cost control and budgeting. The firm is a five star hotel that caters to the local and international families and individuals seeking relaxation and refreshment or individuals and companies doing business. The evaluation identified cost reduction of utilities primarily as a potential revenue enhancer when property evaluated and handled. It was found out that power consumption is one of the major inputs that comprise higher expenditures. Reducing this input may therefore reduce cost and raise the hotel's revenue. The study has proposed the conduct of thorough evaluation of the power usage of the hotel or a comprehensive energy audit to determine areas for conservation, and determine the magnitude of possible cost savings. The use of automated systems that adjust power input in relation to volume of users was therefore recommended for integration in the hotels systems. Bibliography/References Hilton Hospitality, Inc. 2007. Millennium Seoul Hilton hotel. [Online]. Available: http://www1.hilton.com/en_US/hi/hotel/SELHITW-Millennium-Seoul-Hilton-hotel/index.do (19 October 2007) Review Procedure To determine the effectiveness of the saving systems employed a comparison between the per capita consumption rate of hotel users (costumers and employees) at times before system was applied and during the times when the systems were used. Per capita consumption will be computed using the following formula: Per Capita Consumption = (Monthly consumption)/(No. of persons in a month)(time of usage): For evaluation purposes the number of persons accessing or using the tested facility should be recorded including the total time each person stayed in the hotel. This data will be collected for at least 3 months prior to using the systems. The same data will collected from the same facility for another 3 months when the systems have been employed. It should only include those guests and employees who stayed and used the facilities of the hotel being tested initially. The number of person accessing the facility multiplied by the time they uses the facility must be clearly recorded to obtain reliable result. If one person uses only 3 hours, and another person uses only 2 hours then the record must reflect such. This is properly recorded through an electronic log book which will be installed in the test areas. If the per capita consumption is reduced then the solution is therefore effective. Read More