Budgeting and budgetary controls in a group of hotels : a case study

Abstract

Purpose: The purpose of this study is to gain an understanding of budgeting and budgetary controls processes and evaluate their effectiveness to achieve organisational objectives. This study assesses the importance of budgeting and budgetary controls during the COVID-19 pandemic. Furthermore, it analyses beyond budgeting techniques that are being used in conjunction with traditional budgeting in these hotels. Finally, a number of ways of how budgeting and budgetary control processes can be improved are proposed. Design: A qualitative research methodology was adopted, where semi structured interviews were conducted with a number of officials who are knowledgeable and involved in the budgeting and budgetary control processes employed by the selected group of hotels. Findings: The findings of this study highlight the importance of budgeting within this group of hotels, so much so that budgets are considered as an operational roadmap upon which management can base hotel operations. An important outcome from the findings is that the most crucial component of budgeting within the hospitality industry is the room revenue. Budgets centre around room revenue. Therefore, the slightest change in such figure affects the budget in its entirety. Furthermore, the findings indicate the importance of budgetary controls within the industry, especially in present turbulent times, where budgetary controls were essential in controlling costs to keep the organisation alive. Apart from the internal planning and control function, the findings shed light on the importance of the external functions of budgeting, which are vital for the purposes of obtaining finance. Finally, the beyond budgeting techniques used are also identified such as rolling forecasts. Conclusion: This group of hotels places great importance on budgets and budgetary controls, as such tools are the core of operations within the hotels. The budgeting process adopted by this company goes into great detail which enables management to achieve the maximum return possible from each hotel. Although traditional budgeting is often criticized by literature, this study proves that it is still the go-to tool that managers utilise to make the most out of the hotels under their responsibility. However, even though such process is adequate, certain aspects can still be improved. The recommendations in this study propose ways how such improvements may be made such as shortening the length of the budgeting process. Value: This study identifies the importance of budgeting and budgetary controls in successfully managing and operating a group of luxury hotels to achieve the organisational objectives. Moreover, it also shows that the external functions of budgeting are as valuable as internal functions. Finally, this study establishes that beyond budgeting techniques, used in conjunction with budgeting, enhances the budgeting process.