Activity-based management and traditional costing in tourist enterprises (a hotel implementation model)

Abstract

Nowadays, Greece is a country blessed with many archeological monuments and sightseeing of great interest and we have to mention the thousands of beaches and ideal places for tourism. Thus, one of the main sources of income is tourism. The growth of Tourist Sector in Greece consists of well organized hotels and apartments similar to the best of the world. Hence, the need of information about costing is essential and crucial. The cost methods used are similar to the ones used in other sectors such as product industry. But, the service sector need more care because the bad cost information will set a higher price for the rooms and fewer tourists will visit Greece, less income for the economy, more advertisement expenses, and less free advertisement from those that will not arrive. The method of Activity-Based Management along with new technologies in computing can provide huge amount of information for the present situation, pinpointing all the problematic areas. The scope of this article is to discuss the outcome of implementing both Traditional Costing and Activity-Based Management models in a high level hotel enterprise. We start the method by drawing a schematic plan of the flow of costs in the hotel. It pictures the departments, the sections, the functions and the activities that take place in the company. Next, sets the cost objects (such as the cost of services provided) and the questions to be answered such as which services are profitable. The analysis continues with the understanding of the general ledger that determines how we will assign costs to activities setting also the level of detail required during activity data collection. We then categorize the activities and the cost information; we assign costs to activities, and get the Activity Data. The data acquired can feed management with information for the organization structure, and help overtake current bottlenecks and boundaries. Also, it can concern budgeting or benchmarking, or to be used in simulation models of other scenarios for expanding the business. The outcome is based on the Activity data and can be versatile according to how will use this information.