Costing systems and variance analysis for the local five-star hotel industry

Abstract

Purpose: The main objective of this study is to determine whether the five-star hotel industry in Malta the extent use of standard costing and variance analysis. Design: The study was done by conducting a semi-structured interviews to the financial controllers of the five-star hotels in Malta. Eleven interviews out of fifteen were done. Findings: The study found that due to dynamism and non-monetary factors the use of standard costing is limited and not popular with the hotels. The study found that the hotels prefer a customized costing system, as the use of software was found to be used by some hotels. However, the use of variance analysis is used by the majority of the hotels as the use of variance analysis was seen as an aid to management especially in decision-making. Finally, the study found that the investigation of variances is mostly done in Malta even if the hotels form part of a foreign group. Implications: The study confirms previous studies which found that the use of standard costing in the hospitality industry is poor. The study confirmed that dynamism and non-monetary factors (such as quality of service) render standard costing as obsolete.