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Destination Management

Lecture 9

University of Applied Sciences Stralsund

Leisure and Tourism Management

WS 2009/2010

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Part Three

Considers the challenges involved in managing attractions such as marketing, financial management, operations

management and human resource management

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Human Resource Management

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• Considered to be the most important aspect of management

• Attitudes and abilities of staff have a crucial impact on the visitors experience

• Labour costs are likely to be the largest single items on the attractions budget

Human Resource Management

Part Three \ Human Resource Management

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Tourism industry suffers from bad reputation in HRM

• High turnover of staff

• Seasonality of demand

• Poor status of jobs

• Lack of career structures

• Unusually demanding jobs

• lack of management expertise

• Lack of widely recognized qualification and training schemes

Problems of HRM at visitor attractions

Part Three \ Human Resource Management \ Problems

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Problems of public sector attractions are often in direct

contrast to the problems mentioned before

• Low turnover of staff

• Inflexible working practices

• Fixed-wage rages

• Standardized recruitment and disciplinary procedures

Problems of HRM at visitor attractions cont.

Part Three \ Human Resource Management \ Problems

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Benefits for organisation of good HRM

• Improves performance of staff

• Provides a competitive advantage to the organization

• Contented staff provide better service to customers, encouraging repeat visitation

• Reputation for good staff will lead to increased first-time visitation

• HRM plays a part in determining the success or failure of any organisation.

Part Three \ Human Resource Management

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Case study

Can the notion of service be fully implemented?

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International benchmarking and best practice

Case study “New Horizons” Page 63 et seq.

Part Three \ Human Resource Management

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Financial Management

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Financial Management

• Is at the core of corporate strategy at most attractions

• Is concerned with ensuring liquidity for operations

• Covers a number of separate functions:

- financial planning

- financial control

- management accounting

- cost accounting

- financial reporting

Part Three \ Financial Management

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Financial management functions

• financial planning- how will the financial resources utilized in the future

• financial control- ensuring most efficient way of using, security issues

• management accounting- providing data for decision-making

• cost accounting- analysing cost structure, fixed/variable costs

• financial reporting- presenting financial performance to stakeholders

Part Three \ Financial Management

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Budgeting

• The budget is the financial management frameworkwith the following functions:

- guide everyday financial management

- basis for evaluating performance and taking decisions on corrective actions

- impress stakeholders such as banks and grant-making bodies

Part Three \ Financial Management \ Budgeting

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Budgeting

• There exist two types of budget

- capital budget (expenditure) salaries, marketing, maintenance, taxes, depreciation, …

- revenue budget (income) entrance charges, rents, franchises, consultancy services

• Profit centres and Cost centres- monitoring financial performance on an individual basis

• Attraction budgets should include a cash flow statement

Part Three \ Financial Management \ Budgeting

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The budgetary process (flowchart)

• Evaluating the existing budget

• Discussion with departments on required changes

• Approval of the budget

• Implementation of the budget through budgetary control

• Monitoring the performance against the budget- identify variances, corrective actions, modify budget

Part Three \ Financial Management \ Budgeting

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Problems with budgeting at attractions

• Basing budgets on past experiencesis critical in rapidly changing attraction business

• Forecasting is very difficult- use contingency plans to cope with variances

• Many influencing factors are outside the control- legislation, reducing market size or increasing costs

• Zero budgeting is a common answer in practice- starting with a clean sheet each year

Part Three \ Financial Management \ Budgeting

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Management information systems

• Designed to provide information for decision making- visitor numbers in total and by type- visitor expenditures and place of spending- other income- staff costs- major unexpected bills- credit situation- stock levels- budget variances

• Some of the data need to be delivered daily

• Reporting procedures need to be established

Part Three \ Financial Management

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Corrective actions

• Revenue generation

- Attracting more visitors

- Pricing

- Increase visitor expenditures

- Obtaining revenue from other sources

- Maximizing use of people and financial resources

• Cost control and reduction

- Staffing

- Goods purchases

Part Three \ Financial Management \ Corrective actions

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Revenue generation

• Attracting more visitors

- increased promotional activity to raise awareness

requires corrective actions in marketing plan and budget ! requires financial resources to pre-finance activities

- sales promotion such as season tickets

designed to increase more frequent use should be connected with communicative activities

- Arranging special events to attract new customers

aimed to win regular visitors

Part Three \ Financial Management \ Corrective actions

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Revenue generation

• Increased visitor expenditures

entrance charges often represent a minority of income!

- Shops (merchandising) suit the taste and pocket of every market segment

- Catering outlets need to be tailored to the desires of the specific market

- Guided tours personal, guide books, walkman tours

- corporate users seminars, conferences, exhibitions

Part Three \ Financial Management \ Corrective actions

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Revenue generation

• Obtaining revenue from other sources

- Rents and tenancies usually fixed income from service facilities

- Franchises and concessions usually income based on financial performance of partner

- Consultancy services may include advice in training, retailing, …

- Grants mainly for public operated attractions

- Sponsorship mainly used for special events

Part Three \ Financial Management \ Corrective actions

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Cost control and reduction

• Is rather more complicated than income generation

- Staffing

simply employ fewer people employing casual- rather than permanent staff spending less on training reducing wage rates contracting out jobs

• Results in demoralized and demotivated staff !!!!!

• Is in stark contrast to what we identified as good HRM !!!!!

Part Three \ Financial Management \ Corrective actions

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Cost control and reduction

• Is rather more complicated than income generation

- Goods purchases

bulk purchase of fast moving items

regular review of suppliers

use „sale or return“ whenever possible

operating „just-in-time“ delivery systems

delaying payments until the last possible moment

pilfering must be minimized through security measures

reducing food wastage

Part Three \ Financial Management \ Corrective actions

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Cost control and reduction

• Is rather more complicated than income generation

- further measures

tackling administrative costs

reducing costs of utilities (water, gas, energy)

selling off unproductive assets

contracting out services

reducing opening hours

• Quality of service must never be adversely affected !!!!!!!!!!!!

Part Three \ Financial Management \ Corrective actions

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International benchmarking and best practice

Case study “New Horizons” Page 54 et seq.

Part Three \ Financial Management