Working capital management at Selmun Palace Hotel : a case study

Abstract

Due to the importance of the tourism industry for our country, it seemed interesting to take this opportunity to delve into an area which is seldom mentioned directly in our academic studies. The scope of this case study is to analyse how working capital is managed at Selmun Palace Hotel. The particular environment in which hotels operate, together with the methods and techniques used to plan and control each component of working capital in this context are described in the following chapters. This study also suggests ways and means as to how certain weaknesses in working capital management can be dealt with. The research for this study was conducted in two stages. The first stage entailed background reading on the subject and the second involved understanding the practices and procedures followed in managing working capital at Selmun Palace Hotel. Literature on the subject, particularly with regards to the hotel industry was used. The information was obtained from the Library of the University of Malta, the Library of the Central Bank of Malta, The Malta Hotels and Restaurants Association, The Tourism Authority and from the Malta Financial Services Centre. Various interviews were also held with the financial controller of Selmun Palace Hotel. In addition, a director and a former manager helped by providing a general background. A director of Selmun Palace Hotel was of the opinion that it would be possible to study and evaluate the working capital management of the hotel. However, the collection of practical information was hampered by unexpected limitations when the financial controller refused to disclose data that would have been very useful for this study. Indeed, it is questionable whether this information is available to management in the first place.