In our recent publication in the International Journal of Hospitality Management, we set out to determine which type(s) of hotel strategy act as the key precursor(s) of hotel property SMA use, and whether the use of SMA had a positive impact on hotel property performance.
So what exactly are Strategic Management Accounting (SMA) techniques?
At the hotel property level, they involve the collection of long-term, externally-focused and forward-looking information for the purpose of:
To conduct our study, we gathered data via a survey from 80 hotel properties.
Our primary finding was that the key precursor to hotel property SMA usage is a hotel propertys adoption of market orientation business strategy; and where this is the case, superior hotel property financial performance was in evidence.
A hotel which adopts this type of business strategy will tend to operate in a highly competitive market, and therefore puts their customers at the center of their strategic and operational thinking. To implement this strategy, the hotel will need to gather market information related their target customers needs, as well as of their competitors capabilities, to deliver superior customer value. Knowing this will enable the property manager to discontinue product offerings that add no value, and to include only value-added services.
Realizing that in a competitive environment, competitors capabilities and target customers needs are in a constant state of flux, there is often a feedback loop and learning is essential. The focus is on offering only those products for which customers find value and are willing to pay. We find that the information generated through adoption of SMA techniques assists managers with these needs, and they enjoy superior hotel property performance.
On the other side of the constellation is the sales orientation business strategy. A hotel which follows such a strategy will usually only do so where they compete in a market with a low level of competition. Hotel managers are able to offer their product to the market in way that is somewhat divorced from or at least shows little correlation with customer and competitor considerations. Management considers that there are few, if any, alternatives for customers in their market and so they see little merit in expending the resources and effort needed to gather competitor or customer information (e.g., through SMA). Instead they are able to set a price up to the maximum customers are willing to pay. Our findings suggest that the further a hotel moves away from a market orientation business strategy, the less benefit there will be from adopting SMA techniques.
In summary, while there may remain some locations globally where hotels operate in less competitive markets, the overarching trend is toward hotels facing higher levels of competition. Where there is greater competition, there will be a need for hotels to adopt a market orientation business strategy, and our findings highlight that such hotels will be unequivocally better off in terms of superior hotel property performance by adopting SMA.
Turner, M. J., Way, S. A., Hodari, D., & Witteman, W. (2017). Hotel property performance: The role of strategic management accounting. International Journal of Hospitality Management, 63(May), 33-43.
Ecole hôtelière de Lausanne (EHL)
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Demian Hodari is an Associate Professor of Strategic Management at the Ecole hôtelière de Lausanne. His research focuses on the evolving roles of hotel owners, asset managers and general managers. He regularly presents his research at academic conferences, provides executive education and is a frequent moderator and/or chairperson for industry events.
Michael J. Turner
Michael J. Turner, Ph.D, is a Senior Lecturer in Accounting at the UQ Business School, The University of Queensland in Brisbane, Australia. His research and teaching specialization is in hospitality managerial accounting focusing on capital expenditure decision-making, competition, strategy, and the strategic partnerships between hotel owners, management companies and general managers, and the ensuing performance implications.